MightyRecruiterIf you are in the process of starting your own business, you are probably thinking about obtaining financing. Before you talk to lenders, however, you should prepare your operating budget. Lenders will want to see a comprehensive summary of expected expenses. Ensuring your information is complete and accurate will ease your way towards getting the financing you need. An additional benefit of drawing up an operating budget is that you will also have a better picture for yourself of how much you can expect to spend to sustain your business and know what your minimum revenue should be. When writing up your budget, aim to include all types of expenses, no matter how minimal you think they will be; reviewing some common types of business costs can help you avoid overlooking important items.
Premises and Equipment
The first common budget category contains costs associated with maintaining physical premises. If your business needs physical premises, figure out what type of space is necessary. Some companies only need office space while others may require warehousing or work premises. Whether you plan on renting or purchasing, location, size and type will affect pricing.
Next, consider how much you will need to spend on equipment. Depending on the nature of your business, you may have to purchase office furniture, computers, specialized software, machinery or vehicles. You will also have to pay for utilities: water, electricity, and gas. If you have equipment that will use above-average amounts of any of these, factor this into your estimate of your monthly bill. If you will operate vehicles in the course of your business, add fuel costs to your budget. Will you need to hire people to work for you? Their salaries and wages should also be included. If your equipment requires regular scheduled maintenance, your budget should feature the cost of such upkeep visits.
Insurance and Licensing
Another category of typical expenses includes the paperwork you need to ensure that your operations are legal and safe. You will need several types of insurance policies in order to cover potential damage to your premises or equipment, possible malpractice suits, and other hazards likely to occur in your line of business. Please note that heavily regulated occupations are likely to be subject to numerous state, federal or local requirements that may require regular outlays of funds. Find out about any licenses or permits you may be required to obtain, including the associated fees and frequency of renewal. Do not forget to add an estimate for taxes.
Advertising
Advertising is a budget item that is a recurring expense. For most businesses, initial success is dependent on effective, targeted advertisements. Studying the market for your products or services will help you determine which advertising medium, frequency and style is most likely to effectively promote your company and how much you can expect to spend on it. Materials or supplies are another example of an expense that will occur at regular times.
Finally, each business has incidental expenses that are not always planned for or foreseen, but do need an amount allotted to them in the budget. For example, you may anticipate that you will need the services of an attorney or an accountant, so budget a reasonable amount for potential fees. It is also wise to set aside an amount that can be used to cover any unforeseen repairs.
After reviewing this general outline, you are likely to find that there are items specific to your line of business that were not mentioned here. Be sure to consider everything that goes into ensuring that you are able to market and provide your products or services.
An operating budget is an important tool for many aspects of running a successful business, from obtaining financing to formulating your strategy. At all times, it is important that your budget be entirely accurate and allow for all necessary expenses.
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