Budget Allocation
40% of revenue is spent on sales & marketing 20% is spent on product/R&D 20% is spent on G&A
| Budget | Category | Tool | COST | Payment Date |
|---|---|---|---|---|
| Software Licenses | Design | Adobe Creative Cloud | ? | |
| Software Licenses | Design | Figma | $15/mo | 9th |
| Software Licenses | Tech | GitHub CoPilot | $? /mo | ? |
| Software Licenses | Tech | Warp CLI | $? /mo | ? |
| Voice | cloudphone.com |
Revenue Allocation
revenue is the total amount of money generated from sales, cash flow refers to the movement of cash into and out of a business, and profit represents the financial gain remaining after deducting all expenses from revenue.
up to $3500 net profits
30% retained earnings
- taxes
- expenses
- inventory (COGS)
| Category | Cost |
|---|---|
| Software | $30/mo |
| Adobe | |
| Ms office 365 | |
| Hardware | $200/mo |
| 1 new laptop every 36 months | |
| 1 new mobile device every 36 months | |
| Domain | $10/mo |
| Taxes & licenses | $50/mo |
| TOTAL | $290/mo |
30% marketing
- advertising
40% operational expenses aka net profit wages - split between us two 20%
(Sale amount - Operating expenses ) * 20%
Expectations
10% close the sale 10% customer relationship management
First sale in a month -$300 operating expenses Second sale -$80 operating expenses
earmark strategy
earmarking might refer to reserving profits, revenue, or capital for a specific investment, project, or contingency. Funds are tagged for a purpose, distinguishing them from general or discretionary pools. Restriction: Once earmarked, using the funds elsewhere usually requires approval or reallocation processes. Transparency: It often serves to clarify intent, whether for donors, stakeholders, or taxpayers.
break-even analysis
Break-Even Analysis for Staff Wages.
The feasibility of staff wages is determined by the point where the contribution margin generated by sales is exactly equal to the total cost of those wages.
Here is the breakdown, using PhD-level terminology for the underlying financial principles:
1. Defining Financial Feasibility
The financial feasibility of a new wage structure is achieved at the point where the incremental revenue from the new staff covers their Total Cost of Labor (TCL), which is the sum of their Fixed Cost (wages, benefits, taxes) and their Variable Cost (commissions, bonuses).
You must calculate the required sales volume to generate a Total Contribution Margin (TCM) that equals the TCL.
The general formula for the required sales volume to cover an expense is:
2. Calculating the Break-Even Point for Wages
The break-even point (BEP) for staff wages is not a single number but a function of sales volume and profit margin.
A. Total Cost of Labor (TCL)
First, determine the Total Cost of Labor (TCL) for the new staff. This cost will be your Fixed Cost to Cover in the BEP equation.
B. Contribution Margin Ratio (CMR)
This is the most critical metric. The Contribution Margin is the revenue remaining after deducting the Variable Costs of Goods Sold (V-COGS). The ratio represents the percentage of each sales dollar that contributes to covering fixed costs (like staff wages).
C. Break-Even Sales Volume
Once you have the TCL and the CMR, the required Break-Even Sales Volume to cover the new staff wages is calculated as follows:
This result represents the incremental gross sales revenue your consultancy must generate beyond its current break-even point just to cover the cost of the new staff.
3. Break-Even Point in Profit Terms
To determine the break-even in terms of Profit (specifically, the required Gross Profit), you simply need to equate the total cost of the staff to the gross profit they must generate:
This is the most direct answer: The wages become financially feasible when the gross profit generated by the sales associated with those staff members exactly equals their Total Cost of Labor (TCL).
Any gross profit generated above the TCL then represents a profitable outcome for the firm.
4. Financial Implications for Your Consultancy
In the context of your solo consultancy following SCRUM and SAFe principles:
-
Agile Metric Integration: The calculation should be incorporated into the financial metrics of your Value Stream analysis. It determines the minimum Program Increment (PI) revenue target required to sustain the new personnel.
-
Residual Commission Impact: If you are paying a Residual Commission (as discussed previously), that commission is a variable cost. It should be included in the V-COGS when calculating the CMR, as it directly reduces the amount of profit that contributes to covering the fixed wage component.
Budget Projections
Budgeting Parameters
- compare operating costs with capital spending
- understand variances
Estimate Types
- Order of Magnitude Estimate
- Budgetary Estimate
- Definitive Estimate
Budget Breakdown
20% Ad Spend
Start-up Costs
Software Development: This is likely the largest expense for a SaaS start-up. It includes the cost of developing and testing the software, as well as any necessary hardware and infrastructure.
Cloud Hosting: SaaS businesses typically rely on cloud hosting services such as Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform. These services typically involve monthly subscription costs, which can vary based on the amount of storage and bandwidth needed.
Legal Fees: This includes the cost of registering the business, obtaining necessary licenses and permits, and hiring an attorney to review legal documents.
Website Development: This includes the cost of developing a website, including design, development, and hosting fees.
Marketing and Advertising: This includes the cost of developing a marketing plan, creating marketing materials, and advertising the business through various channels.
Administrative Costs: This includes the cost of office space, utilities, and other operational expenses.
Customer Support: This includes the cost of hiring and training customer support staff to handle inquiries and technical support for users. Legal fees: This includes the cost of registering the business, obtaining necessary licenses and permits, and hiring an attorney to review legal documents.
Equipment and supplies: This includes the cost of purchasing or leasing equipment, such as computers, printers, furniture, and other supplies needed to operate the business.
Inventory: This includes the cost of purchasing initial inventory to sell or use in the business.
Marketing and advertising: This includes the cost of developing a website, creating marketing materials, and advertising the business through various channels.