Mompreneurs Need Home Business Budget

Every Mompreneur has a clear and well defined goal, that is to earn money with our business. Then, how can we know if we really earn or loosing money? We normally need to do accounts by ourselves and a home business budget could help us to know when we are in profit or loss.

A budget is the estimation of the costs and income. The prediction may differ from reality and thus we need to review our budget from time to time and adjust it based on real numbers. Here are some tips on set up our home business budget.

1. Periodicity of your budget
We normally choose to calculate costs based on monthly basis and it’s easier for us to derive the amount based on 12 months per year. For example, if you are paying your web hosting $120 a year, the monthly costs are $10.

2. List all the recurring costs
Make a list with all costs we know such as domain name, web hosting, autoresponder and so on so that the costs are clearly known and recorded inside the budget. It’s good to use credit card or paypal account for payments and keep track the transaction from the credit card or paypal statement. Some costs are in yearly basis and transform them to the monthly basis follow the periodicity of your budget.

3. List the one time payments
One time payments are those costs that incurred only one time and normally involved bigger sum of money. For example, you have bought a new table or pc for set up the home business. You also plan to invest a sum in your education and learning. Those are the one time payments for your business and you need to derive the monthly costs based on each items and also take into consideration of the depreciation.

Table = $180 and distribute the costs over 3 years, table = $5 per month
PC = $1800 and distribute the costs over 3 years, PC = $50 per month
Education and Learning = $1200 per year, thus $100 per month

If you are selling physical products, you probably need to know how much stock to carry in each month and what is your opening and closing stock.

Now you have a complete list that gives you a glance on the costs that you are paying every months.

4. The Earnings
Based on the example above, the budgeted monthly costs would be around $200 per month for online business and would be higher for Mompreneurs who operate offline businesses. It is always not the case that we could have immediate profit within the very first month or even the first few months. There’s a period where we don’t have the corresponding earnings and even don’t reach the break-even point. Break-even point is where the earnings = costs.

For moms who just get started, it’s unrealistic to expect to be in profit after a very short period of time. Our earnings are derived from sales and how many sales do we need to get per month so that to reach the break-even point? Let’s assume that the selling price is $20 per item to break even, we need to sell 10 items per month. We need to sell more if our monthly costs are higher. 10 items per month sounds easy but for the first few month, we probably consume lots of time in our learning curve and network building. It’s very common we have zero sales for the first few months.

5. Compare budget and actual profit and loss
After few months you have some actual figures for your comparison and you are advised to put those budget and actual costs and earnings into one calculation sheet. You can easily see period by period and what is the net result of your business and immediately know if you are earning or losing money. You may also decide to reinvest part of your earnings and increase your marketing spending month by month.

6. Review budget
Review our budget on a regular basis and the more data we have, the more accurate our budget will get. Budget helps us to decide whether to invest more in marketing activities or save costs by reducing our expenses. Always monitor the results of our marketing activities.

7. Time for Mompreneurs!
Home business budget is a powerful instrument to provide us a good financial basis if we are on track or not. Many moms have the tendency to oversee spending and overestimate earnings. Budget also helps us to make faster and smarter business decisions without affect our cash flow.

I truly hope that all Mompreneurs would manage our budgets and forecast our future – month by month and year by year.