Small Businesses: How To Effectively Budget Your Money

It is all about profit at least that is what we want it to be. But how do we get a profit rolling into our revenue statements? What with government regulation, taxes, and the ever present need to attract customers, it can be hard to squeeze by with anything year to year. Here are some tips for managing your money in way that will cause success for your future growth.

Downsize, Downsize, Downsize

Identify what you need to accomplish, and do not pay more than you need to do it. If your work just requires a little room, get a little room. If you work does not require a fancy company car, do not buy a company car. The more you decrease your expenses, the more you will increase your profit.

Always Think How You Can Give Back to Your Customers and Your Community

Your community can become your customers, but they will not desire to buy your product or service until they see you giving back in some practical way. Make a point to donate 10% of your company revenue to some sort of charity. Although this may seem extreme, it is what many successful businessmen like Warren Buffett, Bill Gates, and John D. Rockefeller regularly chose to do. An excellent quote from Rockefeller tells us the value of regular philanthropy:

“I never would have been able to tithe the first million dollars I ever made if I had not tithed my first salary, which was $1.50 per week.”

Practice the 70% rule

Never spend more than 70% of your business revenue. The rest should be invested in your community and emergency fund.

Buy Low and Sell High

This is something Apple Inc. does. They manufacture the iPhone at a cheap factory in China, and then sell it at 3 times the manufactured value to entertainment obsessed Americans. Identify those who have an excess of something they hate, and those who desperately want the hated item. Your company will explode in size if you can successfully do this.

Remember That True Wealth is Not Money, It Is Capital

Be honest in your accounting and do not confuse the two. Capital is something you use to make something else. Good examples are people, machines, factories, mines, computers, businesses, houses, food, transportation. To grow your company you need to grow your capital.

Never Go Into Debt

If you are currently in debt, devote most of your profit to paying off the loan. Too many businesses and individuals in America thrive on a philosophy of endless credit. The foolishness of this mentality is shown whenever the market inevitably comes crashing down and they lose possession of someone else’s capital that they were just borrowing for cheap. Make a point to buy supplies only with actual cash/debit, never credit. Otherwise, your business is never really yours. It is your banker’s.

Our basic 6 principles for effective budgeting at your small business are downsize, philanthropy, 70% rule, buy low and sell high, grow capital, and never go in debt. If you practice these basic tools, your business will be far more successful than your competitors. Companies such as Karla Dennis and Associates are a great resource for helping you be financially successful with your small business.