post by:
Donna Cohen
Are you a new eCommerce business that is building a budget? Is it overwhelming? We understand. That’s why we’ve made this convenient checklist for you to use while you’re planning your business’s future goals.
Building a budget isn’t easy. There are a lot of variables to consider. Expenses, income, surprise costs, and funding to support those things are all necessary to grow your eCommerce business. Don’t worry, we’re here to help you through the process. Follow this list step by step and you’ll not only build a budget, but understand your business’s needs so much better. A happy business is a healthy business, after all. Let’s get started on your journey to fast flowing cash.
1. Examine Operating Costs
When it comes to examining your operating costs, it is always good to overestimate. There are constantly going to be unexpected costs that pop up along the way, so be prepared when crunching the numbers. List your costs in detail. Leave nothing out. Even the smallest bill can make a difference in the long run.
Day-to-day fixed expenses include rent, payroll, insurance, internet, and utilities. Variable expenses include goods sold, commissions for labor, and maintenance. They may seem like the obvious ones to keep track of but there are little things that go without notice, such as the employees’ coffee, product giveaways, and advertising.
2. Haggle With Suppliers
When it comes to products, it’s always good to search for the best deal. It will create more cashflow for you in the future when sales are low. Don’t be afraid to haggle with the suppliers. Offer advance amounts if you’re a business that is seasonal.
Another way to save money is to meet with different suppliers. Mention in the meeting that you’ve spoken with a competitor of theirs and they might just drop the prices. Remember, saving money now means more cashflow for you later.
3. Estimate Your Revenue
You need to be realistic when estimating your revenue. Overestimating can lead to borrowing more money than you need when you apply for loans. If you don’t make enough money to cover the loan, this can lead to penalties and higher interest rates.
You can plan better by using your previous year’s figures as a reference. Revenue must be tracked monthly, quarterly, and annually. Sound like a lot? It is. Running a business is hard work, but it’s well worth the time you spend making sure you do it right.
4. Understand Your Gross Profit Margin
You’re in the business to make money, right? That means profits. If your business has leftover costs at the end of the year, this means you haven’t made any profit. This is not the goal. If you are in the negatives then you need to reevaluate your costs.
Are you spending too much on rent? Move to a cheaper location. Is your supplier asking too much for the goods? Find a supplier that offers a better deal. Looking at the big picture can tell you how well or how poorly your business is faring.
5. Estimate Cashflow
Cashflow is important if you want to keep up with monthly loan payments, payroll, inventory, travel expenses, and so on. Cashflow is generated by sales, but depending on your business, sometimes sales become outstanding balances. It’s important to give guidelines to your customers to ensure you get your payment.
For example, set forth a penalty fee if they are late paying you. Offer a grace period. Make sure you offer the customer various ways to pay, so pick a good credit card processing company. It’s also important to set aside emergency money for these situations, just in case they fail to pay you despite all the precautions you put in place.
6. Predict Trends
Peak periods for your revenue come and go. It’s necessary to predict when your cashflow will flow and when it will dry up. This way, you can spread the cashflow over the course of the year in preparation for the slow seasons.
Seasonal businesses, especially, need to prepare properly for the spikes in trends and the slow months. You don’t want to shut down during those months because there is always someone to market your products to. It just may not be enough to get you through, hence, the careful planning.
7. Set Goals For Spending
Set goals, so you don’t spend money without a plan. Impulsive spending can hurt a business. If you want to decorate the shop and see the perfect furniture, make sure you have money set aside for just that. Don’t assume that you’ll make it up later with sales.
It’s always good to reevaluate your spending. There may be some products that aren’t selling well, so you need to switch things up. Work supplies may be going unused. Use the funding for those things and put it toward something else, such as advertising. Or simply save it for a rainy day.
8. Add It All Up
Put all your information together. Your fixed and variable costs should be recorded, as well as your income. Once you see what’s leftover (or what’s not) you’ll know how to budget your business. Keeping track of your business is imperative to its health and your mental well-being.
The best way to do this? Get a software program that will help you. There are templates that will assist you in building your budget, so all you’ll have to do is enter the numbers. Find an accountant to help you if it’s too hard to keep track of everything.
9. Predict Needed Funding
Once you have your budget all laid out in front of you, it’s easy to plan for necessary funding. If you’re falling behind and need to catch up—funding. If you need help getting through the slow seasons—funding. If you simply need a cushion for day-to-day operations—funding.
Remember when you’re calculating how much you need, stay within reason. Never ask for more than you need. Debt is something that’s hard to dig yourself out of if you can’t manage to make the monthly payments on time. Penalties can add up, and interest can grow.
10. Seek Funding
There are so many companies out there waiting for you to apply. It can be overwhelming to sift through them. The first step is to find a bank or lender that will approve you. Be aware of your credit history and business’s worth. Once the lenders are narrowed down, pick a financing option that works for you.
There’s a financing option for every type of business. Starting, maintaining, and growing businesses all have a chance for additional funding. Pick the plan that will fit your unique needs and apply. Gather the requested paperwork before starting because some may require a lot of paperwork before being approved.
Quick Funding Options
It’s important to prepare for the unpredictable, as well as maintain your cashflow. Having funding in place can protect your business and your peace of mind. Cashflow is important if you want to grow as a business, and sometimes that requires a little help. Here, we’ve listed a few of the short-term funding options that will benefit you the most as a new business. Remember that if you have bad credit and don’t care for the offer they give you, you can always refinance later when your credit score is higher and your business is thriving.
Merchant Cash Advances
Merchant cash advances are meant for those who need quick funding. Unlike most loans, they won’t dictate how you spend the borrowed money either. If you want to spend it on inventory, prepare for that product launch. If you want to use it for rent, get ahead on the payments. The loan is paid back with a percentage of every debit and credit card sale, so it’s easier than ever to keep up with the monthly payments.
Inventory Funding
Inventory funding is a great solution for your short-term finance goals. Whether it’s a loan or line of credit, it’s easier to obtain than a traditional loan, which requires a lot of paperwork and high credit scores. You’ll be able to keep up on your inventory and prepare for high sales. Interest rates are lower than typical loans, as well. Once you sell your inventory, pay back the loan with the earnings.
Personal Loans
Personal loans are easier to be approved for than business loans. Your interest rate depends on your credit history, so this can be a good or bad option for you. Traditional banks and lenders both offer personal loan options, so there’s no shortage of places to call. They usually have a fixed monthly payment, so you won’t have to worry about it fluctuating during the slow months.
Business Line Of Credit
Instead of receiving a lump sum that you have to pay off monthly, you can get a line of credit. You can take from this account whenever you need the extra cash. Credit limits and interest rates range anywhere from low to high, depending on your history. Sometimes the drawing period is limited to a certain amount of time, others it is available for as long as you need it. The great part? You’re only charged interest on the amount you use, not the whole limit like other loans.