If you want to take your internet business more seriously, how about putting in the same kind of planning and effort an entrepreneur would in any other industry? Don’t just throw it together to see what happens, crossing your fingers for some kind of automated income stream to come dancing out of the fog of a half-hearted effort. If you want to succeed, one of your greatest tools is perspective, and one way to gain that perspective is to set up up a proper budget.
1 What Can a Budget Do for Your Business?
- Provide clarity, so you know exactly what needs to be done to achieve goals.
- Force you to do the real research and arrive at realistic profit expectations.
- Create organized data sets you can manipulate while seeking improvement.
- Highlight problem areas.
- Illuminate wasteful or inefficient expenses.
- Reveal trends and deviations.
2 Collecting Data for Your Budget
The first thing you need to do when setting up your budget is start collecting data. If you’re already in business, this will be as simple as digging through paperwork, online accounts, and perhaps speaking with your accountant and other professionals you rely on.
If this is your first year in business, you’ve got a bit more of a challenge ahead of you because you don’t have this information. But that’s actually a good thing because it requires properly researching your business model, a step many online businesspeople skip, and assessing your plan’s viability.
Research your competition and even speak with other people in the industry to arrive at realistic figures – they should be as exact as possible. You’ll need to create data for your projected first year sales, cost of inventory, advertising costs, employee costs, outsourcing costs, website management costs, insurance, and any other possible expenses.
The budget you put together using this data is your profit-and-loss budget.
3 Creating a Cash-Flow Budget
Perhaps even more important than your profit-and-loss budget is the cash-flow budget. Just because your research suggests profitability doesn’t mean the money will come in a timely manner from month to month, and depending on your business model and expenses, this can often bring your business to a standstill or kill it off completely.
A cash-flow budget is created by breaking your annual budget down from month to month and determining whether or not you’ll have enough money on hand to cover expenses when you need it. If you foresee periods of negative cash flow, you might consider a line of credit to offset the natural business swings.
Are you serious enough to make your online venture succeed? If so, start out on the right foot by creating a budget. After all, if your business is worth creating, it’s worth planning…