Budgeting for Variable Costs

Budgeting tools laid out on table

Are you ready to take control of your financial future? Well then, you’ve come to the right place! In this blog post, we’ll break down the steps for budgeting for variable costs in your business. What are variable costs you ask? Variable costs are expenses that go up or down based on how much stuff you make or sell. For example, raw materials, labor, packaging, and shipping. Controlling these costs is an important step on the road to achieving financial stability. So, let’s get started and learn to spend smarter!

Set a Realistic Budget

The first step when it comes to variable costs like supplies, shipping, and other fluctuating expenses, is to have a solid plan in place. You should begin by looking at the highest price you’ve paid for these items over the past year. Next, add a little buffer by increasing that amount by 10%. This way, you’ll set a budget that’s not only practical but also takes into account those unpredictable price hikes that seem to pop up when you least expect them. By being proactive and giving yourself that extra breathing room, you’ll be better prepared to tackle variable costs head-on and keep your business running smoothly.

Consider Time as an Expense

Remember, time is valuable, especially for small business owners. When evaluating variable costs, factor in the time required for each activity or purchase. For example, let’s say you’ve been outsourcing certain tasks like graphic design or content creation, but you find that it’s becoming both time-consuming and costly. You should then consider bringing those tasks in-house by hiring a dedicated team member or exploring automation tools that can streamline your processes. By managing your time effectively, you can save a substantial amount and put your main focus on overseeing a smooth operation.

Seasonal Price Fluctuations

Keep an eye out for seasonal variations in prices. Certain products or services tend to be more pocket-friendly during specific times of the year. So, think ahead and consider making purchases in advance to seize the opportunity. For instance, take advantage of summer sales to stock up on inventory and supplies, or book flights during off-peak periods to save on travel expenses. By staying informed about these golden opportunities, you can squeeze every bit of savings out of your budget.

Smart Shipping Strategies

Shipping costs can quickly eat into your budget if you’re not careful. You should always explore all your options to minimize these expenses and get the most bang for your buck. Can you pick up certain items from a local store instead of paying for shipping? Are there cheaper shipping options available? Ordering in larger bulk quantities can also help you save on reoccurring shipping costs – so consider stocking up on what you can! With a little strategy, you can save money while still getting the items you need.

Employee and Partner Gifts

Let’s not forget about the importance of showing appreciation to your employees and partners. While it’s important to budget for these gifts, there’s no need to go overboard, especially in the early stages of your business. A little can go a long way, so look for thoughtful and cost-effective options, such as personalized notes, homemade treats, or meaningful gestures that express gratitude without straining your wallet. 

If you are ready to start making a budgeting plan for your business, a great place to start is with Outgrow Your Garage courses! Check out Budgeting & Financial Projections to begin planning for the future of your business. And our Pricing course is great for learning to price your services and track your profits. Enroll today, and start making your budgeting dreams a reality!

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