Business

Budgeting For Your Business: Where To Skimp & Where To Splurge

Budgeting For Your Business

Funding a small business or a startup can feel like a bit of a minefield. When you’re building an enterprise from scratch, every financial decision you make as the business owner can have a palpable impact. Timing is also a major factor to the efficacy of any growth step you take, especially in the earlier stages of business development. In other words, it can even be possible to make the right investment decisions at the wrong time.

So how can you hope to navigate all the complexities of business budgeting? Understanding how to differentiate between a necessary and unnecessary business expense can naturally help you make smarter investment decisions over the course of your company’s development. We’ll be outlining some of the most splurge-worthy business investments as well as some that it may pay to be more conservative with below, just to help any budding entrepreneurs develop their business budgets.

Invest in insurance and industry compliance

Making sure that your company is built on a strong foundation is key for its longevity. This means investing in business insurance as well as ensuring your company is fully compliant with all relevant industry standards and regulations. Business insurance must absolutely be considered a splurge-worthy investment, especially for companies with plenty of overheads or even those seeking professional indemnity or public liability cover for their company. 

Securing business insurance also naturally walks hand in hand with ensuring industry compliance, as taking the time to read over any standards or regulations that are relevant to you and taking measures to keep your business aligned with these standards, will reduce the likelihood of you having to make a claim on your insurance policy. Thankfully, you will be able to find all the information you need on industry body websites as well as government sites. Business taxation information can also be found easily on the ATO (Australian Taxation Office) website. 

Be sure to also inform ASIC (Australian Securities & Investments Commission) as soon as any changes are made to your business, these being changes like changes to your company name or address, to your company’s classifications, or the appointment or removal of shareholders. Keeping the registration and details of your business up-to-date is also a key component of maintaining compliance. 

If you’re uncertain about whether or not you’ve fulfilled all your obligations surrounding industry compliance, then we recommend enlisting the help of a compliance consultancy firm for expert insights. Similarly, working with a dedicated accountant and perhaps even a business lawyer can help you manage your enterprise with the utmost confidence that you have ticked all the necessary boxes and are ready to open your doors.

Assess the value of your overheads

A common trap that many budding business owners fall into is investing in expensive overheads before they may even be considered a necessary expense. For example, renting out an office or a storefront can be a costly immediate expense, especially for businesses that aren’t currently profitable. If you’re still developing your products or even building your brand, then you definitely do not want to spend any of your precious development funds on paying for your rent or utilities. These unnecessary expenses are likely to put you out of business before you even begin.

Overhead costs like rental rates, lighting, and office fit outs may not even be necessary for businesses that are turning a profit. With a number of organisations still maintaining hybrid or remote work models for their employees, your business may be able to cut down on overhead costs immensely in the long run by simply trading in your large office space that seats your entire staff, for a smaller company headquarters that’s primarily used as a setting for client presentations or staff meetings.

If you have determined that your overheads are actually a necessary expense for your business operations, however, then we highly recommend developing a budget for your business to help you balance overhead costs with other necessary expenses. 

Tech and other tools of your trade

Starting your own company is a monolithic endeavour that will see you stepping into a variety of different roles, regardless of the nature of your business. Even with all the technological solutions available to entrepreneurs in the present day, the responsibilities and daily tasks of the business owner can still feel chaotic on the best days. That’s why many see project and business management software as a necessary investment for overseeing business operations today. 

Alongside software solutions, you’ll naturally also want to ensure that your business is equipped with all the necessary and cutting edge tools of your trade, just so you’re primed to deliver the most high-quality products or services alongside your major competitors. If you’re operating a retail storefront, then you’ll want to make sure that your POS systems are primed to take a wide range of payments, including cash, card, and BNPL (buy now, pay later) services. And as for more industrial businesses, having all the most efficient production machinery is key for ensuring that your finished goods are worthy of their production costs. 

Remember that just as it’s a shoddy carpenter who blames their tools, it’s also rather shoddy to keep ineffective or outdated tools in the first place. You can take pride in your business and its offerings by making sure that you splurge on all the equipment that helps you perform at your best. 

Make the most of your marketing

Knowing whether you should skimp or splurge on marketing and branding for your business is actually best determined on a case-by-case basis. For startups, it certainly pays to invest in your name recognition and the development of digital assets like your business website and social media profiles. Strategic branding is also likely to help you stand out from your competitors.

And as for marketing, digital marketing channels will likely be a strong investment for your business, mostly in part due to consumer expectations that modern businesses maintain a strong digital presence. Investing in web development can also help boost your exposure, allowing you to reach a wider audience and build on your consumer base.

Keep in mind that the most effective marketing strategies are also dynamic and adaptable rather than static. So in this regard, it is actually possible to outgrow and thus, overspend on your digital marketing.  The world of digital communications moves fast, meaning that your message can feel dated rather quickly. For this reason, it’s imperative to keep monitoring the performance of your active campaigns and defund them as soon as a downward trend is detected. From there, you can develop a new strategy that’s primed to deliver results.

Digital marketing is also a highly specialised discipline that typically requires a combination of creative and analytical skills, alongside plenty of experience. For this reason, business owners who are feeling a little out of their depth are encouraged to outsource their business marketing to a specialised marketing agency, or even hire a dedicated marketing professional to handle this task in-house. 

Remember: strategic spending is key!

We leave you with this final tip and firm reminder that the right investment decisions do differ from business to business. Because of this, it’s up to business owners to determine exactly where their funds will be well spent. This can be achieved by maintaining a strategic approach to your spending and investing, and reassessing this approach regularly to factor in changing variables. 

And when in doubt, absolutely seek second opinions from your accounting and legal teams, fellow shareholders, or even dedicated financial advisors. Nobody truly does this job on their own, after all. 

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