Here’s What You Should Spend Money On as a Small Business Owner
Ready to navigate the money maze without the headache? I get it—finances can be as confusing as a GPS without signal. But today, I’m breaking it down into a simple, no-nonsense formula for your business budget. It's like having a friend who's really good at saving money and spending it wisely. So, grab a comfy seat, your favorite beverage, and let’s make financial planning the coolest thing since sliced bread. Because let's face it, who said money talk has to be dull? 💸✨
First Things, First, Budget Basics for Your Small Business
When it comes to balancing the budget for your small business on a month-to-month basis, a straightforward rule of thumb is the 50/30/20 rule. This popular budgeting guideline provides a simple framework for allocating your business income across three essential categories: necessities, wants, and savings.
Here's a breakdown of the formula:
50% for Necessities: Allocate 50% of your business income to cover essential expenses. This includes fixed costs like rent (if applicable), utilities, insurance, and any other necessary bills for running your business.
30% for Wants: Dedicate 30% of your income to discretionary spending or "wants." This category includes non-essential but beneficial expenses such as marketing and promotional activities, additional software tools, and any other investments that contribute to the growth and well-being of your business.
20% for Savings: Set aside a solid 20% of your income for savings. This can act as a financial cushion for unexpected expenses, contribute to future business expansion, or serve as a personal emergency fund.
Why Tracking Your Numbers/Financials Matters in Entrepreneurship
Foresight and Strategy: Keeping an eye on your numbers is like having a crystal ball for your business—minus the mysterious fog. It's not just about crunching numbers; it's about having the foresight to make informed decisions and plan for the future.
Spotting Trends: Your revenue and expenses aren't just data; they're the cool detectives helping you solve the mystery of business success. Recognizing trends is like having Sherlock Holmes on your financial team—minus the deerstalker hat. Are sales spiking during pumpkin spice season? Are expenses doing the cha-cha every Friday? Knowing these patterns lets you dance through opportunities and sidestep challenges with style.
The Dangers of Not Knowing Your Numbers:
Financial Blind Spots: Running a business without knowing your numbers is like driving with a blindfold—exciting until you hit a pothole. It creates financial blind spots, leaving you vulnerable to unexpected storms in the business sea. Without a clear picture of your revenue and expenses, you might miss crucial financial warning signs, potentially turning your ship into the Titanic.
Cash Flow Crunch: Ignorance may be bliss, but not when it comes to cash flow. Neglecting to track your numbers can lead to a cash flow crunch—picture a dramatic movie scene where the hero is just short on funds to disarm the ticking financial bomb. This can result in missed opportunities, late payments, and a soundtrack of stress.
Strategic Stagnation: Your business is a dynamic entity, not a sitcom on repeat. Not understanding your financials is like skipping the script and hoping for the best. Without a grasp of your numbers, strategic planning becomes a game of pin the tail on the growth strategy. Spoiler alert: blindfolded business rarely leads to blockbuster success.
Practical Tips for Tracking Your Business Financials:
Set Regular Checkpoints: Establish a routine for reviewing your financials. It's like a weekly business workout, ensuring your financial muscles stay flexed. Regular checkpoints help you stay on top of your numbers, preventing them from going rogue and causing financial mayhem. I always have an actual meeting on my calendar at the end of the month to do my monthly accounting. If I don’t actually put it on the calendar, there’s a high probability I won’t actually stick to it and do it. I also utilize Honeybook to easily track every dollar that goes into my business and every dollar that gets spent. This comes in handy for tax season! Keeping track of your income and expenses in your business as you go is like giving a little gift to yourself come April. If you’re organized now, Tax Day doesn’t nearly have to be as stressful for us small business owners!
Seek Professional Guidance: If the financial side of your business feels like navigating a labyrinth, consider asking for some help. An accountant or financial advisor is like your own personal Yoda in the financial galaxy, providing wisdom and ensuring your business doesn't turn to the dark side of financial mismanagement.
Tracking your revenue and expenses isn't just about numbers; it's about making financial management a little more whimsical and a lot more effective. So, put on your financial wizard hat and let the magic of informed decision-making begin!
Essentials for the Small Business Budget
Office Supplies
Office supplies, from the humble pen to the mighty printer ink, are the trusty sidekicks ensuring your business battlefield is well-equipped. If you're shipping products, packaging materials are like the armor, securing your goods as they journey to their destinations. Don't forget postage or shipping fees, the secret passage connecting you to your customers, making sure your products reach them in style.
Marketing & Promotion
In the realm of marketing and promotion, your business takes center stage. Professional brand design functions as a captivating poster, defining your brand and making an impression on your audience. Website development or maintenance ensures a seamless online experience for your customers. Graphic design services add flair and personality to your brand, contributing to its unique identity. Business cards and promotional materials act as invitations, welcoming people into the world of your business. And, of course, your Email Marketing Platform (I recommend Flodesk) serves as a tool for direct communication, connecting you with your audience and making them feel valued.
Education & Training
There’s a lot of corporations out there that have budgets for continued education for their employees, so why don’t we as small business owners do this for ourselves? Investing in education and training is like fueling your business with superpowers. Online courses and workshops are the magic spells that enhance your skills and knowledge, giving you the ability to conquer new challenges. Professional development resources act as the treasure maps guiding you through the uncharted territories of your industry, helping you stay ahead of the competition.
Technology & Software
In the realm of technology and software, envision them as essential tools in your business toolkit. Your devices, such as computers, laptops, and iPads, bring your ideas to life. For artists or designers, a printer for artwork serves as the canvas for turning imagination into tangible creations. Cloud storage services secure your data, ensuring constant accessibility. Lastly, website hosting and domain fees form the foundation of your digital presence, allowing customers to explore and connect with your business.
Insurance
Ensuring your business has a solid safety net is like giving it a superhero cape. Business insurance, if applicable, acts as your business's shield against unexpected villains that could threaten your financial peace of mind. Liability insurance, on the other hand, is like having a sidekick that protects you from unforeseen accidents, giving you the confidence to navigate the unpredictable terrain of entrepreneurship.
Professional Development and Conferences
Investing in attending conferences and professional development events can provide valuable networking opportunities, industry insights, and knowledge sharing. It's a great way to stay updated with the latest trends and connect with like-minded professionals.
Accounting & Bookkeeping Services
Hiring an accountant or bookkeeper can help ensure accurate financial record-keeping, tax compliance, and financial reporting. It can save you time and provide peace of mind knowing that your financials are being handled by a professional.
Photography & Videography
Professional visuals are like the life of the party, strutting their stuff across your website, social media channels, marketing materials, and advertisements, injecting your brand with tons of visual appeal and a serious dose of pizzazz! Great visuals can attract customers, increase engagement, and contribute to the overall success of your business.
If you’re not yet in the financial position to pay for a cost like this, don’t worry! We have to cut corners somewhere, and while all these expenses might feel necessary right now, they’re not all an absolute necessity. There’s certainly things you can get by without if needed. BUT, just because you might not have the budget for a photographer doesn’t mean you can’t capture great visuals for your business. Check out my free guide on how to take photos for your business like a pro!
Hidden Costs People Don’t Tell You About
Bank fees: Bank fees are those sneaky costs that quietly impact your bottom line. They represent the toll you pay for the convenience of financial services. While individually small, these fees can accumulate, underscoring the importance of monitoring them closely to safeguard your hard-earned earnings.
Credit card processing fees
Credit card processing fees act as toll booths on the transaction highway. They facilitate smooth customer journeys through the purchase process, yet come with a minor toll on your revenue. Acknowledging and understanding these fees is crucial for navigating the financial highway strategically and ensuring your business remains financially sound.
What I Spend Money On in My Small Business Budget
Email Marketing Platform:
Flodesk Flodesk serves as the backbone of my email marketing strategy. It empowers me to create visually appealing and effective email campaigns that resonate with my audience. With features like intuitive design templates and automation tools, Flodesk enhances the efficiency and impact of my email communication. I’m a designer, but even for those that don’t know their way around branding, Flodesk has the tools to make designing beautiful emails so easy, even a caveman could do it.
Website:
Squarespace Membership/Domain (yearly expense): My website is the heart of my online presence. I’m learning this in real time after years of not prioritizing it the way that I should have. I don’t own my Instagram profile (as much as I’d like to think I do), but my website is one platform I actually do own. So it’s important to put time into this! The Squarespace membership and domain fees cover the annual costs of hosting, ensuring a seamless and professional experience for visitors. This investment supports the maintenance, customization, and overall performance of my website.
Contractors:
An Assistant, and a Freelance Designer when needed: As the demands of my business grow, so does the need for additional support. Investing in an assistant has been one of the best decisions I have ever made for my business. I wish I would have done this sooner! On a project basis, collaborating with a freelance designer also comes in handy when I need a PDF designed for email list or if there’s a graphic design task I can outsource. I don’t always do this, but when my plate is extremely full, it is the sweetest sigh of relief to move a few design tasks off my plate and onto someone else’s. My artwork has a very unique look though, so I’m very selective about what I outsource, and it’s usually only for tasks that the brand and design elements are already made, but just need to be arranged, formatted or pieced together for something new.
SEO Services:
I started taking SEO optimization seriously this year and decided to invest in SEO copywriting to ensure that I am using the right keywords. While I’m still learning a lot about SEO, I realized that when it came to updating the services on my website, I was struggling to come up with ideas. It felt great to outsource this task to someone else. Writing is one thing, but copywriting with a focus on SEO optimization is a completely different skill. I understood that outsourcing this work would incur a short-term cost, but it would be a long-term investment in the future and overall success of my business. This way, I can find new leads and continue to grow without relying solely on Instagram.
Attorney Services/Contracts and Agreements: One thing I knew I finally needed to stop DIYing this year was my contracts. I wanted to ensure I had all my bases covered and that my contracts were enforceable in the event of a violation of terms, so it was time to ensure this was done right. Solid contracts safeguard my business from potential legal pitfalls and establishes clear guidelines for collaborations and transactions. Now I’m working with an attorney to ensure all the different types of contracts I have are updated and reviewed by a professional. I sleep better at night knowing that this part of my business is no longer a DIY job!
I’m starting to get more comfortable with investing in my business and paying for larger expenses, but it wasn’t until recently, and that’s after being business for 5 years. I’m finally learning to give myself permission to invest in the future of my business!
Project Management System:
Notion: Notion acts as my centralized hub for project management. It's where I organize tasks, collaborate with team members, and track project progress. I can tailor it to fit my unique workflows and make project execution a breeze. It's seriously the secret weapon that keeps my business running smoothly. It also houses client portals for all my monthly marketing support retainer clients. It's like having a VIP lounge where they can access all the important stuff. I've been using Notion for over a year now, and let me tell you, once you go Notion, you never go back! It's become my trusty sidekick and the secret sauce that keeps my business running smoothly.
Design Platforms:
Adobe Creative Suite: Adobe Creative Suite is the powerhouse behind my design endeavors. This is one of those costs for graphic designers that’s just an absolute. Non-negotiable. Depending on your industry/business, your non-negotiable/necessary expenses might look a little bit different than mine!
Envato Elements: Envato Elements provides a treasure trove of creative assets. From stock photos to mockups, templates and graphics, this subscription service broadens my creative palette. I love using Envato specifically for the amazing fonts they offer. Envato is stocked with amazing options to choose from whenever I’m scouring the web for the perfect font pairing for a new business branding client!
Canva Premium: I know a lot of graphic designers are Canva haters, but I’m not one of them! I love utilizing canva for work with my assistant as well. I’ve made a bunch of Pinterest Pin templates for her on Canva so she can easily go in and make new pin graphics with the templates and get pins shared online quickly. I wouldn’t expect her to be proficient in a complicated platform like Adobe Illustrator, so Canva is the perfect way for us to collaborate.
Tezza App: The Tezza app is my go-to for photo editing, adding that extra touch of creativity to my visual content. Its user-friendly features and filters elevate the aesthetics of my photos, ensuring a cohesive and polished look across various platforms.
Epidemic Sound: Epidemic Sound is my source for high-quality music to enhance the production value of my YouTube videos. With a vast library of royalty-free tracks, it not only elevates the viewer experience but also ensures compliance with copyright regulations. This investment contributes to the overall professionalism and engagement of my video content.
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