There is a tendency for new business owners to overlook or ignore details in planning. Components such as price points of competitors, which point of sale (POS) system is best for business, and what payment terms vendors will expect are some examples of abandoned details that belong in early planning.
Where the “Big Picture” Is OK
It is, of course, reasonable to keep some details in perspective and handle them when your business is operational. For budgeting and building a financial model, it is perfectly acceptable to have “buckets” for items that will later be clarified.
For instance, if you have a brick and mortar business that may require a specific interior layout, then using proxies or ballpark estimates from other business owners or contractors is perfectly fine. You should not try to nail down which contractor you would go with, nor a specific list of materials and costs at the time you build your initial business plan. The process and expense of a build-out will depend on a lot of factors, including where you build, whether a chosen contractor is available, and so on.
You may even end up in a lease where the landlord agrees to pay for the build-out, leaving a bit of wiggle room in your budget for other needs.
This scenario would dictate you have a build-out bucket in your financial model, perhaps plus or minus 20%, and you can feel free to move on.
Where the Details Really Matter
For many other areas, this strategy should be ditched for a more specific estimate. If your budget items have potential to influence your operational cash, these should be given detailed attention where possible. A few examples:
- Knowing whether you intend to have net 30 versus net 90 payment terms with suppliers can make a huge difference in your operational cash flow
- Knowing whether your credit card processing system takes a 1.5% fee versus a 3% fee plus assessment charges per transaction can make a difference in your cost budget (Then again, you may decide you want to avoid credit card processing altogether, depending on your business.)
- Knowing whether you will hire salary employees, hourly employees, or independent contractors – and whether you intend to offer healthcare – will all greatly impact your breakeven projections for your business