Welcome to this episode of The Business Bites. I am your Host, Rachel Brenke, and I am super excited to talk about budgeting. As a Business Consultant for many, many years. I don’t even want to say the number anymore because it totally dates me, but one of the things that I love working on with my clients is their budgeting within their business, because I find that not only does it help their business, but it also helps their personal side of their life, as well. Because a lot of the techniques that I do in budgeting creeps over and directly impacts personal life, which also can increase their quality of life. Also, it’s going to bring home more money, hopefully, in the end.

One of the biggest things that I always tell people is, “I want you to identify the leaks in your boat.” And what I mean is, leaks like a hole in the boat, not a leek like the vegetable, but the leaks in the boat are costs that are essentially leaking money out of your boat. They are things that are taking money away from you, because as you see, as we get into this budgeting list of things that I feel like people completely forget to include, you’ll hear the response from people or you guys may be thinking, “I just don’t have enough room in my budget to put money towards those areas.” Well, that’s where I always respond, “Have you plugged the leaks in your boat?”

What I mean by that is, when we go through all of this, the very first step is going to be evaluating your cost of doing business, but I want you to sit down and look at these costs and see, are they really necessary to your business? Are they really giving you any return on investment, or are they just loss sinking leaks that you’re paying out every single month, and you’re not necessarily using? The most common ones for these are subscriptions and equipment in your business that you’re not using, but subscriptions is a pretty easy one for you guys to fall victim to. Because it’s not something that you physically see, like equipment in your business that you can sitting on your desk, or in your office.

These subscriptions are in your computer or in your TV and you may forget that they’re even there, and wonder why you don’t have as big as a profit margin as you’d like? My example to this is, maybe you have signed-up for a free trial for maybe a social media automation program and you had to put your credit card in for it. Nothing wrong with that, as long as when the trial is up, if you’re not going to continue using that service, you make sure you go and cancel it. Sounds like common sense, but a lot of times you forget about it. Whenever I do a free trial like this, I always put it on my calendar for me to reevaluate after the free trial time, or else I could be three or four months down the road, finally check my credit card account or bank account, and go, “Oh, no. I’ve been paying out for that and I haven’t even been using that service beyond the trial.”

Which also leads me to my next point, that for all of your budgeting and stuff, in order for this process that I’m going to talk to you guys about, in order for it to work, you have to set at least monthly admin days. Especially in the beginning, when you’re still trying to identify these leaks and plug them up, but you need to set aside administrative days at least every month, if not every quarter. I don’t like every quarter because that’s still every three months, and three months of subscriptions that you could have thrown out the window if you’re not utilizing them. Of course, I’m not talking about all subscriptions. Only ones that you’re not utilizing in your business or getting a return from, and so having a specific administrative day every month when you have to pay your taxes or you do your month report roll-up.

For me, it’s also when I’m scheduling social media or content that month. I have a podcast on this, as well. It’s Gaining More Time In Your Business and I’ll link it in the show notes for you guys, but the thing about it is, by doing it this way, then I’m not losing more money. Okay, so we’ve gone through that you guys need to make sure you don’t have leaks in the boats, which I’m going to give you the structure here, but also make sure you have an administrative day, so that you are staying on the straight and narrow with all of this. The very first step in evaluating your business budget is identifying all your costs of doing business. This can be any thing that is the cost of doing your business. This is your overhead.

If you are a brick and mortar, or even just a virtual, but you have a office and you’re using a printer, printer ink, printer paper, pens, paper clips, so that’s your office supplies. It can be your website, your hosting, your domain names, any thing that is a cost of doing your business. If you are one of those that sells physical products, then you’re also going to have a cost of goods that’s included in that. Often time, this is where people’s budgeting or pricing evaluations stop. They think, “Okay. Here’s my costs and that’s all I need to be concerned about,” but I’m obviously going to walk you guys through the ones that you’re more than likely missing, and if you’re not, they can probably always be fine-tuned, but so all of your costs of doing business.

What I like to do is sit down and think about all the costs that I have and then also compare that to my bank account. Because that’s going to take me back to plugging the leaks, but it’s also going to remind me exactly what I’m paying out for, as well. So the cost of doing business, your cost of goods. The next one to make sure that you’re including on there is the income, what you’re wanting to make for you? For me, or people that are set up where you are an employee of your business, for me, I get a paycheck from my business. I write myself a paycheck. I am my own boss, but I am an employee of my boss, myself, as well. So for me, I have an identified income, and this is really super easy if you’re one of those that has to replace another income, or your family depends on that money.

It’s a little more difficult if you aren’t necessarily someone that needs this money or you’re already working a full-time job and you don’t really have plans to quit, and this is just extras. For this, is where I recommend you look at your personal goals and plans and see, “Is there anything in my personal life that I’m wanting to do with this sort of money?” Maybe it’s an upgrade in your house, or go on a vacation, or take some time off, and that’s where I’d put in that income number. The next one is paying down any debt that you have. I am super, super, super fan about building and running a debt-free business and I’m not someone that says, “You can’t have investors, you can’t take loans, or any of that sort of thing.” It depends on the business that you have.

So when I had this perspective, it’s from more of my perspective of what I do. I’m a solopreneur. I have a lot of virtual businesses and they’re more services-based. I do have some retail, but that’s often where I carve out that you can look at having debt when you have more retail, but as long as, and this is the point that I’m trying to make. As long as if you are in debt or you work in a business that it is not out of the ordinary to be carrying a loan or something. Probably to carry your inventory, et cetera, as long as you have a line item in your budget in order to pay down this debt. One of the things that I always tell people is that, “I’m not a fan of credit cards.” I have another episode on this, as well, and I always say, “It’s okay to have a credit card for the business.”

I especially like it for travel, so that I’m not giving up my bank account number to the world, but then when I come from travel, I pay all that off from out of my bank account. So I’m not against credit cards, but I definitely agree in paying down debt. My biggest recommendation. If you’re working towards paying down debt, whether on a personal side or a business side, I subscribe to the Dave Ramsey method of this. I get it. I just said, “Credit cards are … I’m okay with credit cards,” and that’s probably one of the things that I differ from him on, but I definitely like his snowball method for paying down debt. If you guys have any questions about that, definitely check that out. It’s so common sense. It makes, it’s so super simple and easy that anybody can do, because you just start with your little debts and then you work your way up to your big debts, whether it’s personal or business.

The next item is having insurance and there’s a broad varieties of insurances that you guys should be having as business owners, but some of the ones that I really want you to consider is, what happens if you have a disability or a death? That’s for you. This is for the person that’s the wage-earner here, that’s making the money, that’s running this business. Do you have insurance paying into that? You may have equipment insurance, you may have property insurance, and those sorts of things, but consider putting into your business plan and into your budget to get yourself insurance.

Because what happens if you are disabled or you have life insurance, you end up passing away? For me, I wish that this is something that was almost required. Because I started my consulting business about the time that I had cancer and I wish I had had this type of insurance at the time. Instead, I had to work through my surgeries. I had to work through my radiation and I would have rather spent that time focused on myself and my family. My clients were understanding and everything, but at the same time, I still had to keep going. Whereas, insurance could have helped me.

All right. Then the last big bucket is just savings, in general. I have four major buckets for this that I want you guys to really look into having into your budget. Having a rainy day savings. This is so that if you need to pull quickly and go get some funds. My example for this recently just happened. My microphone and webcam got chewed up by our rescue puppy dog, who likes to eat anything and everything no matter how much we train her or try to work with her. I was in the middle of recording for a launch and it was very difficult, because I was like, “Man, this is like $100-some dollar camera. What am I going to do?” I had my rainy savings that I could pull from, because my main checking account and everything is already carved out in funds for other things.

Everything has an earmark. Everything has a place, but by having the rainy day savings, I didn’t have to worry about having to swing by Best Buy or getting on Amazon real quickly. That’s a low cost amount, but maybe you have, your computer quits, or your hard drive, or something like that. You want to be able to pull from your rainy day savings without having to screw up your entire budget and put yourself in the red. Because, and what I say by, “Yourself,” I don’t necessarily mean your business, but I mean you.

Because a lot of times, if you have something come up, business owners often take from their own income in order to cover those costs and we don’t necessarily want to do that. If we have a rainy day savings already set up, then that is the best thing for us. The second one is a long-term savings. I recommend having three to six months of all of your costs of doing business, your income cost, it is all of this sort of stuff shucked away, so because you never know what’s going to happen with business and your family. Especially if your family depends on this money. You need to definitely have this savings.

The third one is an educational savings or an educational budget line item, so that you’re investing in your education on a routine basis. I like to do this per year at the end of the last year, is when I will evaluate what my business plan and what education that I want to take, and I’m able to pull directly from my education savings to go ahead and invest for that next year. Then the last one is retirement. If you guys have not already set yourself up with a retirement fund, this is really, really important. In all of this, talking about the insurance, the rainy day savings, the education, the retirement, all of this doesn’t require a big outlay of cash right off the bat.

So, for me, I recommend if you only have five or ten bucks a month to put into retirement, do that. That’s better than putting nothing, five or ten bucks to putting in towards your education budget. Wherever you feel that you have money left over after you go through your cost of doing business, your income, your cost of goods, you’re paying down your debt, and in your insurance, then you can stick into all of these savings areas. Rainy day savings, long-term savings, education, and retirement, and then as you pay off debt or as you start making more money and you cut out those leaks in the boat, you’re going to start having more cash flow to be able to stick into these areas. All of it works together with your business plan.

I recommend you checking out my episode on Business Planning in 15 Minutes or Less, because it’s going to expand a lot more the strategy and perspective that I take when I look at everything in my business, but specifically into the budget area, as well, because money is a cornerstone of my business plan. I’m not enable to enact a lot of the things that I want if I don’t have the funds available and I still have a family that depends on my income, and a lot of you are probably the same way, as well.

Just a recap for those budget items that I really want you guys to identify. All costs of doing business, the income that you want to bring home, cost of goods if you have that, paying down of debt if you have any, insurance. Then the big four of savings. Rainy day savings, long-term savings, education, and retirement. So that’s today’s Business Bites. I hope you guys enjoyed it and good luck with your budgeting.