In order for your business to survive, you need to have enough money to cover all your start-up costs, the costs of running the business and also for you to live on. This section looks at how to determine your personal survival budget.
2. Personal survival budget
Knowing how much you need each month to live on is critical. Not only does this mean you have enough to survive, it also means you know how much you need to draw from the business and, in turn, you can make informed decisions about pricing.
The money you take out or draw from your business is called ‘drawings’. A personal survival budget shows you the minimum amount you need to take out of the business as drawings.
This is based on how much you need, not how much you would like to draw from the business each month.
Remember, drawings are in anticipation of the profits the business will make. As such, drawings are deducted from the assets of the business in the balance sheet.
Use these templates to help determine your personal survival budget. The first takes into consideration your household costs for the full year; the second provides you with a template for the monthly breakdown.
- my personal survival budget (annual) (MS Word 296kb)
- my personal survival budget (monthly) (MS Word 239kb)