As the weather gets cooler and holiday season decorations appear almost overnight, our thoughts naturally turn to the warmth of friends and family, the joys of giving…and next year’s business budget.

Budget? Now before you go bah humbug and reach for that glass of eggnog take a few moments to read up on why you want to think about your budget right now.

Time of Reflection and Looking Ahead

The end of the year is a perfect time to reflect on what your business has achieved and to plan for new accomplishments.

The past year can also provide you with a good guide on your revenue and expenses—a roadmap for the next year.

A well-planned budget could make your business soar while a poorly planned budget could break your business.

What Should Go Into Your Budget?

Glad you asked. A sensible business budget should include at least four categories of information:

Item 1: Document Your Income Sources

Where does the money that you use to run your business come from on a monthly basis? Take a look at your:

  • Earnings
  • Sales
  • Investment
  • Loans
  • Savings

Item 2: Determine Your Fixed Costs

This is probably the easiest item to determine as fixed expenses don’t change month to month. Examples of fixed costs can include:

  • Rent
  • Utilities
  • Staff salaries
  • Phone and Internet
  • Bank fees
  • Insurance
  • Services like website hosting, bookkeeping, etc.

Item 3: Look at Variable Expenses

Planning for variable expenses in your budget is essential. A well-planned budget will include the ability to scale up or down costs of services or goods as required by your business. Examples of variable expenses can include:

  • Raw materials
  • Contractor wages
  • Commissions
  • Marketing costs, advertising and printing
  • Transportation
  • Travel

Item 4: Potential One-Time Spends

Planning for unexpected expenses is essential to a well-planned budget. Equipment breakdowns happen. Also, new opportunities can present themselves that require a bit of cash to take advantage of. Examples of one-time spends include:

  • Computers repairs and replacements
  • Furniture
  • Software
  • Vehicle repairs

Use Industry Benchmarks to Make Budgeting Easier

If you’ve been in business for a while, you’ve accumulated data that will make budgeting and forecasting less complex. However, new businesses might not have enough data. That’s when you look at what your competition is doing.

To be honest, a well-seasoned business could always benefit from looking at how their budget compares with industry benchmarks.

Industry benchmarks can provide you with data you can use to make educated budget forecasts – expenses to expect, income ebb and flows, etc.

It also can give you a good idea of what percentage of your budget should go to specific items.

Let’s consider marketing. The U.S. Small Business Administration recommends spending seven to eight percent of your gross revenue on marketing and advertising.

However, a benchmark check shows that marketing budgets can vary widely depending on the industry. A recent study by the American Marketing Association showed how much marketing accounts for percentage of business budgets in several industries. For example:

  • Consumer Product Goods businesses spend 24%
  • Service Consulting companies spend 12%
  • Education companies spend 11%
  • Retail wholesale spend 10%
  • Healthcare 10%
  • Energy 4%

Where to Find Industry Benchmarks

Simple searches on the internet can bring a wealth of information. The U.S. Small Business Administration also provides useful information.

If you have access to your public library, consider using ReferenceUSA. This resource is generally free from your library.

If you have any questions about budgeting, feel free to give us a call at (904) 429-4588. We can help guide you or even take an active role in creating a budget for you.