What's Missing From Your Budget?
What are the top things that entrepreneurs forget to account for when they are budgeting? -- Tina of Providence, RI
The following answers are provided by the Young Entrepreneur Council. Founded by Scott Gerber, the Y.E.C. is a nonprofit organization that provides young entrepreneurs with access to tools, mentorship, community and educational resources that support each stage of their business’s development and growth. The organization promotes entrepreneurship as a solution to youth unemployment and underemployment. E-mail your questions about best practices for starting up and/or managing a small business to smbs@foxbusiness.com.
No. 1: Unpredictable costs.
Colin Wright of Exile Lifestyle
There will ALWAYS be costs you couldn't have predicted, and because of this it's important to have a 'buffer-fund' of as much money as you can spare to handle those server crashes, extra hires or other incidental costs you couldn't have known to figure into the official budget.
No. 2: The effects of scale.
Annie Wang of Her Campus Media
Scaling may affect more areas of your business than you can anticipate. Ongoing processes such as training new team members and maintaining quality control are just some areas that might get exponentially more difficult, without even factoring in the effect of any new operations. Budget in the money and time to make systems more efficient, as new problems related to scale will inevitably arise.
No. 3: Invest in yourself.
Josh Shipp of JSP, Inc.
The dark underbelly of success is busyness. With busyness we can often neglect our own development and learning. As the leader of a business, you must invest in your own learning. You must be an expert on your topic, service or product. If you neglect this, you will be running on empty and it will reek havoc on your drive, idea generation, and profits.
No. 4: The cost of networking.
Vanessa Van Petten of Science of People
I think entrepreneurs forget how expensive it can be to do networking in the right places. Conferences, for example are awesome for networking. However, ticket costs, hotels and transportation to conferences add up. I also never realized how much money I would spend taking people out to lunch and coffee to network with them. Totally worth it, but I wish I had budgeted it in!
No. 5: The costs at home.
Thursday Bram of Hyper Modern Consulting
When you're in the thick of things, it's easy to forget that there needs to be at least enough money to buy this month's pack of Ramen. Preferably, there's a little more than that, but even if you cut your personal expenses down to bare bones, they do still exist. Make sure they make it into your budget, rather than stressing about them down the line.No. 6: Purchase price vs. landed price.
Vanessa Nornberg of Metal Mafia
In a product-based business, it is easy for a first-time business owner to miss the difference between the purchase price for the product and the landed price. The landed price is what really matters, because it includes the costs of freight, duties, taxes, storage, etc. Knowing the true cost of getting the product into your hands is crucial when setting the price and insuring profitability.
No. 7: Slow growth.
Nathan Lustig of Entrustet
Many entrepreneurs don't account for how much money they will spend if their idea does not take off as fast as they hope. When budgeting, we make sure to create at least one "very worst case" scenario that does not have much or any growth, just so we know what will happen if it all goes wrong.
No. 8: Payroll-related expenses.
Kwame Kuadey of GiftCardRescue.com
If you hire employees, in addition to their wages and salaries, there are payroll related expenses that you may have to incur, including matching contribution to Social Security and Medicare, Workers Compensation Insurance, and State and Federal Unemployment tax. Entrepreneurs often neglect to add these to their budget, which account for additional 8% - 30% of the total wages and salaries.
No. 9: Insurance, equipment and applications.
Elizabeth Saunders of Real Life E®
Three of the biggest expenses that may surprise you as an entrepreneur are: 1) Insurance: You need to budget in much more than you pay as an employee for health, disability and business insurance. 2) Equipment: Even simple items like keyboard trays, quality office chairs and file cabinets can cost hundreds of dollars. 3) Applications: You'll need to purchase licenses for even the basics.
No. 10: Paying the taxman.
Michael Margolis of Get Storied
It's really easy if you're self-employed or in start-up mode to forget to put enough money aside for taxes. Budget 15-20% of gross revenue or 35% of net revenue (until you know your business better). Put the money aside in a separate bank account every month. Otherwise, you'll be crying come tax season.