Singapore
Singapore
There are many reasons why some start-ups fail to take off – from being overly optimistic of the future to having a less-than-ideal business plan. While a number of of these reasons may be out of the entrepreneur’s hands, some are within their control. And one of them is planning a proper budget.
Every business needs a budget, and taking the time to budget for your start-up appropriately will put your company in good stead for years to come. A good budget may not be a guarantee of success, but the budgeting process can help you make realistic projections about when you may be able to achieve the financial goals for your business.
As you go about budgeting for your start-up, here are 6 things you should take into consideration.
A budget isn’t a stick to beat you with. It is meant to be a guideline that will help you make wise financial decisions. So it’s important to allow for some level of flexibility as the start-up process always seems to cost more than you initially expect.
While it’s easy to get caught up in the sense of optimism when starting a business, your budget should be designed with the belief that future revenue will be low. This line of thinking will better prepare your company’s finances in the event that things do not go according to plan.
Reducing your initial costs of operation is never a bad thing, but it should be done smartly. Settling for cheaper and inferior alternatives may sound good now, but there is a chance that doing so may instead put the business at risk and incur more cost in the long term.
When it comes to the business world, nothing is ever for certain. So for any new start-up, it is crucial that you plan for unexpected expenses or cash emergencies within the budget. Try to build some reserves over time to meet these needs by setting aside a percentage of your monthly income.
Many companies review their budgets on a yearly basis. But for small business owners, a volatile market and the high probability of unforeseen expenses means that budget reviews should be done more frequently (i.e. every 1 to 2 months). This would give you greater flexibility to adjust the budget when the need to arises.
Even after you’ve found suppliers for your business, be on the lookout for alternative vendors that can give you better deals without compromising on quality. A good time to do this is during your monthly or bi-monthly budgets reviews or when taking stock of your company’s performance.
We understand that the budgeting process may prove to be overwhelming to those not familiar with it. While there are articles on the web that can provide you with some information, you should consider getting help from financial advisors who are knowledgeable in this field. Their experience will be invaluable in helping you choose the ideal budgeting system for your business, and what you learn from them will also train you to develop your own budgeting skills.