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Calculating Costs: Budget Planning for Your Home Based Business


One of the most important aspects of a work at home business plan is budget planning. In order to determine how much money you need to start and run your home business, you'll need to consider all the expenses you will incur throughout the business operation, and create a budget. In addition to knowing how much money you'll need to get started, budgeting planning will also play a role in determining how much you will have to charge your customers for the products and/or services you offer (in order to get profit).

When creating your budget plan, consider the following items:


Licenses and Permits


Depending on the nature of your business, the area you work from may require you to have special licenses and permits to operate. Check with your local small business administration to find out what you should have on the local, state, and federal levels to be sure you are in compliance with all legal issues.




Consider all the things you'll need to operate your business including computers, office furniture, phones, etc. Determine the price of all of these things, new and used, to see where you can get the best deal, and budget accordingly.




Consider any software you'll need to run your business, including accounting, word processing, and web development (if that's the nature of your business or you plan to do your own web design). Price several programs and consider either using an older version of the program or using open source software to save money.




Consider paper, pencils, pens, printer ink, postage, mailing cartons, and anything else you'll need to regularly run your office here. Do a mock shopping spree online with your favorite office supply vendor to get an estimate of your weekly or monthly expenses, and multiply this accordingly for an annual budget.


Marketing and Advertising


Research advertising venues to determine how much you'll spend on advertising each year. If you're not sure because you don't want to waste too much money on it (before knowing how well it will work for you), give it your best guess based on the pricing you see. Don't forget business cards, flyers, and promotional materials, such as pens and calendars, as well.




If you have to ship products to your customers, consider how much you'll have to spend with your carrier per product, and multiply this by your anticipated annual sales volume (to get a good budgeting amount). Shop around for the best deals, and this will give you an idea of what your shipping charges will be for your customers.


Utilities and Rent


A home based business generally already has these things factored into a home budget, however, it's important to calculate the portion of these bills you'll use in your home business operation for tax purposes.


Legal Fees


Consider any fees you'll pay to get the business legal if you're choosing to form a partnership, LLC, or corporation. Consider investing in a prepaid legal plan to assist you, should one of your clients try to sue.




If you're planning to become part of any organization, consider the dues you will have to pay.




If you'll have employees, consider what you'll need in order to pay them. Budget what you'd like to make after all bills are paid (and a portion of the profit is saved for future expenses), so you'll better be able to determine your pricing and target sales volumes.




You'll have to pay income tax on any business gain, at a rate of 15.3% if you're a sole proprietor. Consider sales and use taxes, as well.

After you consider all these things, add some extra cushion to the budget in case you incur extra charges throughout the course of the fiscal year. Having room to wiggle is important in any budget. For help with budgeting items, do a little window shopping and contact multiple vendors to get the best estimate of what these things may cost you.

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