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What you need to know about budgeting for your Houston startup

Budgeting your startup is one of the most important aspects of ensuring success. Miguel Tovar/University of Houston

According to Jean Murray, a business professor at Palmer College where she taught business startup and finance, the most important thing an entrepreneur must meet head on is budgeting. Startup budgeting is important because it allows you to make an educated guess as to what your expected income and expenses will be.

Murray recommends planning for the first day of your startup.

"You have to start by determining what you'll require on the first day of your business in order to open the doors and start accepting customers or having your website go live," she says.

Your first day budget

Murray says it's best to break down your "day-one startup budget" into four distinct categories:

Facilities cost. This is the cost of your startup location. Your office. Your company building or office or warehouse.

Fixed assets. These are expenditures for furniture, equipment, or company cars that you'll need to establish your company on the first day.

Materials and supplies. This is pretty straightforward. It includes office supplies and promotional stuff. In order to get your company started, you'll need these materials on the first day.

Other expenditures. This can range from paying an accountant to help you build a reliable and efficient HR system, licenses and permits, deposits, legal fees, or any other fees needed on the first day.

Monthly expense "guesstimate"

Murray recommends that you estimate monthly expenses, too. Both of the fixed and variable variety.

"Fixed expenses are expenditures that don't rely on how many customers or subscribers you have. We're talking expenses like rent, utilities, office supplies, insurance, loan payments and utilities," Murray says.

Variable expenses, on the other hand, are expenses that actually DO change with how many customers and subscribers you have monthly.

"Variable expenses range from production costs, commissions, postage and shipping, packaging, and wholesale price of items," Murray explains.

Estimating monthly sales is the hardest aspect of startup budgeting. Nobody can forecast what sales for a new startup will be.

"You'll have to take an educated guess. What are your best and worst case scenarios? Then come up with something in the middle," she advises.

For realistic budgeting, you have to understand that not every sale will be counted. It will depend on what kind of business you are running and how your customers and subscribers pay.

"It's wise to include a collections percentage with your monthly sales estimate. If you estimate sales for February to be $100,000 and your collection percentage is 70%, then you should show that your cash for February is $70,000," Murray suggests.

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This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu is the writer and editor at UH Division of Research.

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Building Houston

 
 

Unlike past awards programs hosted by Ignite Healthcare Network, the Ignite Madness winners accepted their awards via video call. Photo courtesy of Ignite

From the comfort of their own homes, several female entrepreneurs accepted investment and pitch prizes at the finals of an inaugural awards program created by a Houston-based, woman-focused health organization.

Ahead of the Ignite Madness finals on Thursday, October 29, Houston-based Ignite Healthcare Network named nine finalists that then pitched for three investment prizes. The finalists included:

  • Eden Prairie, Minnesota-based Abilitech Medical — medical device company that creates assistive devices to aid those with upper-limb neuromuscular conditions or injuries.
  • New Orleans, Louisiana-based Chosen Diagnostics — a biotech company focusing on custom treatment. First, Chosen is focused on creating two novel biomarker diagnostic kits — one for gastrointestinal disease in premature infants.
  • San Francisco, California-based Ejenta — which uses NASA tech and artificial intelligence to enhance connected care.
  • Highland, Maryland-based Emergency Medical Innovation — a company focused on emergency medicine like Bleed Freeze, a novel device for more efficiently treating nosebleeds.
  • Columbia, Missouri-based Healium — an app to quickly reduce burnout, self-manage anxiety, and stress.
  • Farmington, Connecticut-based Nest Collaborative — digital lactation solutions and support.
  • Palo Alto, California-based Nyquist Data — a smart search engine to enable medical device companies to get FDA approvals faster.
  • New Orleans-Louisiana based Obatala Sciences — a biotech startup working with research institutions across the globe to advance tissue engineering and regenerative medicine.
  • Perth, Australia-based OncoRes — a company that's developing a technology to provide surgeons with real-time assessment of tissue microstructure.
The inaugural event that mixed health care and basketball — two vastly different industries with strong connections to women — attracted support from partners and sponsors, such as Intel, Accenture, Morgan Lewis, Houston Methodist, Johnson & Johnson Innovation, and more, according to Ayse McCracken, founder and board chair of Ignite.

"Our partners and sponsors are an integral part of our organization" says McCracken. "Without each and every one of them, the networks, resources, and commitment to advancing women leaders, we would not have grown so rapidly in just four years and our IGNITE Madness event would not enjoy this vibrant ecosystem that now surrounds female entrepreneurs."

First up in selecting their winner for their investment was Texas Halo Fund. Chosen Diagnostics took home the $50,000 investment.

"While we were impressed by everyone who pitched tonight, one company stood out to us," says Kyra Doolan, managing partner. "[Chosen Diagnostics] exemplifies what we are looking for: an innovative solution, a strong CEO, and a real addressable market."

The second monetary award was presented by Tom Luby, director of TMC Innovation. The award was an $100,000 investment from the TMC Venture Fund, as well as admission to TMCx. The recipient of the investment was OncoRes.

"We are absolutely blown away," says Katharine Giles, founder of Onco. "We've already got a great link to Texas and looking forward to more."

The largest monetary award that was on the table was presented by Wavemaker Three-Sixty Health, a leading Southern-California based, early stage venture capital firm, for $150,000. However, at the time of the announcement, Managing Partner Jay Goss decided to award four startups an undisclosed amount of investment. Goss says he and his team will meet with each company to establish an investment.
The companies that were recognized by Wavemaker were: Healium, Ejenta, Emergency Medical Innovation, and Nest Collaborative.
Lastly, Ignite itself had $27,500 cash awards to give out to the pitch competition winners. The funds will be distributed between the winners. OncoRes took first place, Abilitech came in second place, and Obatala Sciences took third place.

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