N-K’s Way to Budgeting for 2023

Get inspired by our approach to budgeting for the upcoming year.

Budgeting can be many things: vital for your business, but also daunting, overwhelming, boring, or plain scary. Why not make it a bit more fun by turning it into a perfectly aligned Tetris-inspired chart?

Budget Tetris

This was our first step. To reach our Tetris style budget allocation, we started by asking crucial questions in reflection and looking ahead. How our financial goals for the next period shape comes directly from our past experiences and our values. These are the prompts we asked ourselves when reviewing and reflecting upon our past year’s budget:

1. What did we spend last year?
2. What is our budget this year?
3. Was last year’s budget allocation aligned with our values?
4. What do we want to do differently this year?
5. Which categories are essential for us this year?
6. How many resources do we want to allocate to each category?

Then, we settled on the following 2023 budget allocation:

Salaries & Freelancers 55%

Savings 20%

Education 7.5%

Tax & Legal Advice 5%

Tools & Equipment 5%

Donations 5%

Other 2.5%

Expense categories

It may be difficult to figure out what kind of expenses your budget should consist of, especially if you’re new to managing your own creative business. To help you with that, here are the expense categories we recommend to clients, and what they mean for the running of Nea-Kosma.

We love dividing our expenses into these broader categories for several reasons:

• It makes the overall budgeting process easier
• Categorizing data makes it easier to analyze your spending
• Provides an overview of which type of expenses is/isn’t/will be crucial to your business
• Helpful for your accountant see what your expenses are, and where specific bills go
• Preparation ahead of time for submitting your tax return

Of course, every individual creative or creative business will have a different budget allocation plan based on what exactly you do. However, you can use our expense category system as a starting point, an inspiration of sorts, and adjust it to your own needs!

Expense categories / What to budget for:

• Advisory — legal support, tax support
• Banking fees
• Business travel — visiting our client or team in Frankfurt and Berlin incl. tickets and hotels
• Education — books, online courses, business coaching
• Equipment — laptops, offices equipment, phones
• Freelancers
• Insurances — business insurances e.g. against cyber risk
• Marketing — postcards, so-me services
• Networking — events, conferences, business meals
• Office supplies — pens, notepads, stationary
• Communication — phone, internet
• Salaries
• Savings — buffer covering three times our fixed expenses
• Software & Tech — Notion, Microsoft, Tableau, Adobe, Dropbox,…
• Studio rent
• Taxes — corporate tax, trade tax

Stay flexible

As firm believers in flexibility, we allow our budget allocation to be a navigation tool rather than barriers that restrict us. Last year, for example, 5% of costs didn’t fall into our essential categories, thus the creation of category OTHER. By being clearer with our spending habits, we aim to minimize this miscellaneous spending to 2.5% this year.

We see businesses not as separated entities from society and have a responsibility to consider the impact of our actions on our environment and communities — by aligning our values with our spending habits, we strive to ensure our actions are responsible and conscious.

“In an age when change happens so quickly, any strategic plan must be updated at least every year. Many companies don't do yearly budgets, they do a new budget every six months. In our case, an inflexible plan would be centralized planning at its worst. It builds in a certain rigidity, a certain bureaucracy, that is oblivious of changing realities. A budget can be a valuable guideline and planning tool, or it can be a bludgeon.” – Yvon Chouinard, founder of Patagonia