If you have been with us this long in the Starting a Business series, you obviously want to start a business! Now, we’ve talked about creating your business plan, your brand, and beginning to advertise and market. However, there is a gaping hole in our planning strategy thus far: Finances.

If you looked through the table of contents on the business plan provided by the Small Business Association (SBA), you will have seen the section of supporting documents. This is where you put your resume, research that supports your business, credit score form, tax returns, and a three year financial projection.

Most of you probably said “Whaaat?” I know that when I first saw that, I did. However, the reality of the situation is this: Businesses cost money to run. There are those of us in the world that are fortunate enough to have saved a little bundle of money that we can invest, there are those of us who know someone with a bundle of money that they can invest, and there are those of us that need for this business plan to be top notch so that a bank will look at that, along with your personal financial history, and say “Bang up job, Natalie! You only need five billion dollars? Excellent.”

In short, you need to know how much money it will cost for you to successfully operate your business in the first year, an estimate of what money will be coming in, and an estimate of cost/income for the two years following.

Well guess what friends? The SBA has got your back again.

My local Small Business Development Center(SBDC) has an amazing Excel spreadsheet (linked above). It is set up to cover three years, and has formulas placed in it so that if you enter your cost for American Music Therapy Association membership, it will carry it into the next two years, and add it to all of your other expenses. If you think you are going to make $500 this month, put it in the sales column and it will subtract it from your operating costs.

It is a fantastic tool, but you have to know what to put in. If you aren’t sure how much money you have to start with, work backwards. Insert in all of the costs to operate, and see what the total ends up being. In our field, I advise giving yourself enough financial leeway to operate at least 3-6 months with limited income. I started with what everyone tells me was a good head start in bookings, and I’m still nowhere near covering expenses with what I bring in.

So what is going to cost you money?

This is a tricky question, because each business will be different. Think about tangible items first. Do you need furniture? Instruments? A computer? Storage? Office supplies? Do you need to think about rent for a clinic, or gas expenditures? If you have a clinic, you have to think about insurance for the building and utilities. What about your malpractice insurance? Business license. Zoning fees. Cost of advertising. An Accountant. Photocopies. Website. Phone line. Membership and certification dues. Quarterly estimated taxes. Your paycheck. Interest on a loan. Interest on a credit card. Shipping.

Suddenly every little thing has a price tag attached. It is your job to insert that on the excel sheet. If you aren’t sure of something, estimate high. You’d rather have budget left over than to go over budget.

The Emotions: Shopping is fun, so this might seem fun to you until you start to look at the numbers at the bottom. This page is your dry run on paper for your business. It is here that you can decide if you really need that $500 bass xylophone. It is here you can decide if you are charging enough for your services. Once you make things look doable on this paper though, things will be manageable in the real world.

My advice? Don’t put down a single amount of income for the first year. Realize that you will be very slow the first few months. That was my main mistake. Next week, we’ll discuss how to find that mysterious start up funding.