Do you have a budget for your handmade or creative biz?
Ya, I know, that’s kind of a personal question isn’t it? Sorry if it’s a little too personal – but here’s why I’m asking………
- We’re half way into the year {YIKES!}
- Are you on track to meet your goals?
- Are you hitting your financial targets?
- Has your income been steady but you’re wondering where the money went?
- Do you have a budget for your biz?
Last time I mentioned the importance of having a budget in 3 things every handmade/creative biz owner must do – Bookkeeping basics, so I thought I’d dig a little deeper this time.
If you don’t know if your hitting your financial targets, are wondering where your money went, and you don’t have a budget for your biz …..
Well, you NEED one! Plain and simple.
A budget is telling your money where to go instead of wondering where it went.
I really like that quote by Dave Ramsey and really it’s pretty simple – nothing more than a fancy “estimate” of how much you think you’ll spend and make.
Why you need a budget for your handmade or creative biz
Ok, so silly me – I think EVERYONE needs one.
It’s like a financial road map that you can follow throughout the year so your money doesn’t get lost.
Knowing where the money you earn in your business is ACTUALLY going and where you NEED it to go can often be totally different.
Think about that last big impulse buy you made (because it was such a great deal) that you now regret – because NOW you’re short on cash to pay your normal bills ….
Knowing where you money needs to go is important when you’re making decisions about what you can and can’t do financially – that includes personally as well as business wise.
- Maybe you know that your summer months have slow sales and you need to watch your expenses carefully during that time.
- Or, it’s the beginning of the year and you know your computer is on it’s last legs and that you need to save up to buy a new one.
Having a estimate of what you need for money will help you to PLAN for both of those situations.
By now you’re probably wondering………
How in the heck do I go about creating a budget for biz?
I’m so glad you asked 😀
Let’s start with what you’ll use to create one:
- pen and paper (the good old fashioned way)
- a spreadsheet program (a little fancier)
- your accounting software (super easy – especially if you have last years data already there. Heck it almost creates itself)
Now let’s focus on how to get started. First we’ll look at expenses:
- what expenses (and how much they are) do you have on a monthly, quarterly, or yearly basis?
- what other things do you plan to do throughout the year and when? (think that computer purchase)
- list them all out with the dollar amounts and total them up by month, quarter and for the year
Next, let’s look at income. This one is going to be a little tougher……
- use last years actual income as a starting point
- as a brand spanking new biz – then your budgeted income should be at least the amount of your expenses (and you’ll know EXACTLY how much money you’re going to have to take out of your own pocket)
- if you’re a designer and you sell your patterns to a magazine, you’ll know how much they’ll pay you and when – so use those numbers
Now you have the basics for creating budget. Yeah you!
But wait, there’s more…….
Once you have your budget mapped out you have to USE it – you can’t just stick it in a drawer or folder and forget about it till the end of the year.
You have to haul it out every month and compare it to what you REALLY had for income and expenses, so you can see how you did.
This is called a budget vs actual (or an Estimate vs Actual) report. It allows you to compare what you “figured” you’d have for income and expenses vs what you REALLY had for income vs expenses.
Review these numbers carefully.
- Are you spending more than you planned? (Watch out for those impulse buys.)
- Did you have to take more money out of your own pocket than you anticipated? (How’s the family going to feel about that and how long can you continue to fund your biz?)
As a brand spanking new biz, it’s easy to “justify” (to yourself anyway) spending your own money to get your biz up and running. But you also need to keep any eye on how much money out of the family budget you’ll need each month.
Do you have a budget?
- If not, are you going to create one?
- If you do, are you actually using it?
Give me your thoughts – or feel free to ask any questions in the comments below.
Better yet, why not hop on over to Facebook and join the free community.
