SolveYourProblem
Article Series:
Start
A Home Business
Plan
for Every Business Expense
by Jeff Cohen
Developing a budget for a home business start-up
is more of an art than it is a science. No matter how exactly
you think you’ve pinned down all your expenses, it never works
out that way in the end. It’s guaranteed that more business
expenses will appear that you either didn’t think of or just
could not have predicted. That’s why you need to make sure
that you always plan for every possible expense.
Things Break
Remember that any equipment you buy can go wrong, no matter
how expensive or high-quality it was (this is especially true
of anything IT-related!) When things break, you probably won’t
need to buy a new one, but you’ll at least have to wait for
the manufacturer to replace what broke. This can lead to days
of lost or less-efficient business, and cost you money. Budget
for equipment failures.
People are Unpredictable
When you hire staff, you have no way of knowing that they
aren’t going to let you down. You might have worked out that
it takes $200 to train one new staff member, but what do you
do when that newly-trained staff member quits and moves to
London after three weeks at the job? You’ve got no choice but
to train someone else and take the loss. Budget for staff turnover.
The World is Against You
Or at least it can sometimes feel that way. Just when you’ve
got everything perfect, someone sets up a little construction
site next door, and drives your business away. Or maybe it
rains for a few weeks, meaning that there’s just no demand
for your bouncy castle hire business. Whatever, you need to
budget for times when you’ve got no customers – and make sure
you have something else to be getting on with in the meantime.
Customers are Out to Get You
‘The customer is always right’, right? Well, yes, but their
‘rightness’ can sure cost you a lot of money. You have to be
prepared to take huge losses to pay off complaining customers.
Remember that one unhappy customer can undo hundreds of dollars
worth of marketing efforts – once you make a customer unhappy,
your options are to take a loss fixing the situation or to
take an even bigger loss when they tell everyone how you didn’t.
The only way to avoid this expense is to please all of the
people all of the time, which just isn’t possible. Budget for
unhappy customers.
Competitors Kick You When You’re Down
If one of your competitors spots a good opportunity to take
some business from you, they won’t hesitate. You need to have
a ‘war chest’ ready to make aggressive offers and marketing
efforts, and be prepared to get into a full-scale price and
advertising war with the competition. It’s massively frustrating
to be in a position where your rivals are getting all your
business simply because you already used up your marketing
money for this month. Budget for war.
Double Your Budget
Whatever happens, remember that under-budgeting is the worst
mistake you can make. It’s known as ‘under-capitalization’,
and is generally thought of as one of the quickest ways to
kill a business – anyone who might be willing to give you finance
will just think you’re a fool if you’ve under-capitalized your
business, and might even refuse to lend to you.
Most home businesses budget only a few thousand dollars for
their expenses (if they even create a budget), thinking that
they already have everything they need. People don’t
realize how quickly little costs like having some business
cards made
or getting your suit dry-cleaned start to add up. This doesn’t
apply for other kinds of business, but if you’re like 99% of
home business starters, you really ought to double your budget.
If you doubt me, start adding up all your ‘little’ expenses
over a year, and see what happens.
Budgeting for every expense in your initial plans shows that
you’re not the kind of person who thinks that everything’s
going to go right for them. Instead, you’re a practical businessperson
who knows that anything that could go wrong probably will,
and you plan to make a profit anyway. There is a difference,
after all, between arrogance and cool-headed determination,
and it’s one that the people with the money want to see. # # # # # SolveYourProblem.com : 2007
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