Do you have some business goals for 2021, besides increasing sales? Often, expenditures are needed before or as sales are growing in order to achieve business objectives. Have you thought about how you might fund those goals? Let’s talk through a couple of common goals and how you might fund them.
One of the first things business owners typically consider to get out of overwhelm is hiring additional help. Sometimes this is outsourced; but eventually, most businesses require employees (for whether or not the person you bring on is an employee or contractor read here).
When you have an employee, you must pay their wages, but you also have to consider additional expenses like taxes, unemployment insurance and workers comp, health insurance, or a 401k plan. For an estimate on what this might cost you, use this calculator. You might also need to buy a computer or other equipment for your new employee, and you will definitely spend some of your time training. All of this adds up.
Once you’ve calculated the estimated cost of the first year, divide that by 12. Now set aside this amount in a separate account for two to three months. This allows you to see if you can truly afford them and gives you a cushion if sales don’t increase as quickly as you think they will to cover the added cost.
Almost every business has essential equipment like computers, printers, and furniture. Some businesses also have specialized equipment like cameras, scanners, cash registers, and special servers. Eventually, this equipment needs to be replaced and/or added to. We recommend setting aside a portion of your sales each month for equipment. Look at what you think you will need to replace or add in the next 12 months, and set aside a portion of your sales each month for these purchases. This helps with your cash flow and can keep you from continually borrowing money.
Changing Your Office Space
Sooner or later, most businesses will find the office space they’re using no longer meets their needs. Whether they’ve outgrown their space, are wanting to buy instead of lease, or the space needs have changed due to changes in the business, many business owners need to make a move at some point.
Even if you move somewhere that won’t cost more on a monthly basis (which is rare), the move itself and new space renovations cost money. Start planning now for the day you move by setting aside funds every month. Can you make the space you’re currently in work longer for you? Maybe spending a little to reconfigure the space will save on a more expensive move. If sales have you already bursting at the seams, you should be able to support saving that money for expansion for a few months before you begin looking at moving. It may also take you months to find and renovate the new space, so start setting aside money now.
If you do choose to buy new space, talk with your lawyer and your CPA about whether it’s better for you to rent or buy and whether that space is better owned by your business or a separate entity that you create. There are many important considerations.
Do you sense a common theme? Save ahead! Need help figuring out how to do this or what your options are? We’re here to help! Schedule a free consultation with us today.