It hasn’t been a great year for a lot of businesses. As far as lean ones go, this might be the leanest a lot of businesses have ever seen—and hopefully the only one of this calibre. If that describes your year so far, it might be time to consider making a bare bones budget.
Business ebbs and flows, it’s simply the personality of it. Hopefully, the economy will pick up soon. So, perhaps with some skimping, saving and cost-reducing, you might be able to get through the last little bit we have left.
What is a Bare Bones Budget?
A bare bones budget is one that takes your spending down to the absolute minimum that you can possibly handle.
With a budget like this, you spend only what you need to survive and fulfil financial obligations. Beyond that, you spend nothing. No extras, no upgrades, no additional spend.
A bare bones budget is a decent strategy for getting through a financial rough patch for those businesses that can manage to do one. However, they’re not for everyone. It’s important you talk to your financial planner, accountant or chief financial officer when it comes to making big business money decisions like these.
What Does One Include?
When you make a bare bones budget, you’re making a budget that includes absolutely nothing extra. That means you include ONLY the things you must pay for to survive as a business.
Things like office space (if you really need it), utilities, gas, any debt requirements, phones, insurance and internet coverage are probably all fair game, depending on what kind of business you’re in. But you don’t want to include anything like bonuses, raises, new programs or equipment—essentially ditch anything you absolutely do not need for the next little while until your feet are back on the ground.
How to Build a Bare Bones Budget
1. Figure Out What You Need to Spend
When it comes to making a bare bones budget, you need to start with what you know.
Make a list of all of the expenses you currently have and figure out which ones are absolutely necessary for you to function and which can be cut. This is a hard list to make and categorize because you want your business to run as smoothly as possible, but sometimes the tough decisions really do need to be made.
2. Only Pay What You Have To
Staff is expensive, so having a solo venture is one of the cheapest types of businesses you can run, at least when it comes to paying for personnel. Only pay for the staff that you currently need. If you can live without the third administrator for a while, it’s a good position to cut. It might mean that you add your own contacts into the system or check your own email, but the budget cuts could be used elsewhere.
Likewise, if there are services you don’t really use or could live without, cut those too. You really need to focus on what you NEED, not necessarily what makes it easier or what you would like to see happen. A budget this thin is supposed to get you through harder times, not be the status quo.
Remember that contracts still have to be honored and financial obligations met.
3. Cut Office Space (if you can)
A quick way to cut a big chunk of your spending is to cut your office space if you can afford to. Some offices are on contract, others are simply required. But if your business could move to a remote-only model you could save a ton of cash.
Working from home can take a huge budget line away and give you more money so you can keep your head above water longer.
4. Reduce, Reuse, Recycle
There are probably a lot of things that you already have that you can use. If you can reuse what you already have, go for it. If you can avoid purchasing new things or reduce the number of things you purchase, that’s also a great option for cutting the budget. Finally, where you can recycle what you would normally throw away.
Whether or not you’re building a bare bones budget, having a reduce, reuse and recycle program goes a long way to making smart financial decisions.
Have you ever made a bare bones budget? What was your experience like? Share it in the comments below.
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Tae started out as a journalist before following the money into the corporate world. But it turns out that the grass isn’t always greener and now you can find her spending most of her time writing about all the things she loves. Namely, money, travel and business with a hefty dose of self-deprecating humor. She is a podcast fanatic, blogging aficionado and loves to find new ways to turn passions into cold hard cash!