One mistake I see small businesses make with budgeting is: not accounting for the owner’s salary, or underestimating the salary.
It seems like an obvious thing to include, but I’ve seen many small businesses forget that the owner will need to take money out from time to time.
When I use the word “salary” here I mean salary paid to an owner of a corporation and to withdrawals by the owner of a sole proprietorship (even though sole proprietors don’t technically get paid a “salary”).
Something else I see all the time is … underestimating what the owner will need to take out of the business to survive.
I’ve made this mistake myself with my own budgeting. I budget my salary at a ridiculously low level, and then end up having to pay myself more than budgeted just so my family can survive.
Be realistic about your salary needs when you create a budget. You want your budget to reflect reality, even if it means your bottom line isn’t exactly rosy in the end. It’s better to know that at the start than to get into a situation where you’re withdrawing more and more money for yourself beyond what you budgeted, and you get into financial troubles because you weren’t expecting this to happen.
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