By Albert W. Rubeling
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Extra resources for How to Start and Operate Your Own Design Firm, : A Guide for Interior Designers and Architects
Budgeting will be easy at first since your new firm will have relatively little overhead or accounts receivable. ” The basic purpose of a preliminary budget is to identify your income and expenditures and establish a goal for profit. Achieving a profit is the fundamental challenge that all businesses in the free-enterprise system face. As your firm grows, budgeting will become more complex. An operating budget is just as important as any financial, legal, or design plan. Even when you are starting out, having a budget will help you measure your success and provide a roadmap to achieve your goals.
Your employer is paying you $30 per hour in salary. There are two hundred workdays in a given year (excluding weekends and holidays and two weeks for vacation, if you even take one). The two hundred workdays equal 47 Chapter 05 2/10/07 10:23 AM Page 48 HOW TO START AND OPERATE YOUR OWN DESIGN FIRM 1,600 prime buffing hours, which translate into $48,000 annually. Now, this assumes that you will be working eight hours every workday on a project. Is that possible? The reality of it is that you will probably be working twelve to sixteen hours per day and close to three hundred days total in your first year!
The first question that you must answer is how much money you need to live on each and every month, not how much money do you need to get through a given year. Does your spouse have an income? How much money do you spend each week? You will be surprised by how you spend money. This primary step is crucial to help you diminish your business risk. However, it is important to understand that what you think your needs are and what they really are may be different. What expenses could be cut if you produce less income?