WHY

Tracking and controlling business spending is critical to financial health and profitability. Keeping an eye on spending prevents overpaying, improves pricing and profit margins, and facilitates precise forecasting and budgeting. Opportunities for investment or cost reduction are revealed by routinely reviewing expenses. Cash flow management, lender and investor credibility, strategic decision-making, and the long-term viability and expansion of a corporation all depend on efficient spending control..

To increase earnings, businesses must control costs. Tracking and limiting expenses allows you to set more competitive prices and increase your profit margins. Monitoring spending keeps a company solvent. Businesses can avoid overspending and financial troubles by tracking where their money is spent.
Creating accurate budgets and projections enables organisations to plan, manage resources wisely, and make informed financial decisions. Checking spending on a regular basis might reveal previously unknown tendencies, assisting business in identifying ways to save or invest more.
Understanding costs is critical for managing financial flow. It allows businesses to know when to pay bills and when to expect money to arrive, ensuring that there is enough cash on hand. It also prepares businesses for investment, since investors consider how expenses are managed. A good cost plan boosts a company's trustworthiness, making it more appealing for investors and loans.

EACH YEAR, OVER 50,000 NEW BUSINESSES ARE REGISTERED IN NZ, EACH WITH ITS OWN STRUCTURE AND RULES.

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EACH YEAR, OVER 50,000 NEW BUSINESSES ARE REGISTERED IN NZ, EACH WITH ITS OWN STRUCTURE AND RULES. ✦

WHAT

These are costs that remain constant regardless of how much a business produces or sells.
Variable expenses fluctuate based on company activities and decisions, changing monthly with the business environment.
A strong and effective marketing and sales plan, employing both online and offline media, is critical for engaging and connecting with customers.
Good financial management is essential for long-term growth and success in any business. This includes closely monitoring financial flow, keeping tabs on spending, and reviewing profits.

Every successful business has essential key operations that are crucial for its continued growth and overall success in today's competitive marketplace. Clearly defining your business model and operational strategies not only helps achieve short-term success but also fosters long-term sustainability and resilience in the face of challenges.

HOW DO YOU DEFINE YOUR BUSINESS MODEL?

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HOW DO YOU DEFINE YOUR BUSINESS MODEL? ✦

One size does not fit all when it comes to your business

Dont feel limited by your specific trades or skills; instead, consider your options. You have the opportunity to explore and expand your potential beyond what you might think.

Fixed Costs

These expenses are regular and consistent, meaning they do not fluctuate with the level of production or sales activity. Below is a list of common fixed costs that many small businesses encounter in their operations.

Rent or Lease - Monthly payments for office or retail space.
Salaries - Regular wages for full-time staff.
Insurance - Business insurance like liability, property, and health.
Utilities - Basic utilities such as electricity, water, and internet.
Loan Payments - Scheduled payments for any business loans.

Software Subscriptions - Monthly or annual fees for essential software.
Property Taxes - Taxes on owned property.
Depreciation - The declining value of assets like equipment.
Website Hosting - Fees for maintaining a website.

Understanding these fixed costs is essential for effective budgeting and financial planning. By accurately estimating and managing these expenses, small businesses can maintain financial stability and focus on growth opportunities.

Growth is a positive sign, lean into it with confidence

Let your business evolve naturally over time, adapting to the changing landscape and embracing new opportunities as they arise. This can lead to sustainable success and a thriving enterprise in the long run.

These are the most common variable costs, these fluctuate with the level of production or sales. Being aware of these costs enable you to plan ahead and adapt quickly when facing these situations.

Here’s a list of common variable costs that many small businesses typically encounter:

Variable Cost

Inventory - Supplies or products that vary based on sales volume.
Shipping Costs - Expenses related to delivering goods to customers.
Raw Materials - Supplies for manufacturing or production.
Freelance/Contractor Payments - Payment for project-based work.
Sales Commissions - Variable pay based on sales performance.

Advertising and Marketing - Costs that fluctuate with needs.
Payment Processing Fees - Fees based on transaction volume.
Utilities for Production - Additional electricity, gas, or water tied to production.
Packaging - Costs for boxes, labels, and other packaging materials.

Understanding these variable costs is essential for effective budgeting and financial planning. By accurately estimating and managing these expenses, small businesses can maintain financial stability and focus on growth opportunities.

Stay flexible and adapt to change and new opportunities.

Your business will undoubtedly grow and thrive when you leverage the right tools and strategies to enhance your operations and financial management. With the right approach, you can unlock new opportunities for expansion and success.

Emergency Repairs - Unexpected maintenance for equipment or facilities.
Legal Fees - Fees for unforeseen legal issues or disputes.
IT and Cybersecurity Incidents - Costs to fix system or security breaches.
Employee Turnover Costs - Recruitment and training expenses for new hires.

While fixed costs are predictable and are essential elements for effective budgeting, unexpected costs can unexpectedly arise and significantly impact a small business's overall financial health. Here are some common unexpected costs that small businesses may encounter:

Unexpected Costs

Market or Industry Changes - Expenses to adapt to regulatory changes.
Natural Disasters - Costs from damage due to events like floods.
Tax Penalties - Unexpected fines or penalties.
Currency Fluctuations - Costs affected by exchange rate changes.
Supply Chain Disruptions - Extra expenses from delays or sourcing alternatives.

To reduce the impact of these unexpected costs, small businesses might consider developing a contingency fund, monitoring expenses periodically, and keeping flexible budgeting plans that can adjust to unforeseen occurrences.

Conclusion

One size does not fit all when it comes to business, you are not limited by your specific trades or skills; instead, you have the opportunity to explore and expand your potential beyond what you might initially think. The best way to define your business is to make a Business Plan, this allows you to see the full picture of your business or organisation over the next 3 years.

Your Business Plan explains how you will operate, earn revenue, and handle expenses and most importantly clarifies roles and processes in your organisation.

Regularly updating your plan to include new insights and adjustments is crucial for staying relevant and achieving long-term success.