Having a business budget is essential. It’s something that’s often overlooked, especially if you’re a sole trader like me. But you need to know just how much money you have available and the expected costs you have.

Creating a business budget you can stick to in the earlier days is likely going to be easier. You may not know the full costs of your business, but you know your starting point.

Not all sole traders will set up separate business and personal bank accounts. Yes, we should but we don’t always want the fees that come with the business accounts, right? Soon our personal and business incomes become a jumbled mess, especially if you’re a work at home mom or dad just trying to create some additional income for your family.

It makes sense that the longer your business goes on, the harder it will be to create a budget. It’s definitely harder to create one that you can stick to. So it’s time for a little help and advice.

If you’re trying to create a budget after starting up your company, here’s a guide. You can also use this if you’re just starting out to get some ideas on your business costs.

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Step 1: Use a Tracking System that Is Going to Work for You

Your Aunt Mary will have her income tracking system that works for her. Joe Bloggs who runs the flower shop down the road has his. And then there are your work at home mom friends who are creating their hobby businesses that have their own (sometimes none at all) systems.

They’ll all tell you the best way of doing things. But that doesn’t mean they’ll be perfect for you.

My personal favorite is a simple Excel spreadsheet. Sure I have to input in figures manually all the time but I have the spreadsheet with me at all times and I can manage everything in a way that I understand. I’ll use Mint to help, but the actual business budget is managed through a spreadsheet.

Use a method that works for you. There’s no point working out new software for months on end, only to find that you keep going over your budget and can’t see why. When a method works for you, you see which parts of your business budget are impossible to stick to and where you need to make changes.

Step 2: Know Your Net Income

What’s your take home pay from your business? You need to know this to know what business budget you need to stick to. This isn’t about taking off your rent, business expenses and the like. You just right now need to take off your tax deductions and anything like your pension deductions. These are linked to your business that you have no (or little) control over.

Once you know your net income, you can start working out budgets on other aspects of your business. You have the disposable income for the next set of outgoings in your business.

Step 3: Determine Your Outgoings

Now you need to know what your outgoings are. If your personal and business finances are mixed, then you’ll need to work out both personal and business outgoings. These are your necessary expenses, including your:

  • Rent
  • Internet costs
  • Utility bills
  • Car payments
  • Child care costs
  • Website hosting and domain name costs
  • Business insurance
  • Etc

Don’t miss anything out that is genuinely necessary. Don’t include the odd payments for printer ink or the costs for your weekly coffees. You need to know how much disposable business income you have once all the essentials have gone out.

Now you have an income to create your business budget you can stick to.

If you have two incomes, take out your share of the household costs if you’re combining your personal and business finances. If you are keeping business and personal income separate, it’s still worth including your half of personal costs – this is the pay for yourself to cover those household costs.

Step 4: Determine Your Marketing Costs

You’ve likely overlooked a certain type of necessary spending that does have some leeway: your marketing costs. Part of your business budget you can stick to is your marketing budget.

From the disposable income that you have left for your business, take out the money that you need to spend for marketing. Try to keep this the same each month.

It will involve looking at your marketing plan. Determine the type of marketing that you need to do and the costs for those types of marketing.

If you’re trying to run a right marketing budget, consider the power of social media. There are a few costs if you want to do ads but overall the costs you’re putting into this are time (unless you hire out to a freelancer of course).

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Step 5: Consider Your Outsourcing Budget

When creating an initial business budget you can stick to, you will likely overlook outsourcing. You want to save as much money as possible, right? Well it may be time to look at outsourcing your needs.

Some of the outsourcing budget could be within your marketing budget, especially if you hire a social media manager. However, that’s not the only outsourcing you’ll want to consider. What about hiring a freelance blogger to help with content marketing or a VA for your email management?

Some of this will mean researching costs for your outsourcing needs. However there is always someone for all budgets—that someone is not necessarily going to be the best, but they will fit into your budget. As your income grows, you can look at increasing this budget as you need. The aim right now is to fit into your budget.

Step 6: Consider All Your Occasional Expenses

There will be times that you need to buy a client lunch. Other times you’ll need to pay for a long distance phone call. You may need to buy a hotel room for a conference or even flights to get across country.

These types of expenses are one-offs. The receipts will go into the diary ready for tax time and that’s it. But you need to have the business budget for these expenses without putting yourself in financial trouble.

This is why you need a part in the business budget each month purely for your occasional expenses. Don’t take from another part of the spending or you will go into debt. Once you’ve used up your occasional expenses for the month, you’ll have to wait for the next month for other expenses.

You’ll need to plan ahead for some of this. The last thing you want is to need a last minute flight across country for a business meeting only to find out that you have no money left in the occasional expenses budget due to all the unnecessary coffee lunches you’ve had! I’ve known it happen.

Step 7: Keep a Track Regularly Throughout the Month

So way back in step 1 I suggested setting up a budget system that you can follow. You need to update this and track it regularly. This is where having something like Mint can be helpful. I use it for my personal accounts and can just see at a glance how I’m doing with individual budgets.

If you’re not going to use software, make sure you keep an eye on the spreadsheet. Update it daily and assess your spending. Each week look at how you’re doing and whether there are areas that you can cut back on or will need to watch out on to avoid going over your budget.

Having a business budget you can stick to is worthless if you don’t make sure you are actually sticking to it. There’s the chance that you will go over your budgets and end up in debt and you won’t be able to do anything until you check on it again, say in two month’s time!

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Step 8: Rearrange Your Business Budget You Can Stick With

Start off small and work your way up. There is definitely nothing wrong with rearranging your business budget a little. The first month you may find it way too hard to stick to and need some leeway in areas. You may always want to look at cutting down the costs on some elements of your business outgoings.

You may find that it’s the exact opposite. You can easily stick with it and there’s money left over. What do you do with that money? Is there a plan in place for it? Could you spend a little extra on some occasional items to help grow the business or pay more for your outsourcing? Maybe you could put the money into savings or investments for the future.

Don’t just accept that your budget is what it is. It will change as your business grows and develop. It’s another reason to keep track of your spending and your budgets.

Do you struggle to create a business budget you can stick to? Take a step back and try again. These steps will help you get that initial budget for you to then track and follow.

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