If you want to start your own business, it is important to consider your financial situation. By determining your current income and expenses, you will be better at projecting your financial needs over the next months. For most small businesses, there is a gap between when you start your business and when you begin to produce income. In fact, most management consultants who specialize in small businesses suggest that you have at least 6 months of savings available for the start-up phase of your business. Of course, this number will vary depending on the type of business you decide to start.

Before you make any decisions about starting a business you need to develop a monthly plan of saving and spending. This will help you identify how much money you will need each month to live. Also, it will tell you if your dream of owning your own business fits with your other dreams such as sending a child to college.

Current Budget
First, Start with your personal current income and expenses. Some extra areas not included in the following chart include the following, just add whatever is applicable at the end.:

Home: home repairs, improvements, security, garden supplies

Daily living: Child care, dry cleaning, Housecleaning service, dining out, dog walker

Transportation: Car wash/detailing services, parking, public transportation
Entertainment: Movies, concerts/clubs
Health: Health club dues, prescription, co-pay, Vet/Pet medical, Life insurance
Vacations: Plane fare, accommodations, food souvenirs, pet boarding, rental car
Recreation: Gym fees, sports equipment, team dues, toys/child gear
Dues/subscriptions: Magazines, Newspapers, public radio and TV, religious organizations, charity
Personal: salon/barber, books, music
Savings: college, vehicle replacement

 

Current Budget

Income: Wages
Other income
Total Income:
Expense
Mortgage/rent
Utilities
Home Telephone
Cell phone
Internet
Groceries
Gas/fuel
Car Insurance
Homeowners Insurance
Health Insurance
Car Repairs
TV, Video rentals
Clothing
Gifts
Credit Cards
Loans
Retirement
Total Expenses:
Difference in Income - Expenses

Start up Budget
This includes the things that you need to start your business. Don't forget to add in a couple or 3 months of business expenses that need to be covered during the time of your decision to start your business and when the doors are actually open.

Start Up Budget

One time costs
Fixtures and Equipment
Decorating and remodeling
Installation charges
Deposits with public utilities
Legal and other professional fees
Licenses and permits
Advertising and promotion for opening
Beginning Inventory
Supplies
1-2 month's monthly business expense
Total One Time Costs:

Business Operating Budget,

This includes the additional monthly income over and above your current budget. Some of the things you currently are paying for can be used for the business - don't forget to record them correctly for tax purposes. For example if you use a room for your office you can deduct a percentage of the utilities, insurance, mortgage/rent as business expense. I'm including all expenses in this spreadsheet, but don't duplicate the expenses or your final totals won't be accurate.

Business Income - Expense

Income
Sales
Services
Total Business Income:
Expenses
Advertising
Bad debt, Cash discounts
Delivery Costs
Dues Subscriptions
Employee Benefits
Insurance
Legal and Auditing
Maintenance and Repair
Office Supplies
Postage
Rent or Mortgage
Shipping, storage, handling
Other supplies
Taxes
Telephone
Utilities
Wages
Total Business Operating Costs
Inventory - Cost of Goods Sold
Total Business Costs

Now you have the numbers and you can figure what you can add, give up or adjust.

 What to do if you don't have the resources to start.

After examining your savings and spending requirements, you may find that you lack the necessary resources to start your business. Do not worry. This happens to many people. In fact, this may be the first obstacle that you will need to overcome. If you are still determined to start your business, you may want to begin accumulating alternative sources of income. 75 percent of small business owners and more use their personal savings to start their businesses.

However, if you need more than you have in your savings account, other money sources may be available from bank loans, family members, partners, friends, venture capital companies, mortgage property, loans from the government, or any other source that you can think of. A good rule of thumb is that you should not borrow more money than is necessary to start your business.Often, the more money you borrow, the less control you will have.

Next: Crunching the numbers

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