Overestimate and Underestimate
Business is always going to have expected and unexpected costs. It’s best not to make a budget that directly itemizes everything. A more successful approach will be to create a budget that has some “wiggle-room”, some “play”. If you make $258 on a transaction, mark it down as $250. Now if there’s an additional $8 tax on something out of nowhere, it doesn’t knock you off your established track.
If you know your monthly bottomline, round down on profits. If operational overhead is $20k/month, and you make $25.5k, call it $25k. Do that throughout a season, you may find there’s an extra $6k available for expenses, outreach, bonuses, or what-have-you by the end of the fiscal year.
Likewise, you want to round up for costs. If you purchase something for $251, consider it as $300 deducted from your monthly budget. You’ll keep exact numbers for tax purposes, but for expansion purposes, it makes more sense to round up and down accordingly. Doing it right will yield additional funds on a regular basis, which can be integral in operation maintenance during crisis.
The only caveat here is to have actual numbers which inform your over-and-under estimating. Sometimes a specific expense will crop up which requires all available assets. Provided you keep good records, though, you’re likely to come out on top either way.
Look at your budget and tabulate costs. You’re likely to find that some of the highest operational expenses are centered around acquisition and maintenance of space, as well as production and utilities. Employee costs will vary between business sizes; generally as you scale up, this ratio remains constant.
While employee expenses and production costs can be difficult to curtail—cheap building materials and cut-corners with employees yield poor product performance—you can definitely save money as regards space. One of the best ways to do this is to purchase land and build your own production/operational facilities.
The national average for a prefabricated building like a DIY garage kit is between $16 and $20 per square foot. That means you can build a 3,000 square foot facility for between $48k and $60k. This is ideal for production, operation, storage, or R&D (Research & Development). It all depends on what your needs are.
Adding solar technology and obtaining self-sustaining utilities like heat and water can make such a facility independent, and can be reasonably done for under $20k. Just look for an area where you can put in a substantial well, and then install some solar panels. Check on Amazon.com, but it’s likely you can install a 100-Watt panel for under $150. That means a 5 kWh system is only going to be $7.5k.
Solar technology when properly applied will actually increase property value. If you can build an entirely self-sustaining operational facility of 3,000 square feet for under $100k—which is entirely doable—you can not only knock off serious operational costs regularly bound up in leasing facilities, but you can have an end product which is perpetually viable, and will sell for more than you spent constructing it. This means if worse comes to worst, you can cut expenses and still get away with a decent profit.
According to Fidelity Steel, “An important advantage of steel warehouse buildings is that they are modular and more easily expandable than traditional construction.” This means going the prefabricated route essentially yields property that is scalable with your business. That isn’t possible with a rental option downtown.
If it costs you $10k to rent space downtown on a monthly basis, that’s $120k a year; well over the cost of installation and sustainable upgrade on a pre-fab unit. If you really want to save, going this route has numbers backing it up.
Title: SEO Marketeer
Kevin is an SEO marketeer with OutreachMama and Youth Noise who designs value-rich content aimed at increasing clientele for expanding businesses. Networking, building partnerships, and providing quality products with shareable value make this possible. He’s an author (Amphibian and The Thief and the Sacrifice to his credit) whose professional writing follows business trends in technology, marketing, SEO application, and much more.
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