Freelance Home-Based Small Business Setting a Realistic Budget

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Setting a Realistic Budget For Your Small Business

by Craig Friesen

Setting up a budget for your business (any business) seems like a simple thing but my hunch is most people do not ever get around to it. I know that I went several months without actually drawing one up on paper although I think I had something in my head.

With a budget on paper (or computer), it is easier to keep yourself on track and not overspend. Extending your finances is one of the critical mistakes many new businesses offline or online make. Spend too much money on something that gives you no return on your investment and you can quickly find yourself completely out of funds.

Here is the budget framework I continue to work with. As you will see, the costs begin with the "necessities" and end up with "luxury" so if I need to cut anywhere I usually start at the bottom. However, with sales tracking in place you will also know whether a primary program needs to be dumped in which case you may also adjust the higher categories also.

Gladly Copy and adapt this Small Business Budget Guide for Your Own Use:

1) Web site and domain registration fees -

these are "hard" costs that you can't do without to run your business unless you are strictly working as an affiliate.

2) Program upgrades costs -

these are helpful but can be done away with if money becomes tight. The only thing to watch here is whether you lose anything if you change your mind after upgrading - with some programs it may mean losing your list or downline if you downgrade.

3) Advertising / Marketing costs -

I divide this up into 2 categories:

a) subscriptions fees -

I include my paid list building programs here, upgraded traffic exchange memberships, etc.

b) one-shot advertising costs -

paid ads or purchased traffic, etc.

4) Webmaster Tools costs -

I include my autoresponders and anything else that helps me do things I could do manually if I had the time or know-how. I bought a header creation program a while back and have used it a lot but it is still a "luxury" and I could have made do without it.

My total figure is the amount I can afford to spend without any returns. That is, if I earned nothing back whatsoever this is how much I can "afford" to spend. I think of it as a business expense and very few businesses make lots of money in their first year.

When I earn money, I consider whether I use it to add to my budget or help pay for costs - mostly that is dependent on what is happening with my family budget. This summer our vehicle needed a transmission replacement so for the next few months any commissions I made were used to reduce my out-of-pocket business expenses.

It took me several months to come up with a budget that was somewhat stable and consistent. Now I only increase my budget if I have residual income and if I do not specifically need that income to meet my family budget.

When programs become financially viable on their own (they pay for themselves, that is) I put a little star beside them on my budget chart. For me that is an initial goal - to break even in every program I participate in unless it is a program that is geared primarily for advertising.

There you have it! Build a budget that is fair but challenging. Tinker with it for the first few weeks or months then give it a fair trial without any major adjustments. At first this may seem like a chore you don't want to do, but once you realize how much money you were overspending or paying out on credit interest, you will love it!

Craig Friesen is the owner and CEO of FreedomdreamR.net - a growing collection of resources for work-from-home entrepreneurs. For the latest in home business opportunities visit: www.freedomdreamr.net