Planners, colored pens and sticky notes in hand, entrepreneurs are constantly creating or revising our business goals. Your plan probably has income goals, but does it prepare you to manage future business expenses?
Planning can be an exciting time, Mapping out our dreams and the steps it takes to get there is exhilarating. A successful business plan has measurable goals, and a logical set of steps in place to achieve each goal.
Now that you have your business vision defined, you are the leader of your own destiny. CEO. Jedi Biz Boss! As the boss, it’s also up to you to create the financial structure to support your dreams for the coming year.
Tracking Business Expenses and Living Expenses
Money management is an important part of the work for a business owner. If you have been following me, you know I counsel entrepreneurs to wait to quit their day job until there is enough income from the new business to cover all monthly expenses – not just business expenses.
That means you need to know what your monthly expenses are.
In addition to your recurring monthly expenses for housing and utilities, you will need to look ahead and figure your business costs for the coming year to budget for the supplies and services you need for your product launches.
Making business projections sounds harder than it really is. Avoid the temptation to just take a wild guess.
We all tend to underestimate if the real facts might make us a wee bit uncomfortable. Like when we estimate that cream filled doughnut with sprinkles can’t be much more than 120 calories – because it isn’t any bigger than an apple. Yup, keep making those kind of guesses and you will wake up one morning to find that you can no longer zip your jeans or afford your business.
Overhead, or the “costs of doing business” are the everyday expenses of your operation. This category includes things like internet fees, printer ink, software programs, and business development courses.
This may include the cost of hiring short or long-term team members, like a web designer or virtual assistant, and the cost of hosted servers or monthly fees for programs you use to run mailing lists or online shops.
You overhead costs also include tax preparation or accounting software and legal or accounting fees. You are getting professional tax advice, right?
Add up all these costs and make sure they are in your spending plan.
Sit down with your written business plan for next year, and for each goal or product launch spend some time picturing the process in your mind.
Are you planning to sell a physical product like jewelry or home decor? List all of the supplies you will need to use, including general supplies like glue or staples or tape. How many of these items will you produce? How much of the supplies will you need? Calculate your supply needs even if you already have some things on hand, like paint or brushes. and include those replacement costs in your list. Now figure out how much those supplies will cost. Don’t just guess, run some Google searches or call your suppliers to find out prices.
How will you ship your product? Do you plan to make it a pretty package, include a note or printed coupons? Even if you are going to collect shipping costs at the point of sale, you will need to spend money before the sale for your packaging and promotional materials.
Just as you did for your product supplies, figure out what you will need for packaging and shipping your product. For each item, how many sheets of tissue paper? Ribbon, stickers, note cards?
Whether your product is physical or digital, you will likely have some business expenses associated with marketing for that launch, especially if you purchase ads. Include your marketing costs in your plan.
Add up all the production, marketing, and shipping costs for that product launch and divide by the number of finished items to get a unit cost. This will help you figure out how much to charge for your product, as well as helping you make sure you have enough money on hand to execute your plan.
Chance Favors the Prepared Mind
This is one of my favorite quotes, attributed to scientist and innovator Louis Pasteur. Successful innovators and entrepreneurs are not only open to inspiration, they are prepared for the work that follows to make that inspiration a reality.
Is your business ready for the future? Do you need help with business planning, product launches or money management? What money management tips do you have for new business owners? Share your wisdom in the comments below.