How to create a great startup budget in 9 simple steps

Mike Renaldi

Managing your startup costs is crucial to your success. With this in mind, a startup budget also plays a key role, by capturing your spending plan for the future. Though creating a budget for your startup can be difficult, the good news is that it’s not as hard as you might think.

This guide breaks down budgeting for a startup business, as well as how to create a startup budget. Lastly, you will also learn how Wise saves you money while sending and receiving transfers.

Table of Contents 💡

What is a startup budget?

A startup budget is a spending plan that shows your projected income and expenses. This plan covers absolutely everything, such as rent, inventory, marketing costs, and employee salaries. With a good budget in place, you will make better decisions.

One big thing to remember is that your budget serves as a snapshot in time, and that you need to return to it to ensure you are on the right track or need to make adjustments.

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Why is a budget important for startups?

Think of the budget as a guide to help you map your path forward. A startup budget also shows where the business is doing well, where improvement is needed, and where there is potential to grow.

As the business seeks investment and capital, having a startup budget is key. Investors and lenders will want to see the startup budget, among other items, to understand the business better. The more they can understand how you are spending your money and on what, the easier it becomes for them to make decisions about your startup's future.

Parts of a Startup Budget

A budget has several parts. Each one sheds light on a facet of the business.

1. Projected revenue

The first step of creating a startup budget is to think how much money the company will earn in the future. To get this number, you’ll need to look at average growth over the course of the business in the last 3-6 months to find the average amount of revenue the business makes.

2. Fixed costs

Fixed costs refer to expenses that do not change. Examples of fixed costs could include office rent, wages, and utility bills.

Fixed costs are used in the budget to understand the impact of these expenses on overall profitability and a measure of business health.

3. Fluctuating costs

Fluctuating expenses include expenses that go up and down over time. These expenses can include costs directly impacted by how much of a product is made or sold.

Other types of fluctuating expenses may include marketing and operational costs, such as hiring temporary staff to cover busy periods. It essentially refers to expenses that are harder to predict, as they may be higher in some months and lower in others.

4. One-time costs

A startup business budget will also need to add any one-time expenses to show how money is being spent.

One-time startup expenses are a cost that only happens once and will not occur again. They are included in a startup budget as a way to forecast possible expenses and plan ahead in case they happen again.

5. Cash flow

Cash flow refers to how much money is coming in and out of the startup.

Incoming cash flow can be the revenue made from selling goods or services, dividends, or returns from investments. Incoming cash flow could also include other financial activities of the business.

Cash outflow can include the money businesses use for its daily operations. Cash outflow can consist of rent, debt repayments, supplier payments, and payroll expenses.

This figure shows your ability to pay for your expenses. For instance, if you spend all of your money on new products without being able to earn enough money in time to pay your bills, then you are having a problem with your cash flow.

6. Profit

Profit refers to how much money is left for the business based on how much revenue is earned after counting all expenses, such as fixed, variable, and one-time costs.

To understand its effect on the overall business, profit can be calculated in different ways, including gross profit margin and net profit margin. Profitability is a key measure for business success, and the analyses can show if the business is running at high or low profit margins.


How to create a startup budget in 9 steps

Now that the parts of putting together a budget for a startup are covered, here’s how to create a startup budget:

1. Calculate revenue

Find your revenue by measuring the total amount of money the startup business makes by selling its goods and services. Revenue shows how much money the business makes in total, without counting costs. Treat it as a metric to see how much money the business is making overall before expenses.

2. Find fixed costs

After calculating revenue, list all your startup’s fixed costs, such as operational and production costs that don’t change over time.

For example, if you have high growth and low fixed costs, your startup budget will have some flexibility as these are predictable expenses. Fixed costs are used to demonstrate what areas of the business will remain the same.

3. Determine fluctuating costs

After listing fixed costs, you’ll then find and list the company’s fluctuating expenses. Fluctuating expenses or variable expenses are used to understand the cost of goods (COGS) and are subject to change.

Remember, these costs are not the same amount every month.

4. Plan for unexpected costs

In order to better plan for unforeseen expenses, locate any one-time costs to get a sense of how much money you will spend.

Examples of one-time expenses may be equipment purchases, payments of fees or permits, or rebranding your startup.¹ Including them in the overall business startup budget is used to understand any activity outside the business's regular operations, together with fixed costs and fluctuating costs.

Considering these costs will help you understand how much revenue to put aside for one-time expenses as part of your future financial plans.

5. Create your profit and loss (P&L) statement

Once your revenue and expenses are mapped out, you can create a profit and loss statement. This document shows company income versus costs.

P&L statements show if the business is making or losing money. While this document can’t tell you everything, it’s a good way to create a startup budget based on profitability.

You can use a startup budget template to show profit and loss.

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6. Forecast your projected revenue

Now that you have a clear picture of your revenue and expenses, you can project how much revenue the business will make based on its past results.

To calculate projected revenue, you will need to find out how much revenue the business is currently making. Then, look at data from the past 3-6 months as a starting point and calculate the growth.²

Example of revenue growth:

  • Month 1 saw a 10% growth
  • Month 2 saw a 15% growth
  • Month 3 saw a 15% growth

By averaging the growth, you could use these figures to project revenue for the following 3 months. Projected income is used to understand what kind of growth trajectory the startup expects to experience in the future.

7. Create a cash flow forecast

Cash flow is used to understand how much money is coming in and out of the business.

As part of forecasting future revenue and profits for your startup budget, you should also include a cash flow forecast to show how the business will pay for its fixed and variable costs moving forward. You can use your current cash inflow and outflow to determine what you’ll need to stay profitable in your forecast and how much you would need to scale the startup.

8. Outline your future business budget

Once current and future expenses are determined, you can create a future business budget based on current financial performance and projections for the future. Your startup business budget may change over time, but these components will serve as the foundation for it as you grow your business.

9. Find a startup budget app

When undertaking the process of startup budgeting, having the most recent data is crucial. Manual bookkeeping and accounting can often lead to errors and lost revenue, but that is where startup budget and forecasting apps become immensely useful.

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Budget Software

Many budget software options are available to help you create a startup budget and manage your business budget moving forward.

Examples of startup budgeting software: 👈
  1. QuickBooks: a mainstay of accounting and budgeting software. You can expect functionality that covers all areas with native budgeting tools that satisfy your basic needs and access to integrations that will satisfy your long-term desire for in-depth cash flow forecasts.
  2. FreshBooks: cloud-based software designed to save freelancers and small businesses time and money. With over 100 app integrations, they can streamline manual tasks like invoicing and expense tracking.
  3. Wave: one of the most popular budgeting tools for small businesses with a tight budget and basic needs. It stands out because of its price - it's free! This cloud-based platform offers accounting, invoicing, and budgeting features - all for free.
  4. Xero: a cloud-based accounting software for small business owners to manage their finances. This includes budgeting, invoicing, expense tracking, and financial reporting with 100s of integrations.

These are some options available for budget software, as they have been designed for specific business needs, including many of the parts of a budget mentioned in the article. However, other budget software may be more suitable depending on requirements, such as software designed for sole proprietors or independent contractors.

Cash Flow Software

Ideally, cash flow software should integrate with your budgeting software to give you a better picture of your startup future.

Some options for cash flow software include: 👈
  • Xero Cash Flow: Xero accounting software also includes cash flow reports and statements.
  • Casual: A cash flow forecasting tool with a free option to build forecasts and dashboards that include your key startup data for better decision-making.
  • Futrli: A cash flow forecasting tool that connects to your accounting software and gives you a forecast of your P&L and balance sheet.
  • Cash flow template: A simple template can help you get started and save you money, and some companies keep years after launching their business.

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Of course, you can also receive money in various currencies for free using local account details. With local account details, you'll save money while getting paid even faster. That will boost your budget!

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Learn more:

The 14 Best Business Budgeting Software Tools


  1. Calculate your startup costs
  2. How to Create a Projected Income Statement | QuickBooks Canada

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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