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When beginning any business venture, it’s critical to calculate a correct budget. After all, your project’s success will rely on how skillfully you manage the financial aspects. There are several variables to consider before executing your project. Below we’ll talk through how to create a budget for your new tequila brand.
Fixed Costs
The first step of budgeting for any type of business is to identify all sources of revenue, or income. Of course, this isn’t always easy to identify when your project is in its early stages and your brand hasn’t brought in any revenue yet. This is why it’s crucial to work with industry experts to do research up front. You’ll need to find out what the usual retail prices in the industry are and what your margins will look like. You’ll also need to factor in the expenses you’ll be incurring to retailers distributing your product.
Next, determine your fixed costs. These include any expenses that remain the same from month to month. Think about rent costs for your warehouses or production facilities, certain utilities like internet or phone plans, website hosting fees, and all of your payroll costs. If you’re going to need any specific equipment, facilities, or experienced employees to manage your tequila project, consider this too.
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Variable Costs
Variable expenses don’t come with a fixed price tag. These items are going to vary each month based on your business’ performance and activity. Usage-based utilities like electricity or gas fall into this category, as do shipping costs, travel, and sales commissions. Variable expenses are often the most confusing and risky part of a business venture because they’re unpredictable and easily overlooked or miscalculated. Therefore, if you’re new to the spirits industry, consider hiring a partner that has already successfully distributed or produced alcoholic beverages. This partner should be able to help you identify most of your variable costs and risks.
Many of your business expenses will be regular costs that you pay for each month, whether fixed or variable. But don’t forget about factoring those costs that happen far less frequently into your budget. For example, when you’re working on your Mexican Designation of Origin, legal fees or permits for import and export, you may need to pay large fees up front. Again, asking for expert guidance can help you to calculate these costs accurately.
Finalizing Your Budget
Now that you’ve gathered all your income sources and expenses for your tequila brand, create your final budget. Pulling all these factors together into one comprehensive view of your financial standing for the month will help you with strategic decision-making. Your business budget should tally your total income and your total expenses (i.e., adding your total fixed costs, variable expenses, and one-time spends.) Then, going forward, you’ll be able to compare cash flow in (income) to cash flow out (expenses) in order to determine your overall profitability.
Need help defining your new tequila brand’s budget? Aceves Spirits can help you build an estimated quotation and create your own tequila now.