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How To Build A Budget For Your Small Business (Part I)

Posted by John Boudreau on May 24, 2017 11:49:44 AM

A budget is a critical tool for helping you make business decisions.

In this blog post, I am going to define how to build a simple budget (financial model) for your small business and explain why building a budget can help you improve profitability and make better decisions.

What Is A Small Business Budget?

A budget is your business in black in white. It is the financial skeleton of your business.

According to Wikipedia - "Budgeting is the task of building an abstract representation (a model) of a real world financial situation. This is a mathematical model designed to represent (a simplified version of) the performance of a business..."

A good budget does the following:

  1. Details the products you plan to sell and the revenue generated from those products.
  2. Details your cost of goods sold or the costs incurred when you sell those products.
  3. Details who you think you will need to hire, what they will do and what you will pay them.
  4. Details how much you will spend on sales and marketing.
  5. Details how much you will spend on general and administrative costs.
  6. Details if your business will make a profit in any given month.

Let's go through elements 1-3 in this blog post and why they are important to your business.

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Topics: budgeting, gross margin, small business financial models, COGS