Budgeting Tips Every Entrepreneur Must Know

Budgeting Tips Every Entrepreneur Must Know

Creating and maintaining a budget is an essential skill every entrepreneur must learn. The budget is an integral part of business management and a way to manage finances. With a good budget, your business runs smoothly, cash flow is managed, bills and salaries are paid, and operational costs are handled efficiently. Use these tips to take control of your finances and improve your budgeting skills.

Keep Business and Personal Finances Separate.

Mixing business and personal finances is a common mistake among entrepreneurs. Funneling money and credit to your business from your personal account and vice versa is often tempting, particularly at times when you want to maintain a good cash flow. However, this will have negative consequences to your finances, both business and personal. By keeping them separate, you can prepare a straightforward budget and a clearer, more accurate estimate of your sales, losses and profits.

Learn to Prioritize Expenses.

Running a business can be exciting and your enthusiasm can make it easy to lose touch with your budget. Avoid overspending by carefully assessing what you are about to spend for and how that expense will help/impact your business later. Only if an expense can help improve your processes, bring in more assets or increase your profits should you consider it.

Keep a Record.

Create a system for keeping your documents for easy reference later. Business receipts in particular should be recorded and stored regardless of the amount. If necessary, make photocopies of important papers and keep them in a separate file. These, along with invoices and receipts will give you a better understanding about how your business is doing and help you create an effective working budget.

Prepare for Taxes.

Do not underestimate how taxes can affect your budget, so set aside money (preferably cash) in your budget to pay for taxes. It is a good idea to plan ahead and set aside cash from your revenue for this purpose. Having enough put aside for taxes will save you the unpleasant surprise that come with tax expenses you are unprepared for, the expense of late fees and the inconvenience of an audit.

Keep a Cash Reserve.

As an entrepreneur, you can expect your income to fluctuate. You may earn more on some days or you may even run your business at a loss initially. To prepare for surprises, always put aside at least 5% of your income to pay for any unforeseen expenses that might occur.

Note Your Expendables.

As with all business-related expenses, there are some things that you can do without in case business is not doing so well or if you need to spend for something important. Know which expenses these are so you can remove them from the expense budget without hurting your business operations.

Consider Allowances in Your Budget.

When you prepare a budget, set up a reasonable allowance for unexpected expenses. This will help ensure that you put aside more money than what you might need. In case of changes such as price increases, miscalculations or an expensive but necessary purchase, you will have enough to cover for the expense.

Review Your Budget.

Perform a monthly review of your budget to determine where you are at the moment. Over time, you will be able to see a pattern of spending and identify areas of improvement. Comparing the budget forecast with the actual expenses can help you determine which steps to take to increase your profit and improve your operations. Over time, you may have to work with a professional bookkeeper for this but having the capability to review and understand your budget will help you create better, more effective strategies for the success of your business.

The E-Myth Revisited: A Book Review

The E-Myth Revisited: A Book Review

The E-Myth Revisited, by Michael E. Gerber, is a book that focuses on why so many small businesses fail to attain their goals. And to express his thoughts and opinions or deliver the message, the author incorporates several fictional business owner characters. The narrative also makes significant references to systems at the workplace, and how they dehumanize or not dehumanize the employee.

Major Takeaways from The E-Myth Revisited

The E-Myth Revisited has a lot of uplifting words and suggestions for budding entrepreneurs to excel in their respective ventures. The advice doled out isn’t specific to a particular product/service or industry, but is generic that could apply to a range of businesses. The following are some of the primary things we learned or were forced to ponder over after having done reading the book:

• The author clearly explains why most businesses fail. One of the reasons being most individuals start businesses to be their own boss or make profits. Only the minority sees a business venture as an opportunity to work for and under themselves. And to be an efficient employee of your own business, one has to learn the technical skills needed to excel at the vocation.

• An individual cannot don all business hats. For a business to sustain or your interest to stay intact, it’s important to delegate work and not put a one man show. Most small businesses, to survive and succeed, need three people: a manager, technician and entrepreneur. And a person will get exhausted by the end of the working day or kill his motivation and passion for the business if he tries to be all the three.

• A business must have a system or process to itself that can be replicated. The business owner’s efficiency and profits tend to be higher if he can systematize proceedings. This makes it easier to train people and make them do the expected. Most small business owners fail at this aspect. They don’t have a system in place, and those who do have one have a system that may get dated with time or isn’t designed keeping in mind the prospects of the business becoming bigger in the future.

• To succeed, a business not just needs an excellent idea but the owner should also be qualified to know how to run a business. Your business schools may help you learn business skills in a scattered manner, but this book makes you more eligible to start and run a business.

Areas Where the Book Falls Short

This book by Michael E. Gerber may be quite popular and have its dedicated fan base, but this doesn’t mean the book is without its flaws. For starters, quite a few people have complained about the narrative being stretched out to last more than 250 pages, which could have been easily skimmed down to below 100 pages.

Also, some critics have indicated that the author, in order to validate his point, invents new characters during several stages of the prose. This approach was not just repetitive but was also annoying to a certain extent. And not to mention the ad placements for his own company within the text.

Conclusion

Overall, it’s a great book for people who’d like to start their own business or individuals who are already heading a business but would be better off learning a few essential tips and tricks. However, as aforementioned, the book is a bit too long and it could be hard to finish this book if you’re not an avid reader. Fortunately, the book is also available as CDs, which you can hear to. But since most people read books and not listen to them, we felt this point had to be highlighted.

5 Helpful Tips For Every Entrepreneur

5 Helpful Tips For Every Entrepreneur

You will likely need employees that can help you turn your business vision and plan into reality. As such, you should hire people with the relevant skills and education qualifications. Moreover, candidates for senior positions should have a reasonable level of work experience. For instance, most businesses require chief operating officers (COOs) to have an MBA because it equips one with the skills required to run an organization professionally.

Nevertheless, some companies prefer experience rather than educational qualifications when hiring staff to fill certain positions. A good example is Facebook, which hired George Hotz alias geohot in 2011 – an American hacker renowned for unlocking the iPhone – because he has unique IT skills that few people in the IT community possess.

Organization

You should be well versed in organizational management best practices including data driven decision making and six sigma principles. The beauty of these practices is they have been market-tested by both big and small businesses and proven to work. In addition, they enable businesses to reduce wastage of resources, enhance supply chain cycles, and improve business-consumer relationships. At the same time, you should keep abreast of new developments related to such practices and implement them where necessary.

Marketing

When developing marketing strategies, you must consider your target audience, message, marketing timeline, marketing channels, and marketing message format. For instance, most businesses develop marketing strategies that include a social media angle because social networking sites including Facebook, Twitter, and LinkedIn attract more than a billion visitors every day. What’s more, marketing on these sites is cheaper compared to advertising on traditional platforms such as TV, newspapers and radio.

Budget & Tracking

Lack of proper financial planning is one of the leading causes of business failure according to the US Small Business Administration (SBA). As such, it is wise to follow acceptable budgeting practices such as separating business and personal finances. At the same time, track and keep records of all financial transactions to make preparation of tax returns easier and error free.

Conclusion

Entrepreneurs typically face numerous challenges when starting and running businesses. Luckily, you can make this process much easier by turning your entrepreneurship vision into a detailed plan, building the “Right” team, adopting solid organizational management best practices, developing well thought-out marketing strategies, as well as following acceptable financial budgeting and tracking principles.

How to Succeed in Business

A good business starts with a great idea. It can’t be just a vague idea but a dream that can be adapted into solid reality. The most successful firms start with a plan before anyone ever tries to put that business into practice.


Business-Success-Andrew-Dorko


Start with a Plan

No investor or lender will supply money without seeing spreadsheets that show anticipated overheads, capital expenses, and projected income. A written outline describes assets of location, advertising ideas, employment requirements, supply chain details, plus many other facets of business planning.

Investors want an outline of your career and education as proof you are the right person to start this company. A personal outline would show your studies and accolades related to business and marketing. Investors want to know why you chose a particular product or service to sell. Are you especially skilled in this area or inspired by market research?

Setting Goals

Even the employer of a minimum-wage grocery clerk would like to know if employees aspire to enter university or rise through a company. This helps them to determine who will stick around for the long haul, who is suited to a position with the public or in stock-taking, and who might be potential management material. Investors, lenders, and potential partners will ask why a person would want to start a firm and also his or her plans for the future. Does this person have aspirations to grow and change with the evolving commercial scene? Is he or she confident and aiming high or perhaps aiming too high? If someone is going to become financially involved in this concern, the firm’s founder has to be realistic but also show potential for growth.

Building Relationships

You can come at a commercial enterprise as a professional who knows business or as an expert in some field. Each type of business owner will need to work with the opposite sort of individual to create something successful. Although the trained business person understands the needs of investors and how to conduct and use market research, the skilled artisan or chef knows how to provide a service effectively.

Investors are keen to know where partners got the idea to work together and what will help them to gel. A strong team will work through difficult times, finding creative solutions to problems and raising a struggling new business to its feet. If you want to start a firm, make sure you can speak honestly to team members and that you have a plan to build relationships which are based on trust and integrity.

Implementation

If you did everything above and made sure the supply chain operated smoothly, your professionalism will be apparent. After setting an opening day, be ready to give customers what you promised from the start, no excuses. Be ready, also, to roll with a few minor hiccups.

Continuing the Dream

It’s tempting to take a break when the hard work has finished, but don’t get lazy. Follow up with social media, find ways to connect with customers, and nurture this budding business. Continue to foster a strong team and watch the numbers carefully, but allow the dream to encourage you through the long days of business ownership.