21 Tips for Entrepreneurs for Building a Budget

18.08.2019
Brooks Keret Financial Management
1.
A Real Budget That Reflects Existing Knowledge - The main purpose of the budget in a startup is to implement the vision into a practical plan of operations in a way that both entrepreneurs and investors can truly examine the enterprise's viability. Therefore, do not be afraid of dealing with difficult questions that may arise, they will only deepen understanding and thinking and encourage you the to find various solutions that advance the venture.
 
 
2.
Decline to Detail - We eecommends not settling for an overall general assessment, but rather assess each and every section of the budget separetly and build it bottom-up. A decline in detail will require the entrepreneur to go deeper into the company's planning and raise potential questions and difficulties as early as the planning stage. Just raising the questions will stimulate discussions and thus improve professionalism and chances of success. Even when planning is different from reality.
 
 
3.
Strengthening Trust - When investors examine the required investment and the nature of the venture, they simultaneously and largely examine the quality of the entrepreneurs: the seriousness, professionalism, their business understanding, and especially the degree of trust. A detailed, transparent and realistic quality budget reinforces confidence.
 
 
4.
Budget Flexibility for Changes - Over time, during the developement of the venture, by way of meetings with investors and advisors, additional knowledge is accumulated, which can change the budget data. Therefore, the budget should be flexible to the change. To support this, the tables should include simple and easy formulas for testing and control and each one should be linked so that any single change to one of the data inputs will make the necessary changes to the entire budget.
 
 
5.
English, Dollar, Monthly - The budget of the start-up company in Israel must be in English, and dollars on a monthly basis. Because the costs are essentially shekel, it is advisable to type the shekel in one cell and to translate all shekel expenses into dollars. This recommendation is especially important in situations of material changes in the dollar exchange rate.
 
 
6.
Budget Period - In a new start-up, it is recommended to build a budget for two to three years from the date of investment (not calendar years). Because it can be difficult to estimate the duration of receiving investments. (The period can vary depending on the type of venture). If necessary, you may add a third to a fifth year on an annual basis. (it is important to pay attention to the various developments surrounding the annual assessment)
 
 
7.
Manpower Budget - The highest cost in a startup is manpower. When building the budget, pay attention to order and timing when recruiting manpower, this should be done according to the stages of the company development and milestonesof  the company (for example, recruiting marketing personnel when the company is ready for marketing and sales).
 
 
8.
Labor Costs - Social - Attention should be paid to the inclusion of social costs added to gross wages. (A substantial rate of about 30%).
 
 
9.
Vehicle Costs - Is is common practice to provide those in key poisitions with a leased car
 
 
10.
Office Expenses - Please note that office size corresponds directly with the amount of manpower in the company. If a manpower jump is planned, a move or option to expand the company offices should be taken into acount when allocating the necessary budget.
 
 
11.
Travel Expenses Abroad - In some ventures this budget section may be significant so it is important to pay attention to the current stage of the company and purpose of travel, it is important to adjust the travel budget accordingly. What are the destinations? Length of stay, amount of people on the flight and frequency of flights.
 
 
12.
Insurance - The risks of operations must be examined in accordance with the progress in work plan stages and budget, you should examine and assess with the help of professional advisers the insurance needs of the company. (Elementary, Third Party, Employers, Directors and Officers, Key Personnel, Professional Responsibility, Experiments, etc.)
 
 
13.
Patents - Experts should be consulted about patent registration options and right protections for the company developments, as well as any associated costs.
 
 
14.
Marketing Expenses - Marketing expenses are an essential component. Consideration should be given to the appropriate type of marketing for the company out of a variety of options depending on the nature of the venture and potential customers. (Distributors, Agents, Travel & Exhibitions, Internet Marketing, Traditional Media)
 
 
15.
Legal Expenses - In start-ups, it is generally acceptable to reach a retention agreement with an attorney's office. You should budget a certain amount as part of the investment agreements to be paid for legal fees, upon an investment.
 
 
16.
Capital Expenditures - Deposits, Guarantees, Deposits against long-term liabilities such as rental lease, leasing vehicles, and various performance guarantees
 
 
17.
Capital Expenditures - Attention should be paid to moving offices with increased manpower and to allocate proper funds for improvements in the company's leases. A list of the general equipment needed in the office, including computing and network costs, should be kept as well as a list of equipment to needed for every additional employee.
 
 
18.
Revenue Model - In startups, each company usually has its own unique revenue model. A model based on specific relevant assumptions. It is recommended to build it bottom-up. That is, to specify in the calculation tables the basic assumptions (such as market share, aquisition and retention rates, prices that vary by size groups, etc.)
 
 
19.
When constructing a budget there is usually a tendency to overestimate revenues, which is often a result of excessive optimism about market penetration speed. It is important to remember that most people are cautious and reluctant to adopt changes. Attention should be paid to a moderately-explainable growth rate that can be explained and trained.
 
 
20.
Attention should be paid to the process of building the budget as it is not easy and straightforward and requires understanding the execl file as the cells go on. Care should be taken not to overwrite cell in the file.
 
 
21.
It is advisable to build the budget by way of the entrepreneurs of the company brainstorming with people with experience running startups or those with experience building budgets for startups. In order for the budget to best reflect the company's plans and to train those on whom the budget is presented.

 
We hope these tips help with building your budget. And in any case, we invite you to call and use our services for additional budget services.

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