(Dec. 7, 2020) — When creating a business budget, you need to determine baseline figures for your revenue, expenditure, and other expenses. But then, you probably already know this. Instead, this article will focus on some factors you may not have considered. They can impact your budget in significant ways and deserve sufficient attention.
Your tax has a strong influence on your business budget. Depending on your situation, you could be paying self-employment tax, income tax, and payroll tax. You may also need to pay local taxes like sales tax and property tax.
You can use your previous year’s tax figures to create a budget for the new year. However, past models may not help much if you’ve recently made changes like new employees or revenue streams. In this case, a rule of thumb is to budget 30% of your business income. You can refer to this resource on business taxes for more information: https://taxfyle.com/blog/small-business-taxes-for-dummies.
Your digital marketing strategy
Traditional marketing has a slot on most businesses’ budgets, but digital marketing often struggles for a slice of the pie. This is a big mistake since the leads generated via digital marketing strategies are more targeted than most traditional ones.
Additionally, investing in digital marketing generates compound interest that yields fruit for months and years to come. For example, rich content published on your blog will always be available for visitors. If you don’t already, it’s a good idea to allocate some funds to digital marketing.
Current economic climate
Market conditions can affect your financial forecasts and, therefore, your budget. Depending on what industry you’re in, market conditions may also have an indirect effect, impacting your customers’ disposable income, for example.
The reverse is also true as a booming economy will yield a surplus. Economists have wrestled with predicting economic events for centuries, and they aren’t close to a perfect model. While it may be futile to predict the following year’s climate, expecting changes can put you in a better position to handle them.
Your long-term plan
It’s easy to get carried away with putting out small fires that you forget the long-term plan. Sometimes, the goal is to survive for the first few years until the business finds its footing. But then, if you have bigger plans in mind, like expanding to other locations, developing new products, or hiring more employees, they should reflect in your budget.
Your action step could be as simple as a few extra dollars for research and development — whatever you can do on a small scale, or investing in an automation service that frees up time for other activities.
Sometimes, understanding your competitors’ budgets can help you learn new ways to adjust yours. It’s not so much copying as it’s knowing what works and what doesn’t. For example, if your competitors spend 30% of their annual revenue on SEO, you should determine their motivations and results.
If the same competitor generates three times more online leads than you, now, you know why. Likewise, if their results don’t match the investment, you know what not to do.