March 14, 2023
How To Guides

How to Create a Startup Budget in 6 steps

Starting a business requires careful financial planning to ensure success. One essential step in this process is creating a startup budget. A budget serves as a roadmap for how you plan to use your capital and cover expected business costs, from pre-revenue to later-stage tech companies. Crafting a startup budget can be a difficult task, but it doesn’t have to be. In this article, we’ll break down the process into six simple steps that any entrepreneur can follow. These steps include gathering your tools and setting a target budget, listing your essential startup costs, determining your fixed costs, estimating your variable costs, calculating your monthly revenue, and tallying up your total expenses. When creating your startup budget, it’s important to be conservative with your assumptions and projections. It’s better to underestimate revenue and overestimate expenses than the reverse. Additionally, well-crafted budgets offer direct answers or point you in the right direction, helping you avoid early financial missteps and make informed decisions in the long run. Overall, a startup budget is an indispensable tool for any business owner. By following the six simple steps we cover in this article, you can create a budget that lets you estimate your business startup costs, monitor your cash flow, and stay lean from day one.
John Ladaga

What is a startup budget?

A startup budget is a financial plan that outlines the anticipated costs and expenses required to start and run a new business. It’s a projection of the financial resources required to launch a new venture and achieve its goals. A startup budget typically includes estimates of initial costs such as equipment purchases, office space rental, legal and regulatory fees, marketing and advertising expenses, and employee salaries. The budget also takes into account the expected revenue the business will generate and the projected timeline for profitability.

Creating a startup budget is essential for entrepreneurs because it helps them understand the financial requirements and potential risks of starting a business. Without a budget, it’s easy to overspend or miss important expenses, leading to a shortage of cash and financial difficulties. A well-crafted startup budget serves as a roadmap for the business, allowing entrepreneurs to plan for contingencies, anticipate cash shortfalls, and make informed decisions about where to allocate resources.

Having a startup budget in place can make it easier to secure funding from investors or lenders, as it demonstrates that the entrepreneur has a clear understanding of the financial requirements and risks of the business.

I recommend reading through this full guide but if you're just looking for the free template, here you go!

Why is budgeting important for startups?

Budgeting is an essential process for any business, but it is particularly important for startups. When a company is in its early stages, every dollar counts, and a lack of proper financial planning can quickly lead to failure. Here are some reasons why budgeting is critical for startups:

  • Helps in financial planning: Budgeting is a roadmap for the future of a startup. It helps entrepreneurs determine how much money they will need to get through the initial stages of launching their businesses. By mapping out expenses, a startup can be better prepared to handle unexpected costs or changes in the market.
  • Facilitates decision-making: A startup budget provides a framework for making informed decisions. With accurate financial data, entrepreneurs can make strategic decisions about when to hire employees, buy equipment, or invest in the business.
  • Enables accurate financial statements: A well-crafted budget can help generate accurate financial statements, such as balance sheets and income statements. These financial statements are crucial for sharing with investors and lenders, as they provide a clear picture of a company’s financial health.
  • Helps in identifying cost savings and business investments: A startup budget allows entrepreneurs to see how resources are being allocated and whether their team is spending and earning as planned. This helps in identifying opportunities for cost savings and business investments.
  • Predicts cash shortfalls: Budgeting helps entrepreneurs predict cash shortfalls and line up funds or negotiate with suppliers and lenders early. This is crucial for ensuring that a startup has the cash flow necessary to survive the first few months of operation.
Get your budget right to avoid surprises down the line

What does a startup budget include?

A startup budget typically includes two types of costs: startup costs and operating expenses. Startup costs are the expenses incurred and assets purchased before launching the company, while operating expenses are the ongoing costs of running the business.

Some common examples of startup costs include equipment and inventory purchases, renting or purchasing office space, legal and accounting fees, and marketing and advertising costs. Operating expenses, on the other hand, can include fixed costs like salaries, and utilities, as well as variable costs such as raw materials and shipping costs.

A well-crafted startup budget should be comprehensive and detailed, including all expected costs and potential expenses that may arise. It should be realistic and conservative, with the assumption that expenses may be higher than expected and revenue may be lower in the initial stages of the business.

Additionally, a startup budget may include projections for revenue streams, such as sales or investments, and plans for how to allocate those funds. It should also take into consideration potential cash shortfalls and plans for how to secure additional funding if necessary.

A startup budget is a critical tool for managing the financial health of a new business, providing a clear understanding of costs, revenue streams, and potential funding needs.

What is a good marketing budget for a startup?

Determining the right marketing budget for a startup can be challenging since it varies depending on the industry, business goals, and target audience. However, a general rule of thumb is to allocate at least 10% to 20% of your total revenue on marketing. For example, if your startup generates $100,000 in revenue, your marketing budget should range from $10,000 to $20,000.

It’s important to note that in the early stages of a startup, marketing budgets tend to be smaller due to limited funds. As the business grows and revenue increases, the marketing budget can be scaled up accordingly.

When creating a marketing budget, startups should consider their marketing goals, target audience, and marketing channels. For instance, if the target audience is primarily on social media, allocating a significant portion of the marketing budget towards social media marketing would be a wise decision.

It’s also important to remember that marketing budgets are not set in stone, and they can be adjusted over time based on the results of each campaign. For example, if a particular marketing channel is not generating the desired results, the budget can be reallocated towards more effective channels.

Ultimately, the key to a successful marketing budget is to remain flexible and adaptable. Startups should regularly review their marketing strategies, analyze the results, and adjust the budget accordingly. By doing so, they can ensure that their marketing efforts are aligned with their business goals and are driving measurable results.

How to create a startup budget in 6 steps

Creating a startup budget may seem daunting, but it’s an essential step in the early stages of building a business. By following these six steps, you can create a startup budget that lets you estimate your business startup costs and monitor your cash flow.

Step 1: Gather your tools and decide how much you want to spend

When it comes to creating a startup budget, the first step is to gather all of the necessary tools and resources. This means selecting the budgeting method that works best for you and your business. Some entrepreneurs prefer to use spreadsheet software like Microsoft Excel or Google Sheets, while others may opt for accounting software such as QuickBooks or Xero. Still, others may prefer the simplicity of pen and paper to keep track of their finances. It’s important to choose a method that you feel comfortable with and that allows you to easily track your income and expenses.

In addition to selecting your budgeting tools, you’ll also need to decide how much you want to spend. This can be a challenging task, as you’ll need to balance your desire to invest in your business with the need to maintain a healthy financial position. It’s important to take a realistic approach to budgeting, factoring in all of your fixed and variable expenses, as well as any potential sources of income. It’s also a good idea to include a contingency savings account in your financial plan. This will help you prepare for unexpected expenses or fluctuations in revenue, ensuring that you have a cushion to fall back on if needed. Overall, the key to success in this step is to be thorough, thoughtful, and realistic in your approach.

Step 2: Compile a list of your most important initial costs

When compiling your list of initial costs, don’t forget to factor in any legal fees, licenses, or permits you may need to obtain before starting your business. These costs can vary depending on your location and the type of business you plan to start, so it’s important to do your research and ensure you have all the necessary documentation in order to operate legally.

It’s also a good idea to consider the costs of marketing and advertising your business, as this is essential for getting your name out there and attracting customers. This may include expenses such as website development, social media advertising, and print materials like business cards or flyers. By breaking down all of your initial costs and considering every expense, you can create a more accurate and realistic startup budget.

Step 3: Establish what your fixed costs are

When creating your startup budget, it’s essential to identify your fixed costs, which are the expenses that remain constant over time. These costs may include rent or mortgage payments for your office space, salaries and benefits for employees, insurance premiums, and other necessary expenditures. It’s important to have a clear understanding of your fixed costs, as they are crucial to your long-term financial planning and stability.

One way to estimate your fixed costs is to look at past expenses or projections for the upcoming year. Make sure to include any recurring expenses that may occur monthly, quarterly, or annually, such as insurance premiums or lease payments. Keep in mind that some costs may vary based on the size of your business or the number of employees, so be sure to adjust your estimates accordingly. Having a clear understanding of your fixed costs will allow you to create a more accurate budget and ensure that you can cover your expenses each month.

Step 4: Estimate your variable costs

These costs are those that fluctuate based on levels of sales and output and are not fixed on a monthly basis. Examples of variable costs include raw materials, marketing expenses, and transportation costs. It is important to estimate these costs accurately as they can greatly impact your profitability.

A great way to estimate variable costs is to consult industry averages or get quotes from suppliers, contractors, and logistics providers. This will give you a better understanding of the typical costs associated with your business operations. Additionally, you should consider the variability of these costs based on factors such as seasonality or fluctuations in demand. By taking these factors into account, you can create a more accurate and realistic budget for your startup.

Step 5: Determine how much money you make each month

To determine how much money your business will generate each month, you need to take into account various factors, such as your total addressable market, your prospective market share, and the existing market conditions. To get a better understanding of these factors, you can conduct market research and analyze your competitors’ performance. By doing this, you can come up with realistic revenue projections based on your business’s unique circumstances.

It’s important to keep in mind that revenue projections are just estimates and may not always be accurate. However, they are still valuable as they can help you identify potential opportunities and challenges that your business may face. Additionally, by monitoring your actual revenue against your projections, you can adjust your budget accordingly and make informed decisions to ensure your business’s financial health.

Step 6: Add up all of your total charges, then look them over and make any necessary adjustments

The final step involves adding up all of your total expenses, including your initial costs, fixed costs, variable costs, and expected monthly revenue. This will give you an accurate picture of your financial situation and help you determine how much money you will need to start and operate your business.

After you have added up all of your expenses, it’s important to take a step back and review your budget. Look for areas where you can cut costs or make adjustments to save money. Consider whether some expenses are essential or discretionary, and decide which ones you can reduce or eliminate. It’s also a good idea to set aside some money in a contingency savings account to cover unexpected expenses or emergencies that may arise. By taking the time to review and adjust your budget, you can ensure that your startup is financially healthy and sustainable in the long run.

In conclusion, creating a startup budget requires careful planning and consideration. By following these six steps, you can craft a budget that provides a roadmap for your business, helps you make informed decisions, and prepares you for potential financial challenges.

Make every penny count when creating a budget

Free startup budget template

Creating a startup budget can be a complicated task, but there are many resources available to help simplify the process. One of these resources is a free startup budget template, which can provide a solid framework for your budgeting efforts.

A startup budget template typically includes categories for fixed and variable costs, as well as projected revenue streams. It may also include a section for tracking actual expenses and revenue as they occur, allowing you to compare your projections with reality and adjust your budget accordingly.

When selecting a startup budget template, it’s important to find one that fits the unique needs of your business. Look for a template that includes categories specific to your industry, and be prepared to customize it as needed.

One example of a free startup budget template is the Sturppy Startup Expense Budget Template, which is minimalist and includes the base inputs and outputs. Using a template like this can save you time and effort while ensuring that you don’t overlook important categories in your budgeting process. It’s important to remember, however, that a budget template is just a starting point, and that you will need to tailor it to your specific business needs in order to make it effective.

In short, our free startup budget template is a helpful resource for creating a budget tailored to your new business. It includes specific categories to guide you in estimating your costs and can be easily customized to fit your specific needs. Take advantage of this tool to ensure that your budget accurately reflects the unique demands of your business.

Ready to create a startup budget?

Are you ready to take the first step towards building a successful and sustainable business? Creating a startup budget is a crucial component of any new business plan. With Sturppy’s advanced and user-friendly platform, you can easily estimate expenses, monitor cash flow, and anticipate shortfalls to make informed financial decisions.

Sturppy offers more than just a free startup budget template; it provides a comprehensive platform to help you create a budget tailored to your unique business needs. With a simple and intuitive layout, Sturppy makes it easy to estimate essential costs, determine fixed and variable expenses, and calculate monthly revenue. The app even allows you to adjust your projections as your business evolves, ensuring that you always stay on track.

Remember, a well-crafted startup budget can help you avoid costly mistakes and make smarter decisions. With Sturppy’s powerful platform at your fingertips, you can create a roadmap for success and confidently navigate the financial landscape of entrepreneurship. Don’t wait any longer, start creating your startup budget today with Sturppy!


Who needs a startup budget?

A startup budget is essential for anyone starting a new business, regardless of the industry or size of the company. It allows entrepreneurs to plan and track their expenses and revenue, providing a roadmap for financial success. A startup budget is particularly important for those seeking funding from investors, as it demonstrates that the entrepreneur has a clear plan for utilizing the investment.

What tool should I use to create a startup budget?

There are various tools available for creating a startup budget, from basic spreadsheets to more advanced accounting software. Sturppy offers a free startup budget template that entrepreneurs can use to simplify the process. The template includes pre-formatted sections for startup costs, fixed and variable expenses, and revenue projections. It also calculates totals and provides a summary of the budget.

For those who prefer more advanced features, Sturppy also offers financial modeling software. This software provides more detailed financial projections and analysis, allowing entrepreneurs to create more accurate and comprehensive budgets. Additionally, Sturppy’s software can integrate with other financial tools, such as business bank accounts and credit cards, to streamline the budgeting process.

Ultimately, the choice of tool will depend on the entrepreneur’s level of comfort with financial management and the complexity of their business model. Regardless of the tool used, it’s important to create a startup budget and regularly review and adjust it as needed to ensure financial success.