People go to college to get a degree in order to follow a career they want to achieve. Yet people do not take any time at all to educate themselves on how to build a solid home-based business. They just 'wing it', and a high percentages of home-based business fail before the entrepreneur gives it a chance to succeed.
Aside from choosing the right business to build from your home (among many other factors), one important aspect of success is how to set up a budget.
Here are 5 keys to success in budgeting for a home-based business.
It is the "10-10-10-30-40 Guide to Budgeting."
Based on the revenue generated with your home-based business, following this guide to budgeting means you need to budget based on the following percentages.
10% Donate to Charity
10% Spend
10% Save
30% Put back into your business
40% Live off of
10% Donate to Charity
In business, you can track your income to gauge profitability. But to help people is much harder to address and quantify. Keys to success in any book you read touches on the point of 'serving others'. It is always a good idea to give a portion of your earnings to a charitable organization. If you are a churchgoer, 10% fits in perfectly to tithing. If you are feeling impoverished, a good way to counteract that is by doing something generous. Think like a million-dollar business - and donating to charitable organizations is what big business practice.
Charitable organizations are also tax benefits for your home-based business so it benefits you and your business two-fold.
10% Spend some money
Being tight is one thing. But celebrating your hard work and effort should be a priority - as a reward for building a home-based business. Blow 10% of what you earn on yourself and make the money earned 'count' for something.
20% Save
Put away earnings for a rainy day. Make your business a prosperous one versus one where 90% of the money is spent and there is nothing left to show for it. You eventually want to have more money at the end of the month versus more month at the end of your money- as they say.
30% Put back into your business
Supplies, inventory, marketing, etc. You can't succeed in business without the essentials. Most people look at their profits and feel that in order to maintain a higher margin, they need to cut the most important part of their business - and these are what increases business: Supplies, inventory, advertising, etc.
40% Live off of
If your home-based business is something that generates decent revenue, it is a good idea to make sure 40% of it is something you can put into your daily living expenses: from groceries to credit card debt; mortgage to piano lessons. If your home-based business is something 'on-the-side' to your 'day job', it can slowly replace your personal income and in turn, slowly replace the expenses you have on a monthly basis. This means: more money in your pocket at the end of the day.
Build in a portion of your income into your home utilities: internet, electrical, phone, cell phone, etc. You are essentially; 'working from home' so a portion of this 40% should be put back into business expenses incurred by working from home.
Make sure a portion of the 40% is set aside for year-end income taxes in an interest earning account. Make the money earn for you while you wait to pay off the income tax at then end of the year.
The "10-10-10-30-40 Guide" is applicable for any type of household income. The home-based business, if the right one is pursued, can generate financial freedom and can replace the bi-weekly paycheck. By owning a home-based business, you in fact are looking beyond the paycheck. This is the main reason why people start and commit to a home-based business. If it is a part time business, it still can develop into decent earnings on the side.
By following basic fundamentals of owning a business, and in this case, budgeting, you can give yourself a chance of success, versus the most common result - failure because you quit. Budget for success and not for failure.