Hi, everyone! It’s Cathy from Fiscally Chic with another post about “finance with intention.” I’ve decided to alternate between personal finance and business finance, with this month covering business finance. At the request of AcanthusNichole, I’m going to touch on a touchy subject, budgeting.
Great question, Nichole! Since I don’t know your businessÂ particulars, I’m going to share some thinking points. Plus, budgets differ since everyone’s businesses are at a different point in the business development cycle. The needs of a start-up jewelry designer will be different than Jess LC, which has been around the block a while longer and has expanded into new product lines.
Pay yourself first.
While expenses are definitely a concern for every entrepreneur, paying #1 (you!) should be priority #1. Nobody goes into business to break even or sells widgets just to make more widgets. Even if you’re just starting out, get into the habit of paying yourself first. It doesn’t have to be a large amount. Maybe it’s $50 each week. Maybe it’s 25% of each sale. As your business grows, you’ll already be in the habit of paying yourself and can increase your salary or even give yourself a bonus for a tremendous holiday season or large sale. Plus, you’ll be motivated to sell more!
Focus on your product/service/message, not the
When people think of marketing, they generally think of promotions. There are actually four P’s in marketing: product, price, place (where to purchase), and promotion. While promoting your product is important, I would focus more on the actual product*. Jon Acuff wrote an excellent post about this topic and I couldn’t have said it better myself:
If you worry about the marketing first, you’ll quickly attract a lot of people who eventually find out your message is empty and leave. If you focus on the meaning first, your support might grow slower, but the people who come won’t leave because they’ll realize you’ve got something deeper than hype.
Think about your core business objectives and priorities. Then invest accordingly. If you tell people about your product, but the design is flawed or poorly made, they won’t want to make a purchase. If you make a high quality product with a unique design, customers will be more likely to makeÂ repeat purchases and refer their friends.
*Pricing is also extremely important, but I’ll save that for a future post.
EmersonMade is an excellent example of focusing on the product. They started off with handmade linen flowers. The promotions were simple: blogging and the power of social media. However, the product and branding were (and still are) amazing. How many of you wanted to run around a Vermont farm wearing one of her oversized flowers? I know I did. I bought two during Summer 2009. Back then, EmersonMade had a simple website and the flowers were packaged in simple brown boxes. Nothing that broke their budget.
Fast forward to Winter 2010. I purchased a flower clutch with some Christmas money. At that point, EmersonMade had expanded into clutches, jewelry, clothing, and all sorts of other products. They had also upgraded their website and packaging. Those things were nice, but I purchased the clutch because I knew the quality and design were still very high. I didn’t let the simple brown boxes from 2009 hold me back from a purchase in 2010.
Where will you get a positive return on investment?
Along those same lines, make wise business investments. A better, more expensive camera might help, but will it make you a better photographer? Taking a photography class and practicing with your current camera will make you a better photographer. When you think about investing in your business, will it bring you more income? Will your work be worth more?
As a CPA, I know continuing education classes are extremely important since they help me maintain my license and keep me informed about changes in the accounting industry. Maybe there are certifications you can work towards or conferences you can attend for additional training or networking opportunities. If nothing else, investing time in your business will pay significant dividends.
And don’t forget to sell
Cash is king. You don’t want to be sitting on piles of raw materials (flour and sugar) or finished products (cookies), while waiting for the next sale. If that’s the case, your funds should be put towards promotions. But promoting your product or service doesn’t have to be very costly. Jess has some wonderful tips in previous posts.
Bottom line: Consider your business’s intentions and priorities when creating a budget.