Seven Steps to Setting Up a Home Business Budget
Every Home Business entrepreneur has the same goal - to earn money, it can be as little as $20 a
month or as much a $1,000,000 a year. That being said, as with any business keeping track of incoming
and outgoing cash is vital to the success or failure of your business.
At first, the costs of hiring an accountant to manage your cashflow or create a budget for your
business may be a bit more than you are willing to take on. So to enure you do not miss this very
important aspect of starting your business let's go through the seven steps to set up your budget that
you need to take.
A Budget is nothing more than estimating costs and income. It is your task to review your budget from
time to time and adjust it based on real numbers. The real numbers are the actuals you get from your
business. The budget is the estimation of your costs and income. There are several applications on
the market to perform the mentioned steps. I use and suggest you use Microsoft Excell.
Step 1: Choose the time period of your budget that you are comfortable with, usually people choose
weeks or months. This means you need to calculate every cost to a weekly or monthly basis. For
Example if your opt-im mail list costs are $120 a year, the monthly costs are $10 and the weekly costs
are $2.31 per week ($120/52 weeks = $2.31)
Step 2: Make a complete list of all recurring costs you already know: i.e. Web hosting, Residual
Income Fees, your autoresponder, opt-in lead subscriptions and so on. Consult your credit card
statements and search your Paypal account for subscription payments. Transform the costs to the unity
of time you have chosen in Step 1 (i.e. monthly or weekly).
Step 3: Now make a list of all one time payments you plan to have this year, and calculate the
accruals for the periodicity you have chosen in Step 1. Example: you plan to buy Website building
software for $300 this year (this is your Budget). You could calculate then a monthly costs of this
software as $25 a month, or $5.79 per week.
If you have purchased equipment (i.e. Hardware), you need to distribute the costs amount the life
of the product. (i.e. one PC usually is used for three years.) If you pay $1000 as one time payment,
you can distribute the costs over three years, giving $333.33 per year or $27.70 monthly, or $6.41
per week. This is called depreciation. If you know that after three years you may sell the PC for
$200, calculate the depreciation accordingly, starting now from $800 ($1000-$200).
Add the costs obtained in Step 3 to the list you have already prepared in Step 2. Now you have the
complete list of your estimated monthly or weekly costs.
Step 4: Now we come to the most exciting section: your Earnings!
Most of the internet marketing newbie's would expect to be in positive cashflow after a very short
period of time. This is unrealistic. As you have seen in the first steps of the calculation of your
budget, you may consider hardware, literature, marketing and other costs that in the first few
months without the corresponding earnings. Thus, it is absolutely normal that you may have a period
where you are in negative cashflow for a while. Don't worry buy having a budget and sticking to it
you have prepared for this situaton untill you reach your break-even point (earnings = costs).
But let's come back to the earnings. In internet marketing, your earnings are derived from sales.
There are either direct sales or indirect sales from your downline, if you are running a network
Here you will see that the estimations of earnings is obviously much more difficult than the
estimation of your costs. Ideally, you may express your earnings as a percentage of your marketing
spending. If your marketing effort is not able to produce sales, you may review it and look for
other marketing strategies. If you have tracked your marketing spend properly, you may be in a good
position to estimate your conversion rate (the percentage of your clicks that lead to sales) and
thus, can express your earnings as a percentage of your marketing costs.