Many startup founders find themselves in a difficult situation when it comes to budgeting: they simply don’t have enough money to pay themselves a salary, but they also need money to live on with Payleadr. Often this means that they have to get creative with their finances and make sacrifices along the way.
Trying to run a company while making ends meet with a part-time job or by living off of savings is not sustainable. That’s why it’s important to come up with some sort of budget plan early on that will allow you to keep your business going while still getting paid. Here are tips for doing just that.
1. Establish expenses
The first thing you need to do is establish how much money you really need each month for your lifestyle. This includes things like rent, utilities and food. It’s easy to get caught up in the moment and spend more than you can afford when starting a business, so having an estimate of your expenses is important so you know what you can afford before accepting new projects or going out for dinner.
2. Home budget
This personal finance tool allows you to create budgets, define occasional or recurring expenses, track your income and your credit cards’ balances, and more. It’s free, but with additional features available through a monthly or annual subscription. Home Budget is available on the web and as a mobile app on iPhone and Android.
3. NerdWallet Budgeting Tool
NerdWallet offers an online budgeting tool that allows you to track income, savings accounts, credit cards, bills and assets. It also integrates with Mint to pull in account information already linked to your Mint account. The free version of the tool allows you to create one budget; the Pro plan ($12 per month) allows multiple budgets, unlimited monthly transactions and bill reminders. NerdWallet’s Budgeting Tool is available on the web and as an iPhone app.
4. Start with 50% of your projected revenue
This formula works because it takes into account all your expenses and divides them by two. It will leave you with some money leftover as a cushion for when things go wrong or when new opportunities arise.
5. Set an incremental growth goal
If you want to grow 1% each month, that requires you to make 1% more than usual every month. That way, it doesn’t take a huge leap in revenue to hit your goal and you can stay within budget.
6. Set a goal
The first step is to set a goal. Do you want to increase your startup’s revenue this month? If so, by how much? Or are you trying to reduce your spending? If so, by how much? These goals will help you focus your budgeting efforts.
7. Divide and conquer
Once you have your goal in place, think about what needs funding. Are there specific marketing campaigns that will help meet your revenue goals? Are there specific cost-saving steps that need to be taken in order for you to reduce your spending? Once again, be specific with these questions because the clearer you are about what exactly it is that needs funding, the easier it’ll be for you to actually achieve the results you’re looking for. Put It in Writing
Finally, once all of this is figured out, write everything down — both your goals and what needs funding.