Have you been getting your new business setup and you feel like you’re BLEEDING money? Let’s not even mention that savings or startup money you planned to last for 6 months is almost gone and it’s only month 2?
If this sounds like you, you need a startup budget. A startup budget will help you stop overspending and ensure that you’re only spending money on things that you absolutely need for your new business.
Intrigued? I’m teaching you how to make a startup budget for your new business so you can stop overspending and have enough to last!.
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Step 1: Determine your total budget number (2:10)
Step one of this process is to set a total budget number. A startup budget is separate from your regular business budget. Your startup budget is focused on the spending that you have to do in order to start your business.
When we talk about determining your total budget number, we’re not talking about your monthly expenses for your business. We’re talking about how much money you’re willing to allocate toward starting your business.
Let’s be real for a second. There are always things you have to invest in to start your business. It may be as simple as a domain name, but to me, that’s something that I would consider as part of your startup budget.
The reason we decide your total budget number FIRST is to keep your spending from going out of control. If you have a clear boundary to start off with, it’s a lot easier to say no to expenses that don’t fit into your budget.
If you don’t have a clear view of what you’re willing to spend, it’s harder for you to say no to spending.
Ask yourself: How much are you willing to spend to start your business?
Asking yourself this question ensures that you don’t get caught up in Shiny New Thing Syndrom. This question helps you discern what you can and can’t afford. When you have a number to use as your guideline, you’ll be less likely to purchase things that are outside of your budget.
When choosing your startup budget number, don’t pick a maxed out number. People tend to choose the highest that they think they’re able to do. Don’t pick the number that is going to stretch you beyond having a good quality of life. It’s rare that people stay under budget. They almost always go over.
There will be something that’ll be over budget that you’re going to justify buying it. That’s how we are with money. Which is why you shouldn’t choose your most maxed out number.
Choose a number that feels good and gives you what you need to start your business without stretching you thin. For example, if you have $5,000 in savings, $4,500 is a good total budget number. It builds you a cushion. Don’t pick $5,000 as your maximum budget because you risk going over budget and spending more than you allocated.
Step 2: List everything you’ll need to spend money on (7:55)
This is a brain dump list. Write down everything you think you’re going to need to spend money on. This is not like an organized list. This is not a categorized list. This is you sitting down for 10 minutes and jotting down everything swimming around in your brain that you think you’re going to buy.
Just write it down. Write it all down!
Start with big things that you’re anticipating. Then push yourself to go even deeper into what you’ll need to buy. Consider the little things that relate to the big things. For example, if you need to get headshots done, what about hair, makeup, and your outfit? Do you want to have props? All of those things are gonna cost you money.
Even if you’re not sure you’re going to need it, write it all down. What we’re doing is preparing ourselves for all the money we MIGHT need to spend in our business.
Step 3: Categorize as Essential, Nice to Have, Non-Essential (10:51)
You finished your big brain dump, and now it’s time to categorize the things you plan to spend money on as essential, nice to have or non-essential. Every single expense on that list will have one of these three categories assigned to it.
The essentials are things that you absolutely need to start and operate your business. If you plan on registering an LLC, an essential expense is going to be the filing fees. You’re mandated by law to pay these fees, so that’s an essential expense.
Everyone’s list of essential expenses will be different. For example, a photographer is going to need a camera. A graphic designer is going to need an Adobe subscription. A podcaster is going to need a microphone and audio software. These expenses are the things you must have in order to operate your business.
The “nice to have” category is typically software that you can technically work without. One example for me is Dubsado. I use it to send contracts and invoices but I could do that in other free ways. Quickbooks Online isn’t essential either because you can track your bookkeeping in a spreadsheet.
These are the “nice to haves” because, while they make your life easier, in the early stage of your business they aren’t necessary. A budget is all about the allocation of money and you want to start allocating your money with the most essential things first.
Then we have the non-essentials (which I refer to as “later” in the video). These are the things you don’t need right now. You can think about them later on, such as 3 to 6 months down the road as you scale your business. Don’t stress yourself out with these expenses while you’re starting out.
Want to watch a demo of my startup budget spreadsheet for this step? Tune into the video at timestamp 16:38.
There is no right or wrong way to categorize your expenses. It’s just important that you know what you’re going to need to pay for right now and then later on. This will help you budget accordingly.
So, using my spreadsheet template, fill in your brain dump notes by figuring out what’s essential, what’s not essential, and what can wait until you need it later.
Step 4: Start with the essential items and develop budget (20:00)
Now take a look at your essential items and assign spending caps. This is where you do the actual work of looking at how much money you have to spend. You’ll quickly learn if you’re giving a realistic stab at how much your expenses are going to cost.
In some cases, you’ll have a concrete number to spend, like if you’re purchasing software. In other cases, you’ll need to do some research to get an estimate of your costs.
After you’ve assigned spending caps to essential items, move on to the non-essential items. If you’re using my spreadsheet, as if you fill in the slots, you’ll be able to see the numbers adding up. From there, it’ll be easier for you to eliminate the non-essentials and the “nice to haves.”
I show you how to do this step in my handy dandy spreadsheet starting at timestamp 21:30 in the video. I show you where you’re going to fill in the estimated costs of your items.
Step 5: Adjust as needed (23:47)
Now you’re going to finesse your numbers as needed. Finessing your numbers means you’ll have to make hard decisions about your spending. Comprises will have to be made. This is the hardest part emotionally because you’re going to have to give some things up.
If you DO need to adjust your budget during this stage, lower your spending on some items or get creative with how you can save money. You may also need to cut out some line items if you can’t afford them. Seeing all the numbers right in front of you will allow you to get more realistic about your budget.
Tune into the video at timestamp 26:00, you can see how to allocate your money as needed in my spreadsheet.
Keep paying attention, my friend, because we’re not done yet! Once you’ve finalized your startup budget, you don’t just peace out and never look at your budget again!
Step 6: Track your actuals and update your budget (30:36)
There’s one last step to having a startup budget, and that’s to track your actual numbers and update your budget. When you have a budget, you have to refer to it. When you make spending decisions, look at your budget. It’ll help you figure out if you’re overspending or underspending.
Every time you spend money, check your budget FIRST. Then, plug in the actual expense. If that expense is less than you anticipated, then reallocate the extra money elsewhere. If it’s more, you’ll need to reallocate money from another line item.
I dived right back into the spreadsheet with a demo at timestamp 32:24. I show you how I color coded the numbers so you can see what you can afford and what you can’t.
There you have it! Those are the 6 steps that will help you create and manage your startup budget for your brand new business. Of course, you can download this spreadsheet because I made it just for you!