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Business Planning For Every Expense

Aug 17, 2007
Budgeting is a process that can be made my anyone. No matter how exactly you think youve pinned down all your expenses, its guaranteed that more will appear that you either didnt think of or just couldnt have predicted. It is really important that you consider all factors for every expense.

1. Things Break

Remember that any equipment you buy can go wrong, no matter how expensive or high-quality it was (this is especially true of anything IT-related!) When things break, you probably wont need to buy a new one, but you will at least have to wait for the manufacturer to replace what broke. This can lead to days of lost or less-efficient business, and cost you money. Budget for equipment failures.

2. People Are Unpredictable

When you hire staff, you have no way of knowing that they arent going to let you down. You might have worked out that it takes $200 to train one new staff member, but what do you do when that newly-trained staff member quits and moves to France after three weeks at the job? Youve got no choice but to train someone else and take the loss. Budget for staff turnover.

3. The World Is Against You

Or at least it can sometimes feel that way. Just when youve got everything perfect, someone sets up a little construction site next door, and drives your business away. Or maybe it rains for a few weeks, meaning that theres just no demand for your bouncy castle hire business. Whatever, you need to budget for times when youve got no customers and make sure you have something else to be getting on with in the meantime.

4. Customers Are Out To Get You

The customer is always right, right? Well, yes, but their rightness can sure cost you a lot of money. You have to be prepared to take huge losses to pay off complaining customers. Remember that one unhappy customer can undo hundreds of dollars worth of marketing efforts once you make a customer unhappy, your options are to take a loss fixing the situation or to take an even bigger loss when they tell everyone how you didnt. The only way to avoid this expense is to please all of the people all of the time, that just isnt possible. Budget for unhappy customers.

5. Competitors Kick You When You're Down

If one of your competitors spots a good opportunity to take some business from you, they wont hesitate. You need to have a war chest ready to make aggressive offers and marketing efforts, and be prepared to get into a full-scale price and advertising war with the competition. Its massively frustrating to be in a position where your rivals are getting all your business simply because you already used up your marketing money for this month. Budget for war.

6. Double Your Budget

Whatever happens, remember that under-budgeting is the worst mistake you can make. Its known as under-capitalisation, and is generally thought of as one of the quickest ways to kill a business anyone who might be willing to give you finance will just think youre a fool if youve under-capitalised your business, and might even refuse to lend to you.

You must realize that a few thousand dollars may not cut it. People dont realise how quickly little costs like having some business cards made or getting your suit dry-cleaned start to add up. This doesnt apply for other kinds of business, but if youre like 99% of home business starters, you really ought to double your budget. If you doubt me, start adding up all your little expenses over a year, and see what happens.

If you budget for every expense your being practical and smart and allow the possibility of profit. The difference between cockiness and determination is that you will have money in the end and a less stressful life.
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