America is built on the backs of entrepreneurs.
One of the great things about living in a free-market, capitalist society is that businesses largely meet societal needs (or at least they should—but that’s another discussion). Businesses solve problems. Yes, they make money too. But our country is fundamentally built on businesses. Today, as much as ever, we need driven entrepreneurs to build and run businesses that bring value to society.
For entrepreneurs, the amount of information and advice available on the internet can be overwhelming. The goal of this article is not to provide a detailed blueprint for successful entrepreneurship. Rather, it’s to offer high-level insights for entrepreneurs. As a wealth advisor, I work with business owners at every stage of their journey—from early business development to planning their exit. Every business owner is unique, and their personal approach is what makes their business stand out. However, there are some nearly universal strategies that successful entrepreneurs tend to follow.
This blog post will be the first in a four-part series (or maybe five… or six). Let’s start with building a business budget.
Whenever I begin working with a new financial planning client, one of the first things we review is their budget. I know the word “budget” can bring back uncomfortable memories of high school finance class. Set that memory aside. A budget is simply a way to allocate your dollars according to your needs and goals. It’s crucial to know where your household money is going—and the same goes for businesses.
Here are a few tips for creating an effective business budget:
- Separate Personal and Business Finances
Open a dedicated business bank account and use it exclusively for business transactions. This simplifies bookkeeping and tax preparation. Mixing personal and business expenses is tempting but can make it difficult to track cash flow accurately. Moreover, blending the two makes it harder to determine your business’s true value, which depends on clear, consistent cash flow. - Set Realistic Revenue Goals
Every entrepreneur needs quantifiable goals. Base your revenue projections on historical data, market research, and industry trends. Adjust your goals as needed, but start somewhere. Entrepreneurs tend to handle failure well, so I often recommend aiming slightly higher than feels comfortable. However, manage your cash flow conservatively. This minimizes the impact of falling short while still giving you an ambitious target. - Track Expenses
If you’re not tracking your expenses, you’re losing money—period. The most successful business owners know exactly where their money is going. Categorize your expenses (e.g., marketing, operations, payroll) and review them regularly. Quarterly or biannual reviews can help you identify areas for cost-cutting or reinvestment. - Allocate Funds Wisely
Divide your revenue into categories like operating expenses, savings, debt repayment, and growth opportunities. For example, you might follow the 50/30/20 rule: 50% for operating costs, 30% for growth, and 20% for savings and emergencies. This system assigns every dollar a specific job—a concept I also emphasize with personal financial planning clients. Just as you wouldn’t hire an employee to sit idle in the break room, a dollar without a purpose is a dollar wasted.
This is by no means an exhaustive list, and every situation is different. A business budget will vary depending on the business structure, type, stage, and other variables. In my experience, though, successful business owners maintain a firm grasp on their cash flow. Every dollar matters and should be accounted for and used efficiently.
If you found this helpful, please share it with someone who might benefit. And, of course, feel free to contact me. I’m happy to discuss your goals, provide further insights, or help you in any way along your business journey.
In our next section, we’ll take it a step further and dive into effective cash flow management. Cheers!
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