You’re starting a new creative business and you’ve got all the feels. You’re excited about the possibility that your art, music, designs, or creative work might impact more people. You’re eager to jump in and start making money from your art. And you’re worried about how much it’s going to cost and if you have enough money to cover your startup expenses.
If this sounds like you, you need a startup budget. A startup budget helps you plan your startup expenses, prioritize what’s most important, and keeps your spending on track. So you can spend less time worrying about money and more time being creative.
Not all budgets are created equally, which is why it’s essential to understand the difference between an operational budget and a startup budget.
An operational budget is a plan for how you’ll allocate the money you earn from your creative work. It’s based on your projected income and lists the costs and expenses you expect to have.
A startup budget is similar to an operational budget in that it’s a plan for how you’ll spend money. The key difference is that a start-up budget is a spending plan for everything you’ll need to purchase to start your creative business, rather than operate it.
Unlike an operating budget, a startup budget isn’t based on your projected income. It’s based on the amount of money you have available to start your business.
If you’re a creative entrepreneur, then you need a startup budget. Even if you only have $500 to invest in your business, a startup budget ensures that you make the most of your money.
It’s easy to get sucked into fancy software, tech gear, and expensive equipment when you’re starting a business. But a lot of that technology can complicate things if you don’t have your financial foundations solid. A startup budget ensures that every spending decision you make is intentional.
A lot of artists, photographers, musicians, performers, writers, and fashion designers have negative feelings towards money-talk. But a startup budget helps you develop healthy financial habits early on. Just the act of creating a startup budget builds your business finance skills and you’ll learn a lot about your money personality as you implement, and adjust, your spending plan.
Now it’s time to create your startup budget. We’ve included a free template for you to use that follows the steps we’ll outline below.
The first step is determining how much money you can put towards starting your art business. We do this step first because, without a clear idea of how much you have to spend, it’s hard to say no to expenses… And those expenses can really pile up!
How much you have to allocate to your startup budget is based on:
If you’re using your savings, you’ll have to decide how much of your savings you want to allocate to your business. Don’t use all your savings! For example, if you want to start a photography business and have $10,000 in savings, don’t base your startup budget on $10,000. Instead, budget $8,000- $9,000, so you have some cushion.
The same goes for taking out a business loan. Don’t take out a loan that will result in monthly payments at the high end of what you can afford.
The amount you allocate to your startup budget should be healthy and sustainable for you.
Now that we know how much money you have to work with, it’s time to make a list of everything you think you’ll need to purchase to start your business. Think of this as a brain dump, and don’t get caught up in prioritizing expenses yet. Just list all of your projected expenses.
Examples of expenses you might have are:
Now that we have a master list of everything you expect to spend money on, it’s time to assign each expense one of three prioritization categories:
Be honest with yourself during this step. It’s easy to call everything “essential” but really think about what’s necessary to earn revenue. An essential expense should tie directly back to income. What will allow you to sell your art or your creative services right now? A nice to have will make earning money easier, but you could still make money without it.
It’s time to assign spending caps to each expense. If you’re not sure how much something will cost, take the time to research the estimated costs. The more accurate your startup budget is, the more likely you’ll stick to it.
Start with the essential expenses and assign a spending cap for each one. Starting with essential expenses prioritizes your spending based on what you need to be operational. Remember, without these expenses, you couldn’t earn revenue.
Next, move on to your non-essential expenses and, finally, your later expenses.
Don’t worry about numbers just yet. We’ll be making adjustments later.
Real talk- most people go over budget when they start their business. New business owners are eternal optimists and often underestimate how much things cost or have unanticipated expenses.
To account for this, we pad our budget. Generally, I recommend adding 10% to your budget as a cushion, but how much you pad it is ultimately up to you.
Now it’s the moment of truth: Are you over or under budget?
If you’re over budget, then you’ll need to finesse the numbers. Start by reducing your spending caps, or eliminating, later and non-essential expenses. If you’re still over budget, move on to your essential expenses and ask yourself:
Finesse the numbers until you have developed a budget that fits within your goal.
Most of budgeting is adjusting numbers. So, if you spend a lot of time on this step, don’t worry, you’re still doing everything right.
Now it’s time to go forth and spend money! Buy your domain, purchase a tool to set up a website for your film project, get a project management tool to keep you on track with design projects, and allocate money for promoting your art.
As you spend, update your budget with the actual amount spent. A budget is a living document. You should refer to it often and update it regularly.
If you spend in a category and are over budget, adjust your spending elsewhere. If you spend and are under budget, reallocate funds to other areas (or areas you previously cut).
And there you have it! You just created your very own startup budget for your new creative business and you’re one step closer to launching your dream. Remember, these budgeting tools are here to help you, support your creative vision, and make your dream of starting a business around your creative work possible. Now go out and make it happen!
Meet the author:
Andi Smiles, small business financial consultant and coach, teaches self-employed people to take control of their finances so they can step into their personal power. She’s helped hundreds of self-employed people organize and understand their business finances, while also uncovering their emotional relationship with money. She is a founding faculty member at Parsons Entrepreneur Academy, and will be teaching finance and budgeting for creatives in Spring 2021.
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