Startup Guide: How To Create A Budget For Your Startup

December 21, 2022

Startup Guide: How To Create A Budget For Your Startup

In the past, most people preferred a 9 to 5 corporate job, but trends are now changing and people are shifting towards startups.

Young entrepreneurs and millennials are now bringing their innovative ideas to life and starting small startups.

However, although starting a startup seems quite intriguing and exciting, there is a lot of hard work that one needs to put in in order to make their startup successful.

There are many things that one needs to consider before starting a startup, such as the scale at which the business will operate, their budget, feasibility and many other factors.

The budget should be the main element of every startup. No matter if you are starting a digital marketing agency at a small scale or a huge corporate company, you will need to have a budget.

Many people find it hard to set a budget, and then end up going way overboard, which ultimately makes things difficult. So if you are having problems with budgeting, it is best that you take professional consultation from a certified business builder.

Also Read: 3 Personality Traits That Can Help You Start A Startup

There are some simple steps that can help you make a budget for your business. If you need to learn about those steps, then keep on reading our startup guide to learn more about the tips and tricks of setting a budget for your startup.

Calculate Your Average Revenue

Calculating your business’s average income is the first and foremost step in setting up your startup budget.

In business, revenue refers to the amount you expect to earn through the sale of goods and services. An income projection is a forecast of the total income you will make over a period of time, usually a year or one month. Make a list of all your income sources and add them up.

If you run a restaurant, you might include sales from in-person dining, deliveries, and curbside pickup. For example, if you also sell prepared foods, include the sales from that revenue stream.

An existing business revenue can be estimated by looking at its historical sales figures. If you are predicting your revenue, use the last three months or the same month a year ago as a guide. The best estimate for a new business can be made by looking at competitor sales and market trends.

Minus Your Fixed Cost

Once you have calculated your revenue, it is time to subtract it from your fixed cost. Your fixed costs are any expenses you incur on a recurring basis to operate your business. Here are some examples of fixed costs:

  • Taxes
  • Rent
  • Insurance
  • Employee payroll
  • Hostings

Calculate all your fixed costs for a set time period, such as one month or a year and then subtract that amount from your total revenue.

It is easier to calculate fixed costs rather than revenue as your revenue will keep on changing while your fixed costs will remain the same for months and even years. For instance, your rent will remain the same unless you change your accommodation and go into an expensive area.

So once you have calculated your revenue, it will be very easy to calculate the fixed costs of your business.

Calculate Variable Expenses

After subtracting the fixed cost from your total revenue, it is time to calculate your variable expenses.

Variable expenses are the ones that keep on changing from month to month, such as:

  • Equipment costs
  • Travel expenses
  • Activities
  • Marketing costs
  • Utilities

All of the above-mentioned expenses are ones that will keep on fluctuating, so calculate the variable expenses for the same time frame for which you calculated your fixed costs and then minus the amount from your revenue.

Once you have subtracted the fixed and variable costs from your revenue, it will give you the amount you will earn from your business, and if you add the fixed costs and variable costs, it will give you the amount you will need to run your business.

About Raja Abbas

Raja Abbas is the president of Reach First, a certified digital marketing agency that operates in two different continents. In addition to this business, he has served as a business consultant for many companies in North America. His top specialization is increasing profits and streamlining business processes. He aims to empower the youth of Pakistan so that they can contribute to its economic growth. If you have any questions, feel free to contact him.

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