From the moment we began putting our business plan together, we both agreed we wanted to create a debt-free company. No matter the type of opportunities that would be presented to us along the way or how great they seemed, we never wanted to invest from a place of deficit. If we didn’t have the capital to invest in it, we both simply agreed to pass it up until the time came that we could. And if that time never came, we knew it just wasn’t meant to be.
Friends, we can honestly say, from the onset of our business endeavor, we have never ever been in debt. Sure, some seasons have brought in higher profits than others, but we knew we’d be doing ourselves a disservice if we were working to pay down a debt rather than working towards our profitability. We simply could not afford it personally or professionally.
In order to do this effectively, we had to work strategically. One of the key factors in helping us determine how much and when to invest was having a clear understanding of our overhead and tracking our expenses. It seems like a simple concept, but many new business owners jump in head first before understanding their fixed and variable costs that play a pivotal role in business profitability and sustainability. With that, today we are sharing How to Build a Profitable Wedding Planning Business Part 3: Understand Your Overhead and Outline Your Expenses.
Understand Your Overhead and Outline Your Expenses
No matter the type of business you run, there will inevitably be a cost of doing business. From acquiring a business license to printing timelines, even the smallest of expenses should be recorded. And let us be the first to tell you to implement this practice from the very onset of your endeavor. If you already have your feet in the game and have yet to do this, now is the time to begin. A bookkeeping tool like Quickbooks Online or HoneyBook makes it easy to manage and categorize your expenses, so you can easily track where your money is being spent and where you can further adjust to increase profitability. If investing in a bookkeeping system is not in your budget at the moment, simply create an excel spreadsheet like we did in our first year of business.
How to Organize Your Expenses
In order to remain organized with your expense tracking, it will be important to understand how to categorize them. The first thing is knowing the difference between fixed and variable expenses, which we explain briefly below.
A fixed expense is an expense that will remain the same total amount regardless of the number of weddings you book, the level of service you provide or some other project you take on. This type of expense is usually paid on a regular basis, such as weekly, monthly, quarterly or annually.
Examples of Fixed Expenses for Wedding Planners
- Business License
- Business Insurance
- Website Hosting
- Accounting Services
- Internet Service
- Phone Service
A variable expense is an expense that fluctuates according to the number of weddings you book, the level of service you provide and other projects you take on. Unlike fixed expenses, this type of expense can change from week to week, month to month and year to year and rely heavily on your spending decisions. For example, if you book more weddings year over year, your gas and vehicle wear and tear expenses will increase because you will inevitably be driving more.
Examples of Variable Expenses for Wedding Planners
- Client Gifts
- Client Meals
- Networking Events
- Job Supplies
- Office Supplies
- Travel Fees
- Equipment Rentals
- Contracted Help
- Shipping & Postage
In your first year of business, it may be hard to predict what your variable expenses will be and how much they will cost, so be sure to write every little expense down as you make purchases and categorize them right way (i.e. even the cost of the paper clips you use to hold your documents together).
Both your fixed and variable expense will ultimately help you come up with the weekly, monthly, quarterly and/or annual budget(s) needed to understand how many sales you need to generate in order to earn the desired income you specified in How to Build a Profitable Wedding Planning Business Part 2. Being able to budget for your fixed expenses and being able to better predict your variable ones will further help you make better spending decisions as opportunities present themselves.
Once you’ve determined the type of service(s) you want to provide, how much you want to make and how much time you want to dedicate to your business as well as what it will cost to run your business, you will be ready for How to Build a Profitable Wedding Planning Business Part 4 where we help you break it down, so you know exactly how much money you need to generate to make a profit. Until then be sure to review Parts 1, 2 and 3 (linked below) and stay tuned for when Part 4 goes live.
How to Build a Profitable Wedding Planning Business
- Part 1: Find What You Love and Plan to be Really Good at It
- Part 2: Set a Goal for Profitability
- Part 3: Understand Your Overhead and Outline Your Expenses