My Uncle and I started a business of selling antique and hand crafted furniture. One of the first things we needed to focus was the Budget/Cost, since we were tight on budget.
Estimate the Original Budget: Even though there are numerous tools for estimating budget, we used Excel to estimate the budget for this business. Excel is by far the most reliable, easy and user friendly tool for calculations, trending charts, graphs etc. Once we had approximate estimates for the planned costs – we documented all these numbers in spreadsheet and tracked it against the actual spend for the business.
Ensure all hidden costs are being tracked: We discovered that certain small costs like printing, cost of internet etc were not being accounted for in the budget. Even though it was small cost but it’s always a good idea to track any hidden costs for your business.
Avoid any unnecessary costs: Avoid all unnecessary costs for your business. We categorized all items under the “must-haves”, “good to haves” and “nice to have” categories. We avoided anything that was not in the “must to have” category to begin with. These categories are relative based upon the type of your business and target audience/customers.
Monitor and Track your budget frequently: We made it a practice to monitor and track the financials of the business and compare it against the original/planned budget frequently so that we don’t have surprises at the end. We also measured any variances and had set certain red flags if the variances were too high. Later from our experience we did find it useful to set benchmarks for negative variance (for example: anything more than 10% negative variance would be a Red category which needed immediate attention and resolution).
Track the root cause for over budget if any: Once we had an instance where there was negative variance in budget due to some unexpected/unknown costs. We immediately analyzed the root cause. What initially looked like extra costs due to transportation actually turned out to be extra charges due to labor, handling, taxes and toll etc – which were not accounted before. As a temporary resolution we decided on buying and selling local to avoid the extra costs.
Advertise: It’s very important to advertise for your business. I use www.yelp.com, www.craigslist.com, www.pennysaver.com etc. You can create your own business page in www.yelp.com, put pictures of products etc and always mention a working email and phone number! We created our business flyers and posted them in Local grocery store, library, community centers, told all our friends and spread it through all known networks. Basically we didn’t spend much or nothing for advertising and very soon most people knew about the business.
Marketing and Promotions: Marketing is an important and unavoidable aspect of your new business. Sometimes first impressions are the last impressions for customers – so keeping that in mind we had a grand opening, with reasonable discounts, coupons and promotions all within a small budget and got an overwhelming response. We advertised for grand opening for free using all resources mentioned above. We also made some goodie bags at very low costs which included the business cards, coupons and discounts. The Goodie bags were a great hit!! You can advertise sale and promotions through www.yelp.com, or even giveaway coupons for products at minimal or no costs. As a customer I always like to buy items that are on sale, like I buy the restaurant gift certificates at 50% discount from yelp.
Keeping the Budget under control: Once your business and budget are on track, it’s time to “Control” the Budget for future spending and road-map. This is a key factor for keeping your business thriving and profitable!