A budget is much like a diet; you know it’s important, but it's hard to follow. Whether you're an entrepreneur or not, having financial goals and staying on top of a business budget can be challenging.
If you are responsible for a business budget in 2023, here are 12 ways to spend responsibly while still getting the most out of your money.
Why Create a Business Budget?
It is essential for small businesses to create a business budget. Cash flow problems are one of the biggest reasons small businesses fail. Having a business budget can help prepare for unexpected costs and business expenses.
Knowing your fixed costs and variable expenses will help prepare an operating budget and allow a small business owner to measure business performance against previous years. This can help curb expenses at the right time and help control variable costs.
But what do you spend your money on that can best benefit the growth of the business? We've outlined some areas that are most critical to spend on to ensure business success with your budget.
Invest in IT
Investing in IT is critical for any business wanting to stay ahead. While you can’t save time or money without IT, you can lose both if your system isn't up to par. If your systems are outdated, they could cost you more than they should. They might even be slowing down productivity or making it harder to communicate with customers or employees.
In a 2016 survey conducted by Microsoft, as reported by foxbusiness.com, over 91% of those polled would stop doing business with a company using outdated technology. That was seven years ago, and with how quickly technology has evolved and the prevalence of security breaches and data hacks, that number is probably even higher today.
Investing in IT will help keep everything running smoothly and avoid costly data breaches and other security risks, making your life easier and saving money in the long run. Upgrading your systems and investing in new ones can cost a lot of money upfront, but it will save you even more over time.
It also makes communication easier between employees and customers. Everyone needs access to the same information when working on projects, which is why having an efficient IT system is so important for businesses today.
Advertising is great if you want more people to know about your company.
Investment in advertising is crucial since it helps spread awareness of your brand. Customers will have an easier time learning about your company and choosing to collaborate with you if you present as much information as possible. Advertising can help boost your brand awareness by making it easier for people to find you online, in print publications, and on social media platforms.
Advertising can also help you reach new audiences and expand your customer base. This is especially important if you’re trying to reach customers who don’t know about your business yet or want to attract new clients who don’t live in your area.
Hire good people
It’s important to have a good staff if you want your business to succeed. If you don’t have the expertise or time required to run a successful business, hire people who do.
In addition to hiring people who are smarter than you, hire people who are better than you. You need people with a different skill set and background than yours.
Having a team that can cover all the bases regarding knowing what's happening in your business is good. When making decisions about spending money, ensure everyone is on board with those decisions so there isn't any internal conflict within the team about how things should be done or what goals should be met next.
It's important to hire good people because:
- They can help you manage your business more effectively
- They can take on tasks that would otherwise be too time-consuming for you to handle
- They may have skills and knowledge that you don’t have
Expand your office space
If you’re running a small business, you may not have the space to accommodate everyone who works for you. If employees constantly bump into each other in the hallway or share cramped offices, it can affect their productivity and morale.
If possible, consider expanding your office space so everyone has a private workspace where they can do their jobs peacefully. It might be a wise investment in the organization's future growth, and you might find the cost to purchase is less than the cost of losing employees due to lack of space.
This can be a good way to get more work done and make your employees happier. You may also want to consider expanding into another office space if you’ve outgrown the one you currently have.
Consider subleasing if you don’t want to pay for new office space. This can be a good way to save money while still giving your employees the privacy they need to be productive.
Automation is the perfect tool for saving time and money. You can use automation to automatically track your finances, manage your bills and accounts, maintain your website, and even handle key aspects of your business.
If you're not already using automation software to save time in the office, here are some of the ways you can use it:
- Automate financial tasks like bill payments, invoicing, and expense tracking. This will allow you to focus on other important tasks instead of spending hours every month on business processes that don't require much thought or creativity.
- Use an online calendar system to schedule meetings with clients or employees without manually sending out invitations each time there's a new one.
- Automate customer service tasks like processing refunds and issuing credits. This will free up your time to focus on other important projects, such as improving your site's design or creating new content for social media.
Train your staff
Training staff is one of the most important things you can do to ensure your business's growth and success, whether training a new employee on the job or sending them off-site for additional skills training, ensuring that you're investing in their education and development will pay off in the long term.
The type of training you do will depend on what tasks your employees need to learn, and sometimes that means doing something different with each person.
But some core skills are relevant to almost every industry:
- customer service
- time management
- communication skills
- interpersonal skills
- team leadership
Training can help you attract better employees who don't need as much hand-holding and are more aware of your company's values. They'll also be more likely to stay with the company for longer, reducing your turnover costs and improving productivity across the board.
Training helps improve processes already in place, making them easier for everyone involved: from management down through sales and customer service staff down to your warehouse workers and delivery drivers, who might have some trouble executing on their own without proper guidance or instruction.
Benchmarking is a great way to see how your business stacks up against others in similar industries. You can use benchmarks to compare where you are now with where you want to be in the future.
For example, if your customer acquisition cost (CAC) is higher than the industry average, that’s something you need to work on right away. Benchmarks also show how other companies have solved problems like yours, you may not always have access to their exact strategies, but they can give you ideas of what works and doesn’t.
Benchmarking is a great way to get an overview of how your business stacks up against others. It can help you identify areas where you need to improve and give you ideas for how to do so. Benchmarks also show how other companies have solved problems like yours so that they can be a good source of inspiration.
However, benchmarks should not be used as the sole source of your business strategy. They can help you decide which areas to focus on, but you’ll still need to do some analysis and testing of your own before adopting any new strategies.
Equipment and office supplies
You probably already have some equipment and office supplies, but it's always a good idea to keep an eye out for deals on new ones. This includes computers, printers, scanners, fax machines, software programs, and more.
The more equipment you have, the more efficient you can be at your job. You might also be able to sell some of your old equipment when it's time for an upgrade.
The most important thing to remember when buying equipment is that it's not all about the price. You will also want to consider the quality of the product, so make sure that whatever you buy has solid reviews from satisfied customers and comes from a reputable brand.
Another important point is that it's easy to get carried away with a shiny new toy, but sometimes what you need isn't something new at all. It might be an upgrade of something you already have in place. If your current computer can no longer keep up with your growing business, then by all means, upgrade.
But if that doesn't seem necessary yet (or if upgrading would mean compromising on other things), stick with what works. You can always rethink this purchase later down the road after seeing how much more work gets done thanks to faster speeds, increased RAM capacity, etc.
Security and safety
Investing in security and safety is an important part of running a business.
You'll want to protect your company from cyber threats, as well as physical ones. You'll also want to provide a safe environment for employees working late hours in a potentially unsafe area or having access to sensitive data that could compromise their safety.
You should consider investing in physical security systems, such as:
- Biometric locks
- CCTV cameras
- Security guards (who can be trained on how best to respond if they see any signs of danger)
- Security lighting
- Emergency power sources
Safety and security are important because customers expect a safe and secure environment to conduct business or visit your store. If they feel unsafe, they may choose to do their shopping elsewhere.
You also want to protect your employees: They might be working late hours in a potentially unsafe area or have access to sensitive data that could compromise their safety.
It can also prevent loss of revenue due to theft or damage. Theft, vandalism, and other property crimes can cost you thousands of dollars annually. And if an employee is injured on your premises, you could be liable for their medical expenses.
Also, to comply with local laws and regulations, some businesses must provide a safe environment for their employees, customers, and visitors. You may also need insurance coverage if any lawsuits are filed against you.
Invest in software
If you constantly use pen and paper to manage your business, it may be time for new technology. The software can help take the stress out of running a business.
Here are some common areas where software can make a difference. For example:
Manage your employees with payroll, time tracking, and employee scheduling software. This will allow you to easily track who's working from where, how long they've been there, and even how many sick days they took last year.
Automatically pay them their wages using direct deposit, or get paid faster by receiving checks through the mail.
Manage customers with customer relationship management (CRM) software like Salesforce or HubSpot. This allows you to keep track of customer information such as contact details and payment history so that when they call the office asking about their order status or have questions about why their credit card was declined.
Buy your own building
If you buy your own building, make sure it's good for your business. You don't want to be paying too much in rent or buying a building that is not well-suited for what you do.
When looking at commercial real estate options, look at other businesses in the area and see how they are doing. Look at sales data from those buildings and closely at why some businesses succeed while others fail.
Know what kind of property will give them their best chance for success, but also consider what kind of property will help them grow as a company over time.
For instance, renting might be better than buying if the space has growth potential because leases can be renewed every few years if needed, while owning is much more permanent.
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Business Budget Wrap-up
If you’re a business owner, you likely have some idea of how much money your company spends each year. You might even have access to the numbers in real time. But do you know what to spend it on when you need to spend it?
When you have responsibility for a business budget or are doing business budget planning, spending wisely is critical. However, not spending on what is most valuable can also prove quite detrimental.