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Simple Budget Template for Agile Startups

By Rebecca Morrison
Simple Budget Template for Agile Startups

What process should small-to-medium-sized startup businesses use when trying to define their first overall budget? Also, what's a “normal” amount to spend on office space, payroll, or software?

While there is no one-size-fits-all approach to budgeting, it can be helpful to see how other businesses determine their budgets, and how much they spend on certain categories. 

Keep reading to learn:

  • What a budget is and why your startup needs one
  • How to create a startup business budget
  • How to use a startup budget template

 

What is a budget and why does your startup need one?

A budget is how you reinvest capital back into the company. Budgets represent your priorities: the more money you allott to something, the more it can grow.

Your first business budget can serve as a spending roadmap. Creating a budget can prevent you from running out of money, as the exercise helps you strategically spread out your business spend. 

How to create a simple startup budget

Budgeting can be boiled down to two steps: determining an operating budget and deciding how to spend it. Follow these guidelines as you create your startup business budget.

Determine your operating budget

First, calculate how much money is coming into the business. Add up forecasted sales, external funding, loans, and liquid assets for the year that you’re creating a budget for. Now you know how much money you’ll have to work with.

Next, decide how much of that sum you want to spend, and how much you want to save. Small businesses typically set aside three to six months worth of expenses in reserves. If your business has $20,000 in monthly expenses, that translates to between $60,000 and $120,000 in the bank.

Subtract how much you want to save from your forecasted earnings and assets to determine your operating budget. For example, if your company is on track to earn $1 million over the next year, and you want to save $120,000 in reserves, you have a $880,000 operating budget for the year.

Operating budget = Earnings - Reserves

Decide how to distribute the operating budget

Create expense categories and determine how to distribute your operating budget among them. Below are examples of popular business spend categories and benchmarks that show how much small, agile companies typically spend on these categories. 

Recurring costs

Allot your budget for these recurring, fixed costs first, as they’re not optional expenses like the rest are.

Spending Category

Benchmark: Percentage of Operating Budget

Example: Spend Based on $10 Million Annual Operating Budget

Payroll and Benefits

15-30%

$1.5M-$3M

Office Space

(Rent or Mortgage)

25-30%

$2.5M-$3M

Sources: Shoeboxed, Chron

 

Variable costs

Spread what’s left of your operating budget over the remaining categories. Link your budget directly to your business goals.

For example, let’s say that you run a SaaS startup (like us 😁). You prioritize product development in your first year of business, so you allocate more money to the engineering team than any other department. The following year, you focus on launching the product, so you increase the marketing team’s budget.

Here’s an example of popular business spend categories and how much start ups usually allocate to each.

Spending Category

Benchmark: Percentage of Operating Budget

Example: Spend Based on $10 Million Annual Operating Budget

Office Equipment and Supplies

9-12%

$900K-$1.2M

Software

20-25%

$2M-$2.5M

Travel and Related Expenses

20-25%

$2M-$2.5M

Marketing

11-20%

$1.1M-$2M

Sources: American Express, Salesforce, Shoeboxed, Entrepreneur

 

Simple startup budget template

After you’ve determined your operating costs and spending priorities, download our agile startup budget template below and use it to create a budget for your company. You can also use business budgeting software to help you. Here’s how to use the template:

  1. Decide what time period the budget will cover. We recommend creating an annual budget first, and then creating separate quarterly and monthly budgets to distribute the annual spend. In the first row of the template, write down the time period that the budget covers.
  2. In the second row, record your operating budgets for the time period in question and for the entire year.
  3. Next, fill out how much you plan on spending on recurring expenses. Add up the budget for the recurring expenses, then subtract that figure from the operating budget for the timeframe in question. This shows you how much you have left to allocate to variable expenses. 
  4. Then, allocate variable expenses. Add up the total budget for variable expenses in the second to last row. You have completed your budget!
  5. When the time period for the budget passes, put down how much was actually spent in each category using the “actual” column.
  6. Then use the final column to calculate the difference between the budgeted and actual spend. Use this difference to help your roll over monthly or quarterly budgets into the next one, or to create more accurate annual budgets.

 

After you’ve created your end-to-end spend budget, customize the agile startup budget template to break the categories down further to ensure that your tail-end spend is managed. Unmanaged minor expenses can add up to 20% of total spend. Without spend control, tail-end spend can have a negative impact on the budget.

DOWNLOAD TEMPLATE


Every business needs to have a budget, but budgets need to be enforced in order to effectively manage your company’s spend. Spend management software is the most agile way to control and gain real-time visibility into your spend.


posted by

Rebecca Morrison

better corporate travel starts here.