I've always done a decent job at budgeting for my business and I typically set limits on the amount I spend per year on specific "areas" in my business but this year I decided to take full financial responsibility of my business and really focus on profiting more and running it smoother.
So, what was the easiest quick tips to give someone interested in doing the same? Let me break it down!
Find out your Cost Of Doing Business (CODB)
This might seem obvious (and intimidating) but some people really don't know exactly how much it costs them to run their business. For me, I purchased a guide and found a quick spreadsheet that helped to break down exactly what you needed to pay as well as breaking it down to exactly how much I needed to make per session to get the desired salary I wanted. Here's a quick link to one I found online (not what I used but looks fantastic and easy to use!) https://nppa.org/calculator
Some things we all don't think of are the hidden costs. The extra business cards we order, the printer ink we use to print invoices, the transaction fees from our credit card readers, maybe the repair/maintenance costs of getting your equipment checked out annually (come on, I can't be the only one who does this way less than I should right?!) but those tiny things can add up to easily over $2000+ of expenses we really don't budget into our expenses for the year.
So, focus really hard, if you have some form of software that you use for accounting that can be pretty easy to calculate with a little work. I love that the worksheet I used let me input how many sessions per year I had planned on booking to break down my costs even more which really let me put down goals of exactly how many sessions I wanted to book!
Create a Worksheet for Budgeted Expenses (and stick to it!)
Once you've figured out your CODB sit down and really start to focus on budgeting and what you need to earn per session to make a profit while still setting aside enough to upgrade business expenses. I like to set aside $XX each year in certain categories for my props and equipment upgrades. These categories include backdrops, newborn outfits/wraps/blankets, boxes/bigger props, and camera/lens upgrades. Each year I use a specific savings account and dump a percentage of that months income into the account. Then, I keep track of my purchases and can purchase the props I've had my eye on with that money. I of course keep track and limit the amount of things depending on what I've already spent in that category.
If my backdrops limit is a max of up to five per year and I've already purchased three by March then the rest of the year I can get two more or find creative ways to diy my own. I do give some wiggle room, so if I were to sell an old drop I don't use I put that money into the account and can then purchase an extra if it's something I need but I really focus on keeping it all within limits.
Same with equipment. I am set up to purchase a new camera body every three years and then lens' on the off years. It's nice to have that in the budget knowing I'm slowly upgrading and swapping out for newer and sharper products. If I were to lump purchase them all, I'd go broke but by spreading it out over a period of time and keeping them rotating through it's super helpful and less stressful on the account.
Set up Auto Transfers for your Budgets
This seems simple when you think about it. Say your budget shows you're putting away, $25 per month for your props fund and $50 a month for camera gear. Set up your business bank account to auto transfer over $75 to a savings account on a set date every month. Just like the website/subscription fees that are being taken out you really won't realize it as a big expense coming out and eventually you'll just budget around those coming out, leaving cushion in the checking account for transfers.
PAY YOURSELF A SALARY!
Again, tough to do when you're starting out (I've been there!) but seriously, find a way to pay yourself a set amount and don't "dip" into extras. It might mean you have to set yourself on a personal budget with your spending habits but by establishing a salary for yourself you can then calculate it out to pay yourself weekly or maybe monthly. Then it's easier to plan ahead and know exactly how much you're getting paid so you can adjust goals if needed.
Find Attainable Goals
Keep in mind that budgeting and finances can be extremely overwhelming so start small and scale as you go. It's taken me quite awhile to establish a solid CODB as well as pushing aside "slush" money funds. When I first started I didn't realize how much it actually costs to run my business, I just transferred over my salary to my personal account and paid bills as they came. By sitting down to create budgets and CODB it really opened my eyes to realize that being pro-active about my business accounting, I could live debt free and afford things that I couldn't before.
Be realistic about your goals. If it's not in the cards to purchase new props every year, that's ok. Focus on building the business the way you want/need to and slowly slip in a few purchases when you can. Maybe it's easier to take some cash out every once in awhile instead? If it works, go for it! (I actually pull every $5 bill that comes into my posession and drop it into a mason jar, then cash it in a few times a year, works great for Christmas funds when it's time to purchase gifts!)
So, there's a few helpful tips/tricks that will hopefully help you take control and not feel like you're constantly just paying your business bills. My biggest goal for this year is to pay for a workshop retreat at a resort in the Carribeans and be able to pay it all in cash by February using my business savings account. This would be so amazing to enjoy a vacation (while learning) and write it off!
What are your goals for your business and how do you budget? I'd love to hear what works for you personally!