If no one has told you yet, let me be the first to tell you that budgeting does not have to be overwhelming or impossible! While there are many amazing financial advisors out there who can help you with your budgeting tasks, you can, indeed, learn how to budget on your own if you don’t have the budget to outsource yet.
You already know that budgeting is a requirement for running a successful business. Yet still, so many small business owners come to me not knowing much about budgeting or even their own finances because budgeting seems like a heavily tedious task, it’s intimidating dealing with large numbers, and it requires a different kind of cognitive effort than the creative (aka more fun) tasks.
I’ve learned to love budgeting, but trust me when I say it took quite a bit of trial and error to get to the place where I’m at now where budgeting season is exciting! (I know, I’m still surprised I can say that.) And that’s because budgeting helps me plan out how to grow and scale my business for the following year.
If you’re like most business owners, then you’re probably feeling exhausted just talking about thinking about budgeting. I want to help you confront this fear, though. So I put together three tips to help you create a budget that you’ll not only stick to but it’ll help you heal the relationship you have with your business’s finances.
P.S. If you’re a visual person, you’ll want to download my (free) budgeting template and look at it side-by-side with this post. It will help you see exactly how to lay out everything in a clear way. Click here to download it!
1. Write down all of your expenses
When I say write down all your expenses, I mean literally all of your expenses. Every single dollar you spend in your business, even if it’s a simple $2.50 charge, needs to get written down. It may seem silly or unnecessary at first, but you would be surprised at how these little charges add up.
Writing every expense down can also show you precisely where your money is going each month. You are essentially collecting data to see if there are any areas you need to budget down on, any areas you can spend more on, and if you have any recurring charges you forgot about or can drop.
This step lays the foundation for creating your budget and consequently, planning how you can grow and scale your business. When you can understand your finances down to the cent like this, there is no room for hesitation on which areas to expand in and which areas to cut down in so you can set your business up for success.
2. Write down all of your income
Knowing how much money is flowing out of your business is truly the most difficult step. After you complete it, the steps get easier!
So now that you know how much your business spends a year, calculate how much income your business is making. Right now is not the step for net income, just your income as a total for the year. It’s best to also grab data on your income from last year so you can compare growth and estimate what you could earn the following year.
This can be an emotionally and mentally challenging step for most business owners because sometimes your business isn’t making the money you hoped it would be. Maybe it’s not even making any money at all. I’m no stranger to this, and I was in this spot at the beginning of my entrepreneurial journey. But this is why planning out your budget in this way can be so helpful — now you know exactly where to improve and how to price your skills and services. If you’re struggling with finding your value as a service-based entrepreneur but want to change your outlook on making money from your skills, you would love this podcast episode. In it, I talk about the financial stresses I faced as a fairly new business owner and how I shifted from unsure to believing in my value.
3. Calculate your growth
Now that you have the exact dollar amount you’ve spent on your business and the income you’re racking in, take a look at the net worth. Are you over your budget (you have more expenses than your income or under (you have more income than your expenses)?
If you have more income than your expenses, then that’s awesome! That means you can move on to focus on growth and scale. That could look like hiring a team member, taking a new course or education program, upgrading your current software to make your processes more streamlined, and more.
If you have more expenses than your income, no problem! Budgeting is meant to expose you to how you can use your money more efficiently, and so this is great that you figured this out now. In this case, it’s time to trim your budget in certain areas. Take a look at all your expenses and assess which ones you can do without. Are there any recurring charges you don’t need any more or charges you completely forgot about? Where can you increase revenue?
Diggin’ the budgeting queen
Hopefully this blog post helps you feel empowered to take charge of your finances! When you can break down your budget into smaller, bite-sized steps like this, calculating what you can and can’t afford in your business can feel a lot more manageable. Not to mention, knowing your finances intimately will help you start charging what you are truly worth!
And hey, since you’re here being a rockstar CEO, I want to let you know that on Oct. 27, I’ll be hosting Create Your 6-Figure Plan once again due to popular demand! This is an intimate, 3-hour workshop designed to help you and like-minded creative entrepreneurs create a killer budget for 2022. We will…
- Review your packages to ensure they’re profitable for your business
- Set actionable goals to achieve (or even exceed) your proposed budget
- Have plenty of time to collaborate and interact with not just myself but also the other members of the workshop
There are limited seats available, so click here to claim your spot before the class fills up!