How to Create a Business Budget for Your Online Business

< back to blog home

Many of us have a personal household budget, but do you also have a budget for your business? We tend to forget that – just like with our luxury spending habits – our business spending habits should be tracked and approved to make sure that your business is optimized for profitability over time!

It’s easy to check the balance of our bank account, a little more complicated to analyze if we can actually afford a big investment in our business, but when it comes to overarching sales goals and making sure your business is still alive and breathing next year, a business budget is how we can make sure we are covering all of our wish list expenses!

So without further ado, here is my three-step process to creating a business budget in an effective way to expand your profitability and give you a great financial goal plan for next year!

Start with your bookkeeping!

I mean… Did you expect anything else from my first bullet point?

It is ridiculously difficult to get anything done in your business (hiring a team member, joining a mastermind, investing in new equipment, etc.) without first doing your bookkeeping. Budgeting is no different! Make sure you’re completely caught up year-to-date (meaning January 1st until the date that you’re reading this blog) with your bookkeeping before moving to the next step! We’ll be using that Profit & Loss to create an input template, and we’ll also reference it to forecast our expenses for the next year!

  • If you need a DIY bookkeeping spreadsheet template, check out my favorite one to shout from the rooftops here
  • If you are ready to take yourself OUT of spreadsheets and into a software that will grow with you over time, I highly recommend starting with Xero at their $12 per month plan. (It’s the best software for non-bookkeepers and non-accountants – trust me!) 
  • If you’re ready to hire a bookkeeper, check out my services here!

Pull your Profit & Loss Report.

It’s the BEST template to build on!

In this step, we are going to use those tidy books to create a shell template to build out next year’s business budget! I’ll teach you how to walk through it two ways: if you’re using accounting software or if you’re using a spreadsheet!

Software

The first thing you’ll start with is pulling your Profit & Loss Report BY MONTH. (It may also be called an Income Statement.) We want to make sure that this P&L gives us a month-by-month view so we can accurately enter data in the month that we expect to see it happen. Export that report to Excel and save it on your computer. (You can even put it into Google Sheets if you’re more familiar with that platform.)

Once you’ve got your P&L, remove all of the data from this year and rename the dates with next year (i.e. 2022 to 2023). Check to make sure each line item has a zero value for each month, and also that the formulas are working correctly! (Some accounting software reports will automatically export with sum formulas for rows and columns.)

Spreadsheet

If you’re using a spreadsheet, find the highest-level picture you can get with month-over-month data. If you don’t have that type of information readily available (like you might just have revenue and expenses spread out in different tabs for each month), then I would suggest you start a brand new spreadsheet for your budget and reference your current-year numbers as you’re building it out!

In this blank spreadsheet, you’ll need a column for each month of the coming year, and a row for each revenue stream and each expense category you have. Then sum the totals for each line item and for each month (each row and each column).

Start with expenses, then move to revenue!

Let’s make those wish list dreams come true!

Now the fun part! Once you’ve got your blank shell, start by inputting all of your expenses for the coming year. Make sure to take these extra items into consideration:

  • Any new monthly expenses that aren’t currently on your Profit & Loss that you are expecting to incur in the new year
  • Current team member pay increases
  • New team members
  • Business trips (food, hotel, rental car or ride sharing, plane tickets, etc.)
  • Office expenses (a small spending spree 2-4 times per year for highlighters, pens, notebooks, paper planners, printer paper, etc.)
  • Software subscriptions (List them ALL out so you can make sure each of them are still serving your business, and cut ANY that you don’t use anymore.)
  • Training & Education (courses, group coaching programs, a business coach, a mastermind, etc.)

Once you have all of your expenses listed out BY MONTH, take some time to evaluate what that means for your sales goals.

How much do you need to make to cover all of those expenses and still pay yourself with an Owner’s Draw or salary? To still keep a percentage in your business as savings for taking time off? Or to save the right amount for taxes this year instead of getting hit with an unexpected bill from the IRS during tax time?

If you are using Profit First, take your “Operating Expenses” percentage and back into your Total Income (revenue) number. For example, if your transfer percentage to your OpEx account is 30%, and your total expenses for the year are $30,000, your target revenue number is $100,000. This is a super helpful way to easily go from your total expenses number to your total sales goal number, while still allowing for Owner’s Pay and Tax savings!

Y’all, this is not easy stuff! This can be very daunting for someone who is still trying to simply get a handle on just their bookkeeping. If you ever feel lost or stressed when it comes to your financials, I am only an email or instagram DM away. 💗

Leave a Reply

Your email address will not be published.