So many business owners don’t have a handle on how much they spend in different areas of their business month to month or how much it costs just to stay open for business.
NOT knowing how much you spend is what leads to wasted dollars on expenditures that aren’t producing a return or to uncertainty about whether you can afford to give yourself a pay increase or bring on extra help in your business.
It’s pretty easy to lose sight of all of the production costs, online subscriptions, and other services you pay for. You’re busy providing a stellar service or product to your clients and customers, not focusing in on the numbers. And, I totally get that. But keeping yourself in the dark isn’t doing you or your business any favors.
So, what does it actually take to cover your monthly business expenses? That’s the first place you should start when building out a budget and setting income goals.
I find that most business expenses fit into one of five categories: Command, Consultants, Continuing Education, Communication and Content, and Common.
the Categories Explained:
Command includes any systems or subscriptions you use to manage the business, provide a service or product, or manage clients and customers. It’s the tools such as Dubsado, Shopify, Freshbooks, Xero, G Suite, Adobe Creative Cloud, Planoly, ConvertKit, etc.
Consultants are the independent contractors and professional consultants you work with such as a lawyer, accountant, graphic designer, virtual assistant, copywriter, or a coach. It’s your support team!
Continuing education is just as it sounds! It’s all of the learning opportunities and educational investments – from courses to conferences.
An important tax tip:
You can only deduct education expenses that maintain or improve the skills needed in your current trade or business or that are required by law or regulation to keep your license to practice your trade or profession. You cannot deduct education expenses that qualify you for a new trade or business or to meet the minimum requirements of your current trade or business.
Communication and Content
Communication and content expenses are for the aspects of your business that allow you to communicate and connect with your audience. It’s for website hosting, domain registration, advertising and marketing such as Squarespace, WordPress, GoDaddy, Facebook and Instagram ads, or custom brand photography.
Common business expenses are those expenses you might incur in the ordinary course of business – office rent, office supplies, payment processing fees, postage, printing, licensing, business renewal fees, payroll, etc.
When you take the time to outline what you’re spending and do the simple math, you’ll find yourself able to make more strategic decisions about where you’re investing your dollars and why.