How to Make a Makerspace Budget!

Introduction: How to Make a Makerspace Budget!

About: Resources for makers, by makers

For all types of makerspaces, ensuring the physical space is sustainable can be challenging, particularly when it comes to finances. The best way to make sure your makerspace can support itself, its staff, and its members is to do some basic accounting to track revenue and expenses.

This guide will walk you through a monthly budget template to use as a starting point for tracking, analyzing, and understanding the financial health of your makerspace.

Along the way, we'll learn some basic tips and terminology for creating and maintaining a budget, which is one of the best ways to ensure your makerspace is financially sustainable and can continue doing valuable work for and with the community, yay!

Read time: 20 min

"Build" time: 90 - 120 min

Supplies

Step 1: Step 1: What Are the Sources of Revenue?

Let's start with revenue. This is often a shorter, easier list than expenses. It is also likely you'll identify expenses along the way, so be sure to write 'em down!

1. Identify and list all sources of revenue in the revenue summary table (Photo 1).

Maybe you have all of the revenue sources memorized, maybe you need to double-check with other staff, or maybe you need to look up deposits. Wherever makerspace revenue is tracked, use it! List each source of revenue for your makerspace, even if it only brings in a few dollars a month.

This example includes the most common sources of revenue at a for-profit makerspace: memberships, fabrication services, and classes.

2. This monthly income page helps visualize what is sustaining the makerspace. Invest in these revenue sources!

To get accurate estimates of our revenue sources, let's build a simple model for the main categories.

If you have estimates of the total revenue for each of the categories, go ahead and input to get a rough sense of where the majority of your revenue is coming from. In the next step, we'll look at building models in more detail.

Step 2: Step 2: Build a Model for Each Major Monthly Revenue Source

The more detailed we can make our budget, the better it will serve us! The budget data enables us to fine-tune efforts and see what is working, what can be improved, and what can be let go.

This template includes three sample models for each of the sources of revenue: membership, classes, and fabrication.

It is recommended to build out similar models for all of the makerspace's primary sources of income. Anything consistently under $100/month that is not a key part of the makerspace mission or goals is likely not worth the time/energy (aka skip it and use estimates).

We'll dive into the membership model in more detail, but in the interest of making this guide a reasonable length, we'll skip the Class and Fabrication Services models. Happy to answer any questions or add-in later if there are lots of requests!

Step 3: Example Revenue Model: Membership

The membership model is the simplest, so let's dig into that! This example provides a thorough overview -- if you are familiar with Excel or other spreadsheet software, you can skim this section or just look through the template. The procedure for creating the membership model is generally applicable to other types of models you might need (e.g. Classes or Fabrication Services).

The main challenge is identifying key information to calculate revenue. Start with variations of the questions in Step 1 below and adjust as needed. In general, you'll want to clarify the cost of the service (hourly or flat-rate), how many units of the service are provided for each instance (e.g. class or client), and how often each of these units are provided each month. Start with actual data if you have it, otherwise use best-guess estimates.

Important: Focus on revenue only,don't include expenses (yet)!! If you think of expenses (like contractor fees, supplies, etc.), list them in an empty sheet -- we'll get to them next :)

Step 1: Outline the membership model.

Key questions for structuring the membership model:

1. How many membership types, or tiers, are there?

Template answer: This makerspace has three types of membership: Student/Veteran membership, Basic membership, and Full membership.

2. How much do each of these tiers cost per month?

Template answer: Student/Veteran membership costs $22 per month; Basic membership costs $32/month; and Full membership costs $102/month.

3. How many members do you currently have in each tier?(If you have not yet opened your space: How many members are you aiming for at each tier?)

Template answer: Student/Veteran membership has 15 members; Basic membership has 52 members, and Full membership has 18 members.

Step 2: Create a table for the membership model.

Once you have identified the factors that drive membership revenue, create a table with these column headers: first column is the Membership Tier, second column is the Monthly Cost, third column is the Number of Members, and fourth column is the Monthly Income (Photo 1).

Step 3: Add in the data for the membership model and calculate monthly income.

Add in the data you identified in Step 1: Membership Tier, Monthly Cost, and Number of Members. Once that is filled in, calculate the monthly income per tier: multiply the monthly cost of the tier by the number of members in that tier.

In Excel, type the following into the top cell under Monthly Income (Photo 2):

= C2*B2

If your model is different than the example, adjust the formula as needed.

Press enter to input the equation. Then, click on the cell and carefully click on the small box on the righthand side (Photo 2). The mouse cursor should look like a "+" . Once you've clicked on the box, drag the mouse down to fill in the remaining tiers (Photo 3). This will propagate and update the equation, hooray!

Step 4: Calculate the total monthly income from all memberships.

In a row below your membership table, sum up the Monthly Income column with Excel's "sum()" command. To do this (Photo 4), type:

= sum(D2:D4)

Again, adjust the formula to fit your specific model.

Note: Once you type "=sum( " you can click on the first cell, then drag the mouse down to select the cells you want to include (Photo 5). Remember to close the parentheses! :)

Step 5: Play around with with the model!

This is a great opportunity to explore how different membership tiers affect revenue and test any hypotheses you or others have.

For example, what tier did you expect to bring in the most revenue? Does your model support that? What tier has the most members? What happens if you change the number of members in different tiers? Play around with the numbers to better understand membership revenue and help drive future efforts.

Step 4: Step 3: Identify Sources of Expenditure (aka All the Expenses)

Alright, onward to expenses! Navigate to the "Monthly Expenses" sheet and then follow the procedure below. If you start feeling overwhelmed, take a few deep breaths and remember to just take it one step at a time.

1. Start by listing the consistent reoccurring expenses.

The most common reoccurring expenses (things that don't change much month-to-month) include:

  • Rent/Mortgage
  • Utilities
  • Internet
  • Insurance
  • Website hosting and other online data storage
  • Janitorial services
  • Full-time salaries (if any)
  • ..?

Type each of your reoccurring expenses under the "Item" column (Photo 1).

2. Next, input the amount for the consistent monthly expenses.

Use actual data if available, otherwise input a best estimate. Type in the total amount of each expense under the "Amount" column (Photo 1).

3. Optional: Sort the expenses alphabetically by Item or by amount (Photos 2 and 3, respectively).

To sort the table, click the small box with an arrow on the righthand side of the column header cell. Explore different visualizations to better understand the makerspaces' expenses.

4. Onward to inconsistent monthly expenses! Just like in Step 1, list of each category of expenses.

Inconsistent monthly expenses are things that vary significantly each month. Here are some examples:

  • Materials/supplies
  • Contractor expenses (e.g. class instructor fees)
  • Catering/Food
  • Tool purchases
  • Tool and building maintenance
  • Marketing/Advertising
  • .. ?

5. Next, if you have reasonable estimates for the inconsistent monthly expenses, type those in. Otherwise, build a model for categories above $300 - $500 per month

Note: A general recommendation is that any monthly expense that is more than 2-3% of the monthly income should be modeled as accurately as possible to avoid overspending.

6. For large, inconsistent monthly expenses, build a model that you can easily update each month.

We'll dig into an example in the next step. This is similar to what we did to build the membership revenue model.

7. For smaller inconsistent monthly expenses, an average estimate is sufficient.

For example, if your marketing budget was $100 in January, $92 in February, and $132 in March, the average over the 3 months would be $108 (Average = (100 + 92 + 132)/3).

Step 5: Example Expense Model: Contractor Fees

Most makerspaces (and small businesses in general) are likely to have a significant chunk of their expenses going towards human services in the form of contractor payments. Let's look at how we might track contractor expenses.

Step 1: Identify each type, or category, of contractors.

In the example makerspace, there are three types, or titles, of contractors: Class Instructors, Fabricators, and Administrators (Photo 1). Create separate tables for each contractor category as each category likely has different fees/payment amounts, payment schedules, service units, etc.

For each category, ask the following questions:

1. What are the different roles within each category?

Template answer: Instructor roles are determined by type of class/event, Fabricators are determined by tool, and Administrators are identified by primary responsibility.

2. What is the fee per service unit?

Template answer: Instructors are paid a lump sum, Fabricators have an equivalent hourly rate, and Administrators having varying hourly rates.

3. What constitutes a service unit?

Template answer: A service unit for Instructors is a single class. For Fabricators and Administrators, it is the number of hours they work.

4. What is the monthly frequency or amount of service units?

Template answer: For Instructors, the number of monthly service units per role depends on the number of those types of classes per month. For Fabricators, the number of service units depends on how many hours they work for client contracts (this would likely vary each month). For Administrators, the number of service units depends on the number of hours worked that month.

Step 2: Create a table and column headings for each contractor category.

Use your responses to questions in Step 1 to build the table. At a minimum, include the following:

  • Contractor Role (e.g. "Maker Night host")
  • Contractor fee (e.g. lump sum or hourly wage)
  • Fee units (e.g. number of classes, number of hours, etc.)
  • Total fee

Remember to keep things simple!

Step 3: Fill in the data!

For each category, list the unique roles, contractor fee, and the number of monthly service units. Use actual data as much as possible.

If something changes significantly each month (e.g. Fabricator service units), use a best-estimate for a typical month.

Step 4: Calculate each category of contractor fees.

For each table, create a "Total Fees" header in the rightmost column. The total contractor fees equal the contractor fee multiplied by the number of monthly service units (Photo 2).

Just as we did for the membership model, input the first equation by hand. Then click on the cell, select the small corner box, and drag your mouse down to propagate the equation. Repeat for each contractor category.

To make it easier to calculate the total contractor expenses in the Monthly Expenses sheet, is recommended to add a row at the bottom of each table and sum up each contractor category Total Fees (Photo 3).

Step 5: Review and analyze contractor payments and use to drive makerspace decisions.

Compare contractor expenses with the associated revenue to analyze the makerspace return on investment, or ROI. Use this to inform decisions going forward to ensure the makerspace is financially sustainable.

For example, let's say you find that an advanced makerspace class with an instructor fee of $500 per class only gets an average of 5 signups per class. Even if the class costs $100 per learner, that is not enough to cover the instructor fee, space usage, materials/supplies, etc. It may be worthwhile to replace the advanced class with two beginner or intermediate classes. Once those are consistently full, or your members ask directly for a more advanced class, then revisit offering the advanced class.

Step 6: Using the Budget to Make Decisions

You did it!! Congratulations! You have your first basic accounting tool: a monthly budget to track and compare revenue and expenses!

Navigate back to the Summary tab and look at the "Balance" amount: This dollar amount indicates the financial health of the makerspace (Photo 1). A positive value means that the makerspace has excess revenue, or profit, each month. A negative value means that the makerspace is losing money each month.

If the Balance is positive: awesome! Your makerspace is financially sustainable as-is. Save the makerspace profit for emergency expenses. Ideally, the makerspace emergency fund should have at least 3 - 6 months worth of expenses -- for this example, that means about $50,000 in savings. Once there are adequate savings, or if the makerspace is consistently earning more profit, then consider adding more staff, tools, or other member resources.

If the Balance is negative or small (e.g. less than $100 - $200), call an urgent meeting with the makerspace leaders to address this as quickly as possible. One of the major benefits of basic accounting is that it gives you data to analyze and understand financial sustainability, but it also requires appropriate action based on that data.

Use the revenue sources to identify areas that are worth investing more time, energy, and resources into, as well as those that are not producing as significant of an ROI. Use the expenses chart to identify where y'all can cut back: what expenses are critical to the makerspace and its members and what expenses are optional? What could you cut that would not detrimentally affect members or other folks who use and benefit from the space and that does not add to or enhance the makerspace mission, vision and values?

Step 7: Going Forward

Use this budget tool to explore areas of growth!

For example, what happens to the makerspace revenue if more Full members join? If y'all host different types of classes? Keep in mind the costs associated with each of these changes, and adjust the expenses accordingly.

Remember: the makerspace members are a valuable source of info!

Ask folks what they love most at the makerspace, what they want to see more of, and what they never use or think about. Maybe you and other leaders were really excited about getting that expensive plasma cutter but only a couple folks have used it. In that case, maybe only plug the machine in when needed or consider selling it to create more space and reduce the utility bill.

Lastly, please keep in mind that this is a start to monthly budgeting, intended to help reduce and simplify the up-front work for basic makerspace accounting. From this starting budget, it is highly recommended to build out an annual budget, also called a "Profit and Loss Statement". As makers, we know all too well that often the hardest part of tackling something new is getting started, so start simple, ask questions, learn, and get help as you go, and take it one step at a time.

You got this! The makerspace, its leadership and staff, its members, and the community all benefit from better measurement and understanding of the makerspace budget, ensuring it is financially sustainable for years to come.

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    2 Comments

    0
    jessyratfink
    jessyratfink

    1 year ago

    This is a great walkthrough :D