Starting a Small Business? How do you Budget?

Starting a new business and feeling completely overwhelmed by the word "budget"? You're not alone. We've worked with many business owners over our 30+ years, and here's what we know. Most brilliant entrepreneurs can build amazing products, deliver incredible services, and wow their customers, but when it comes to budgeting? That's where things get a bit fuzzy.

Here's the thing. You're an expert at what you do. Finance doesn't have to be your expertise. That's where we come in. Let's break down budgeting in plain English, step by step, so you can get your financial foundation rock solid from day one.

What Actually Is a Budget? (No Jargon, Please)

A budget is simply your business's financial roadmap. Think of it as your plan for where every dollar is going to come from and where it's going to go. It's not about restricting your spending. It's about making intentional choices with your money to grow your business sustainably.

For new businesses, budgeting is absolutely critical because you don't have years of financial history to rely on. You're essentially building the plane while flying it, which means having a clear financial plan isn't just helpful, it's essential for survival.

The Money Components You Need to Track

What data is needed for a budget? What are the basics to any budget? Let's talk about what actually goes into your budget. Don't worry, we're going to keep this straightforward.

Income (The Money Coming In)

This includes everything that brings cash into your business. For example:

• Sales from your products or services

• Client payments

• Any investor funding

• Loans (yes, they count as income, even though you'll pay them back later)

For new businesses, this is often the trickiest part because you're essentially making educated guesses. We'll show you how to make good guesses in a moment.

Fixed Costs (The Bills That Don't Change)

These are your consistent monthly expenses. For example:

• Rent for your office or storefront

• Insurance premiums

• Software subscriptions

• Loan payments

• Base salaries

The good news? These are predictable. Once you know what they are, you can count on them staying pretty much the same month to month.

Variable Costs (The Expenses That Fluctuate)

These change based on your business activity. Examples include:

• Raw materials and inventory

• Utilities (these don't usually swing wildly)

• Shipping and delivery costs

• Commission-based sales payments

Operating Expenses (Everything Else Your Business Needs)

This covers your overhead, all the behind-the-scenes costs and can include things like:

• Marketing and advertising

• Professional services (hello, accounting and CFO advisory!)

• Office supplies

• Travel expenses

• Equipment maintenance

Your Step-by-Step Budgeting Process (For Complete Beginners)

How should a beginner start a budget? Since you don't have historical data to work with, here's exactly how to build your first budget. This is the easiest way to do a budget for a small business start-up.

Step 1: Start With Your Business Plan

If you've written a business plan, you're already ahead of the game. Are the financial projections in there? That's your budgeting starting point. If you haven't done a business plan yet, don't panic. We can work with what you have.

Step 2: Document Your Big Assumptions

Before you start crunching numbers, write down your major assumptions. It's going to save you later when you need to adjust your budget (and you will need to adjust it). Document things like:

• What products or services you are offering

• Your pricing strategy

• How many customers you expect each month

• Your main marketing channels

• Any seasonal patterns you anticipate

Step 3: Estimate Your Revenue (Be Realistic, Not Optimistic)

This is where many new business owners get into trouble. They let excitement override reality. Here's our approach. Be conservative with revenue estimates and generous with expense estimates. It's much better to be pleasantly surprised than caught short on cash.

Calculate your revenue by looking at area like:

• Your pricing per product/service

• Realistic sales volumes (not best-case scenarios)

• Payment timing (when will customers actually pay you?)

Step 4: List Every Single Expense

Get granular here. We mean it. Track everything, even the small stuff. Use the categories we outlined above and be thorough. Add your own categories. It's better to overestimate than miss something important.

Pro tip: If you're not sure about an expense amount, research similar businesses or ask suppliers for quotes. Most vendors are happy to provide estimates.

Step 5: Calculate Your Projected Profit

Simple maths time. Revenue minus expenses equals profit. If this number is negative (meaning you're spending more than you're bringing in), you need to either increase revenue projections or cut expenses. No judgment here. Most businesses start in the red while they're building momentum.

Step 6: Plan Your Cash Flow

Here's where things get real. Profit on paper doesn't mean cash in the bank. You need to map out when money actually flows in and out of your business. Some customers might pay you immediately, others might take 30 or 60 days. Meanwhile, most of your expenses are due monthly.

This cash flow planning is where many businesses get caught off guard, even profitable ones. We will cover everything you need to know about cash flow and cash flow planning in our February series.

Step 7: Build in Your "Oh No" Buffer

Always, always, always include contingency funds in your budget. We recommend setting aside at least 10-15% of your total expenses for unexpected costs. Trust us on this one. Something will come up that you didn't plan for.

Making Your Budget Actually Work for You

Creating the budget is just the beginning. Here's how to make sure it helps your business:

Start Simple, Get Sophisticated Later

For your first year, an annual budget is perfectly fine. As you gather real data and get more comfortable, you can move to quarterly budgets, then monthly ones. Don't try to run a marathon when you're still learning to walk.

Get Your Team Involved

If you have employees or partners, bring them into the budgeting process for their areas. They'll have insights you don't, and they'll be more committed to staying within budget if they helped create it.

Track Everything (Seriously, Everything)

This is where proper bookkeeping and accounting become crucial. Every transaction needs to be recorded accurately and consistently. Whether you use software or work with a bookkeeping or accounting service (remember BlueSilver can help you with this), make sure you have systems in place from day one.

Review and Adjust Regularly

Your budget isn't set in stone. Compare your actual numbers to your budget monthly. Figure out where the differences are coming from, and adjust your plan accordingly. Remember that your budget stays the same all year. You can adjust your plan in your forecast. This isn't failure: it's smart business management. Our blog, ‘Budgets vs Forecasts: Key Differences’, explains the key differences between budgets and forecasts.

Where BlueSilver Finance & Advisory Fits Into Your Journey

Here's the reality. Budgeting for a new business involves many moving parts, and it's easy to make costly mistakes when you're figuring it out on your own. That's exactly why we offer both accounting services and CFO advisory. Different businesses need different levels of support at different times.

Maybe you start with our accounting services to ensure your bookkeeping is rock-solid and your budgets are built on accurate data. As your business grows and gets more complex, you might move into our CFO advisory services for strategic financial planning and growth guidance. Or you can start with both and really get the most out of your business’s finances from day one.

We've been doing this for over 30 years, and we've seen every budgeting challenge you can imagine. More importantly, we've helped hundreds of businesses navigate those challenges and emerge stronger on the other side.

The best part? We're releasing free budgeting templates later this month to help you get started. But here's what templates can't do. They can't tell you if your assumptions are realistic, help you spot cash flow problems before they happen, or guide you through adjustments when your actual numbers don't match your projections.

That's where having experienced financial partners makes all the difference. We don't just manage your numbers. We help you understand what they mean and how to use them to grow your business.

Ready to Get Your Budget Sorted?

Building your first business budget doesn't have to be overwhelming. With the right approach and the right support, it becomes a powerful tool for making smart decisions and growing sustainably.

Whether you need help setting up proper bookkeeping, creating realistic budgets, or developing strategic financial plans for growth, we're here to guide you through it. After all, you're the expert at running your business. We're the experts at making sure the numbers work in your favour.

Ready to chat about your budgeting needs? Let's see how we can help.