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OSU BA 495 - How To Create A Business Budget

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How To Create A Business BudgetWhat is a Budget?How to Create a BudgetVariable CostsFixed CostsBreak-Even PointCreating Your Own BudgetUsing Your BudgetSourcesHow To Create A Business How To Create A Business BudgetBudgetBy Lucas Duralia,By Lucas Duralia,Kyle Anderson,Kyle Anderson,& Nicole Rasor& Nicole RasorWhat is a Budget?What is a Budget?Budget: most important business tool. Budget: most important business tool. Provides plan for business operations day Provides plan for business operations day to day and long term.to day and long term.Can help business meet or exceed goals Can help business meet or exceed goals and be more financially stable.and be more financially stable.It’s the Business “map”.It’s the Business “map”.How to Create a BudgetHow to Create a BudgetThree Steps you need to understand:Three Steps you need to understand:1) Variable Costs1) Variable Costs2) Fixed Costs2) Fixed Costs3) Break Even Point3) Break Even PointVariable CostsVariable CostsVariable Costs- costs that Variable Costs- costs that increase/decrease with level of sales.increase/decrease with level of sales.Ex: Pizza- the more you sell, the more Ex: Pizza- the more you sell, the more toppings, cheese, pepperoni, etc you need toppings, cheese, pepperoni, etc you need to purchase.to purchase.Once you know your variable cost you can Once you know your variable cost you can figure your gross profit.figure your gross profit.Sales- Variable Costs=Gross ProfitSales- Variable Costs=Gross ProfitFixed CostsFixed CostsFixed Costs- those costs that will be incurred Fixed Costs- those costs that will be incurred whether you have any sales or not.whether you have any sales or not. Ex: Rent, utilities, insurance, etc.Ex: Rent, utilities, insurance, etc.Fixed Costs do not increase/decrease with Fixed Costs do not increase/decrease with changes in sales.changes in sales.They are only good within a certain sales range, They are only good within a certain sales range, once you have exceeded that they jump to a once you have exceeded that they jump to a new level. (ex. you’ll need more help/retail new level. (ex. you’ll need more help/retail space)space)Break-Even PointBreak-Even PointBreak-even point- the level of sales where you Break-even point- the level of sales where you neither make or lose profit (gross profit=fixed neither make or lose profit (gross profit=fixed costs).costs).Fixed Costs/(Price-Variable Costs)= Break-Even Fixed Costs/(Price-Variable Costs)= Break-Even PointPointBreak even is important for two reasons:Break even is important for two reasons:-lets you know what volume you must sell keep -lets you know what volume you must sell keep from losing money.from losing money.-lets you know how much you need to sell to -lets you know how much you need to sell to produce a given amount of net profit.produce a given amount of net profit.Creating Your Own BudgetCreating Your Own Budget1)1)Determine your fixed and variable costsDetermine your fixed and variable costs2)2)Determine what profit you would like to Determine what profit you would like to makemake3)3)Determine if your goals are realistic, if Determine if your goals are realistic, if not; adjust themnot; adjust themUsing Your BudgetUsing Your BudgetThat’s the key…..you’ve created it, now That’s the key…..you’ve created it, now use IT! use IT! If you need to make changes as time goes If you need to make changes as time goes on you can…its not set in stone.on you can…its not set in stone.SourcesSourcesHow to Prepare a Business BudgetHow to Prepare a Business BudgetBy: Jeffrey L. Sailor, CPA, PABy: Jeffrey L. Sailor, CPA,


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OSU BA 495 - How To Create A Business Budget

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