2. How does my budget relate to an entrepreneurship budget?
When looking at an entrepreneurship budget and personal, you never want to be ‘in the red.’ The
term ‘in the red’ describes when more capital is leaving your business than being received into
your business. Similarly, when creating a personal budget, it should not leave you at a loss of overall money. For example, you want to purchase the newest Lamborghini for $100,000, making only $25,000. This purchase would cause you to enter the red, owing to a large debt. With entrepreneurship, budget sees we can apply this same principle. Let us look at our fictional business, ABC ice cream. ABC has $100,000 in capital to spend on supplies, management, and advertising. While ABC is planning, they decide they want to pay 50% of their money on sardine-flavored ice cream. Sound delicious, right? To most people, no. So, with half of their capital in Sardine ice cream, that will likely be an unpopular action leading the business to be in
the red. A more brilliant alternative would be to budget a smaller portion of capital for Research
and Development (R&D), allowing customers and manufacturers to experiment with this flavor
before investing heavily. When creating budgets for your personal life and business, the main
priority should be the assets that will generate the highest return on investment (ROI).
Developing a high ROI could be using that $100,000 to go to college or start a business on a
personal budget. With our ABC ice cream, the $50,000 on sardine ice cream could invest in
more flavors that customers always have, such as chocolate, strawberry, and vanilla.
