Many of us who restore furniture and resell it use the term "business owner" rather loosely.
We started doing something we enjoyed and then it took off in ways we didn't expect.
And I'm going to go out on a limb and predict that we didn't go into "business" because we were excited or enthralled with the idea of managing our finances and setting up a budget.
Like I said, going out on a limb here. :)
But if we truly love what we are doing, we need to take time to make sure that we are spending less than we are making in order for us to make a profit and stay in business.
Here are some things I do to maintain a budget for 551 East.
It's simple, but it's working for us!
1. Set up a separate bank account for your business.
Most banks have great options for small business owners. You don't need a business license to have an account, but make sure to ask what their requirements are. For example, minimum balance etc. It is so helpful to be able to see your cash flow both in and out that is separate from your personal/family expenses.
2. Track your expenses.
I keep a spreadsheet of expenses per piece I restore. For example, here is my cost breakdown for the ombre stained dresser.
Dresser:
Purchased: $30
Stain: $15
Sand Paper: $5
Hardware: Free
Estimated gas for pickup/electricity for sanding: $7
Total: $57
Like I said nothing fancy, but it helps me remember exactly what I spent on a piece so I know how to price it to make a profit.
3. Plan for the future.
When you stared your business you made an initial investment. Maybe it was $50 maybe it was $500. Either way at some point you will most likely want to expand your business and to do that you will need more cash. As I've mentioned before, we started with $350 investment of our own money. Every time I sell a piece, I reinvest the cost of the piece plus 10% of the profit to help our business grow. So for example, the ombre dresser sold for $160.
When you stared your business you made an initial investment. Maybe it was $50 maybe it was $500. Either way at some point you will most likely want to expand your business and to do that you will need more cash. As I've mentioned before, we started with $350 investment of our own money. Every time I sell a piece, I reinvest the cost of the piece plus 10% of the profit to help our business grow. So for example, the ombre dresser sold for $160.
Dresser sold: $160
Cost: $57
Profit: $103
10% of the profit to reinvest: $16
It doesn't seem like a lot, but it does add up over time. You can off course adjust the percentage to reinvest according to your wants and needs.
4. Be flexible.
A budget, although a useful tool for remaining disciplined, it's not set in stone. Don't think of your budget as an absolute ceiling to how much you can spend but is instead a tool for making sure you are meeting your goals and can justify any departure. If you see that changes need to be made, do so. Also, remember that a budget should be reviewed periodically.
OK enough of this budget lesson!!
Go outside and enjoy the fall weather!
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