8 Steps to Build a Business Holiday Budget (w/ Template)

The holiday season is a time when almost everybody spends more money than usual. In our personal lives, we have gift lists for friends and family members, decorate, attend holiday parties and entertain guests. Without careful budgeting and planning, it can be easy to overdo it on holiday cheer and spend more than we can afford to spend.

The same challenge applies to businesses. Many companies host holiday parties for their employees and significant others. It’s common for B2B companies to deliver gift baskets or other presents to their clients. There may also be holiday bonuses to pay. 

At Addition Financial, we’re big believers in creating budgets even when it seems like there’s enough money to pay for anything you need. With that in mind, here are eight steps to help you create a business holiday budget with a free template to get you started.

What is the Purpose of Budgeting in Business?

Having a business budget can help in many ways. Here are some of the most important benefits of budgeting:

• Resource management. A budget puts your resources and financial needs at your fingertips, making it easy to see what you need and how much you have to spend. You can use your budget as an overview of your spending and adjust it as needed.
• Goal setting. Your budget is the perfect place to allocate funds for necessary spending that will help you achieve your organizational goals. These may include sales goals and overall growth goals.
• Attract investors. Having a budget can be useful when it comes to attracting investors. Anybody who is thinking about investing in your company will want a clear picture of your finances and a budget will provide necessary information.
• Flexibility. While a budget should be as accurate as possible, it should also be flexible. In the face of an opportunity or a crisis, your budget can help you rethink your spending and reallocate funds as necessary.
• Avoid overspending. Holiday budgeting is essential because it’s easy to overspend when you’re in a giving frame of mind. Your holiday budget can help you map out gifts and bonuses while protecting your cash flow and financial health.

Creating a business budget can help you manage your resources and avoid overspending, while leaving room for flexibility to pursue your business goals.

How Do You Prepare Your Business for the Holidays?

Before we reveal the steps to build a business holiday budget, let’s talk about some of the general ways that you can prepare your business for the holidays. 

Plan Your Holiday Marketing and Promotions

If your business relies on holiday sales, then you should start early by planning your holiday marketing campaigns and promotions. These may include sales, special events, email campaigns, social media campaigns and more.

The planning phase should include identifying holiday objectives, choosing strategies and allocating funds to each planned strategy or campaign.

Hire and Train Seasonal Employees

Any company that needs extra help at the holidays will need to include employee hiring and training in their holiday planning. You’ll need to decide how many employees you need, what you’re willing to pay and how you plan to attract employees to your business.

Keep in mind that the holiday shopping season actually starts before Thanksgiving and kicks into high gear on Black Friday. You’ll want to make sure your new hires are trained in time to help you with the influx of customers.

Set Clear Rules for Time Off

On a related note, you should have a clear policy in place for employee time off, which isn’t an expense in the usual sense but can cost you money. 

Many of your employees may want time off but it may not be possible to accommodate their wishes. It’s important to come up with a system that’s fair.

Boost Employee Morale

During the holiday rush, employees may feel overwhelmed. For that reason, it’s important to do what you can to boost employee morale.

Planning a holiday party or holiday activities can help, as can expressing your gratitude for employees’ presence and work.

Stock Inventory and Supplies

For many businesses, there’s a need to stock extra inventory or raw materials to make sure that you have products to sell to holiday shoppers.

Given the country’s ongoing issues with supply chains and logistics, you may need to order well in advance to make sure you have what you need.

Plan Entertainment and Gift Giving

Finally, you’ll need to take some time to plan holiday entertainment and gift giving. You’ll need to decide the following things:

• Whether you will be giving holiday bonuses.
• How much the bonuses will be.
• If you are hosting a holiday party for employees.
• If you plan to give gifts to clients or customers — and how many clients will receive gifts.

Each of these items will have a place in your holiday budget.

8 Steps to Budget for Holiday Spending

Here are the steps to follow to create a holiday budget for your business:

1. Review your debts. Before you decide how much to spend this holiday season, you should look at your debts and make sure you have enough to meet your debt repayment obligations. If you have time before the holidays, you may want to focus on making extra payments toward the debt with the highest interest rates.
2. Project your income and expenses. You’ll need to make projections of how much you’ll earn and how much you will need to spend for regular expenses during the holiday season. If your business has consistent month-to-month income and expenses, you can take the average of your most recent three months of each to project what you’ll see during the holiday season. If your business typically has higher-than-usual income during the holidays, you should look at last year’s income as part of your process. It’s better to be conservative with your projections and have extra money than it is to be overly optimistic and be left with additional debt after the holidays.
3. Set a total spending limit. We suggest setting a total budget amount first based on your projections. Don’t think at this stage about what you want to do with the money. Instead, focus on what you can afford to spend and then, use that as your guideline for the next step. Here again, a conservative approach is best. You’ll have an opportunity later to adjust your budget as needed.
4. Make a list of holiday expenses. There are many items that may fall under holiday spending, including travel expenses, entertainment, gifts, gift wrap, decorations, cards, and holiday business expenses such as extra inventory or staffing. For example, if your business sends gift cards to clients, you’ll need to include the cost of the cards plus the cost of postage, and so on.
5. Allocate your budget. Now it’s time to review your list of holiday expenses and plan how much of your total budget to allocate to each. This process may lead to the elimination of some categories. You might decide to send holiday cards but not give gifts to clients, or to choose small, meaningful gifts instead of large, expensive ones.
6. Look for ways to save. After you’ve done your initial allocation, we suggest reviewing your budget breakdown to look for opportunities to save. For example, you might be able to negotiate a bulk discount for raw materials or inventory, use a coupon or discount code when you order your cards, re-use last year’s office decorations or downsize your holiday party to accommodate your other spending needs.
7. Reallocate funds as needed. After you find ways to save money, take one last opportunity to review your budget and reallocate funds as needed. Your first pass may be an estimate, but your second should be based on research and implement any methods you can find to save money.
8. Keep track of your spending. It’s essential to think of your budget as both a roadmap and a tool to keep your holiday spending under control. Even with advance planning, you may encounter challenges and roadblocks that make it necessary to reallocate funds within your budget. If you keep track of expenditures as you make them, you’ll always have a handle on what you’ve spent and how much you have left.

Following these steps will help you accurately estimate your holiday income and expenses and make smart spending decisions — particularly if you do it using our holiday budget template.

Sample Business Holiday Budget Template

To help you create your small business holiday budget, here is a free template that you can use to estimate your income and expenses and allocate funds.

You can use this template in a spreadsheet to maintain running totals and reallocate funds as needed.

Building a business holiday budget is a necessary step for any business owner who wants to avoid overspending during the holiday season. The financial decisions you make now will set you up for financial success in the new year and make it easy to meet your financial goals in the long term.

Do you need funds to pay for your holiday business expenses? Addition Financial can help! Click here to learn about our business loans.