Detailed guide explaining how to create a budget for Startup and Budgeting Tips for E-Commerce Startups
E-commerce, or electronic commerce, is the buying and selling of goods and services over the internet. E-commerce businesses use online platforms, such as websites and mobile apps, to connect with customers and facilitate transactions.
These businesses can range from small, independent retailers to large, multinational corporations. E-commerce has become increasingly popular in recent years, as it allows businesses to reach a wider audience and offers consumers the convenience of shopping from anywhere with an internet connection.
Here is definitive guide to understand the process to create a budget for E-commerce business
A startup budget is a financial plan that outlines the projected expenses and revenues of a new business. It is used to determine the amount of capital required to start and operate the business, as well as to track the business's performance and make adjustments as needed. A startup budget typically includes estimates of one-time expenses, such as legal fees and equipment purchases, as well as ongoing expenses, such as rent and payroll. It may also include projected revenue and any other sources of funding, such as loans or investments.
A startup budget is an essential tool for managing a new business's financial health and ensuring its long-term viability.
There are several reasons why a startup should create a budget.
First, a budget can help a startup manage its expenses and allocate its resources more efficiently. This can improve the chances of the startup succeeding and achieving its goals.
Second, a budget can help a startup plan for the future and make decisions about how to invest its money and time. This can help the startup grow and become more successful.
Finally, a budget can help a startup attract investors, as investors will often want to see a well-planned budget before they decide to invest in a startup.
A startup budget can be used to help business owners understand how much money they need to get started and how much they need to cover expected business expenses over time.
Founders should always be aware of the amount of capital required to bring their company to life and help it grow. Budgets are an essential component of a business plan, are required to obtain a business loan, and are an essential component of your fundraising deck.
Each industry vertical has its own set of standard expenses and milestones for growth. Here are a few examples of milestones and associated costs for a SaaS business:
Here are the steps to prepare a startup budget for an e-commerce business:
Understanding your business goals and the market you are targeting will help you determine the resources and expenses needed to achieve those goals.
Next, you need to have a rough estimate of how much money you can expect to bring in each month. This can be based on past sales data if you have any, industry trends, or market research.
This plan should include the strategies and tactics you will use to reach your target market and generate sales, as well as the associated costs, such as advertising and marketing expenses.
How much should be marketing expenses for Startup?
Well, It all depends. You might not be concerned about pounds and pence, dollars and cents. Marketers aren't necessarily budgeting experts, and the final say will fall to the CEO - or someone with the letters "C-" in their job title.
However, you will bear some responsibility for how the money is spent. As a result, it's critical that you're given a reasonable budget.
There are two major factors influence your marketing budget:
Operating expenses are the costs associated with running your business on a day-to-day basis, such as rent, utilities, payroll, and insurance. Carefully estimating these expenses will help you understand the cost of maintaining your business.
One-time expenses are costs that are not incurred on a regular basis, such as legal fees, website development, and equipment purchases. These expenses should be accounted for in your budget to ensure that you have the necessary funds to cover them.
A financial plan is a detailed projection of your income and expenses over a specific period of time. This plan should include both your projected revenue and your estimated expenses, as well as any other sources of income, such as loans or investments.
Your budget is a living document that should be reviewed and updated regularly to reflect changes in your business and the market. As your business grows and evolves, your budget should be adjusted to reflect these changes.
Preparing a startup budget can be complex, and it is always a good idea to seek advice from a financial professional to ensure that your budget is accurate and comprehensive. A financial advisor or accountant can provide valuable insights and guidance to help you develop a budget that meets your business needs.
Step 1: Gather your tools and set a target budget (Can refer our template or any software)
Step 2: List your essential Startup Costs. Startup costs are the expenses and assets purchased before launching your business. (e.g, Assets are furniture, laptops etc. and expenses are rent, salary etc.)
Step 3: Determine your Fixed Costs for runining business (Fixed cost are cost which will have to incurred irrespective of revenue earned by the startup for e.g, Rent, Salary, Travel Cost etc.)
Step 4: Determine your Variable Costs for Running Business (raw material, ad spends, travel, promotional expenses etc.)
Step 5: Calculate your Monthly Revenue of MRR
Step 6: Tally up your total costs, then review and adjust
Also Read Detailed Blog on How to Prepare Startup Budget in 6 easy steps (read here)
Here are some steps you can take to track your startup's budget on a monthly basis:
Overall, the key to tracking your startup's budget on a monthly basis is to be organized, proactive, and consistent. By following these steps, you can better manage your finances and increase the chances of your startup's success.
If you’re just starting out and taking the Google Sheets approach to budgeting, check out this free template. We’ve broken it all down for you in one simple-to-use sheet.
Q: Why is a budget important for a startup?
A: A budget is important for a startup because it can help the company manage its expenses, allocate its resources more efficiently, plan for the future, and attract investors.
Q: What are some fixed expenses for a startup?
A: Some common fixed expenses for a startup include rent, salaries, and insurance.
Q: What are some variable expenses for a startup?
A: Some common variable expenses for a startup include advertising, materials, and travel.
Q: How can a startup create a budget?
A: To create a budget, a startup should identify its fixed and variable expenses, create a spreadsheet or use budgeting software to track its expenses, set aside money for contingencies, and monitor its spending carefully.
Q: How can a startup track its budget on a monthly basis?
A: To track its budget on a monthly basis, a startup can compare its actual expenses to its budget, identify areas where it may be overspending, and make changes as needed to stay on track. It's important to be organized, proactive, and consistent in order to effectively manage the startup's finances.
Aside from spreadsheets, if you're unsure how to proceed or are uncomfortable creating a budget on your own, seek assistance! At Jordensky, we help early- to growth-stage startups manage their day-to-day business finances, including budget creation and management.
All customers get access to a Jordensky Finance Dashboard, which displays their company's financial figures in interactive, real-time reports like operating expenses, net burn, revenue, cash position, and more.