How To Create a Startup Budget From Scratch

Creating an effective budget is crucial to setting your startup up for success. It’s estimated that 65% of startup businesses aren’t fully confident that they have enough money to start their new company, and a significant reason for this is a lack of adequate budgeting practices.

Whether you’re working through logistics of a budding business idea or you’ve already raised venture capital funding for your startup, a reliable startup budget is key to helping ensure the financial viability of your new venture. Without a clear understanding of your expected costs, the amount you need to succeed, and the amount of capital you have on-hand at any given time, you’ll likely never be able to make the right financial decisions for your business.

If you’re new to budgeting, you’ve come to the right place. Read along as we define the use cases and key elements of a startup budget, and walk you through each step to create an accurate budget for your startup.

“It’s estimated that 65% of startup businesses aren’t fully confident that they have enough money to start their new company, and a significant reason for this is a lack of adequate budgeting practices.” 

Step 1: Brainstorm all potential costs related to starting and running your business

Fire up your computer, open a spreadsheet, and list out all the items required to start and grow your business during the first 12 months. Include big-ticket items like payroll costs, office space rent, equipment, trademarks, patents, and sales and marketing expenses; and smaller, day-to-day items, like cloud hosting fees, subscription softwares, office supplies, and business travel expenses.

Step 2: Categorize your estimated expenses

Now that your long-tail list of expected costs are in place, it’s time to organize these expenses into three key categories:

• Essential startup costs
• Fixed costs
• Variable costs

Step 3: Estimate your monthly revenues

Various income sources may contribute to your monthly revenues; the most common sources of income for startups include:

• Sales
• Investments and/or loans
• Savings

Step 4: Calculate the total estimated costs of starting and running your startup

You’ve done the hard work of outlining the many items which will help determine the costs required to start and run your startup. Now it’s time to add them all up to find the starting point of your startup’s budget.

Step 5: Determine the total budget number for your startup

Take the total startup costs you calculated in Step 4, broken down by month, and compare them with your monthly revenue estimates. Are you generating enough revenue to cover business costs? If not, you must either refine your total costs further, or make a plan for securing additional capital to fuel your business.

Step 6: Put budgeting tools & processes in place for ongoing maintenance

Budgets are not a “set it and forget it” kind of business planning exercise. They should be revisited regularly, at minimum at the end of each month when you receive your financial statements (P&L or Income Statement, Balance Sheet and Cash Flow Statement) to review how your actual costs are tracking against your budget, and making any necessary adjustments as you go.