How to set a realistic business&startup budget: a checklist with numbers - Fuel Finance
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How to set a realistic business&startup budget: a checklist with numbers

No matter how much money make up your startup budget, it’s never enough. And while it is almost impossible to come up with 100% accuracy, the least we can do is give you a checklist of things you have to CTR+V into your budget.

Who needs a startup budget?

A startup budget is a straightforward breakdown of how you plan to use your funds and cover rising business costs. It applies to both pre-revenue and later-stage tech companies.

Before you launch, a budget literally determines how much money you’ll need to make it through the first few months or weeks. At this stage, it will be a nearly-realistic forecast based on market research and your best estimates.

In case of a successful launch, you get to stage two, when your budget becomes an analytical tool that helps you track how you’re allocating resources and whether your team is spending and making the way you expected. Again, this is a field of early opportunities for cost savings and business investments. 

Let’s say paid advertising is your most significant expense category. Does every channel generate high-quality leads? Do you need to arrange longer payment terms to free up funds for dead months? Do the expenses truly align with each team’s KPIs? 

Budgets point you to fund drainage holes and guide your business decisions.

Cheat sheet #1

  • Startup costs are the expenses incurred in the process of creating a new business. 
  • Pre-launch startup expenses consist of a business plan, research fees, borrowing costs, and payments for technology.
  • Post-opening startup costs include promotion, advertising, and employee expenses.
  •  Partnerships, sole proprietorships, and corporations—have different startup costs.

Online businesses have needs that differ from brick-and-mortars; coffee shops have different requirements than bookstores or beauty bars. However, a few expenses are ordinary for most business types.

Understanding Common Business Startup Costs

The Business Plan

It is your detailed map of the new business. Underestimating your expenses increases expected net profit, a situation that does not bode well for any small business owner.

Incorporation Fees ($145)

Choose your business identity, or according to professional jargon, your business entity. General business structure choices include:

  • Sole proprietorship
  • Partnership
  • Corporation
  • Limited Liability Company (LLC)

It will cost you approximately $145. 

*filing fees and other associated costs can vary according to the state where you operate.

Research Expenses

Researching the market, you enter puts your business in a better position to succeed. Some business owners hire market research companies to aid them in the evaluation process. And if you want to get access to exclusive data, be ready to open up your checkbook. On the other hand, you can save up some money and buy completed research from some big company. You might not get the rare insight, but it will be enough for you to know what markets need.


Borrowing Costs

Infusion of capital is square #1 in your Monopoly game. There are two ways to obtain money for a business: equity financing and debt financing. Usually, equity financing entails the distribution of stock. However, this does not apply to most SMEs, which are proprietorships.

The most credible financial source for SMEs will be a small business loan. Get them often from banks, savings institutions, and the government. Business loans are accompanied by interest payments.

Insurance, License, and Permit Fees

Depending on the realm of your business, you will have to obtain specific business licenses and permits. For example, some might require licenses while others need industry-specific permits.

Also, consider carrying insurance to cover your employees, customers, business assets, and yourself. Again, it is better to be safe than sorry.

Office Space ($300–$1,230 per month, per Employee)

Covid really taught us how to operate from home. But if your company needs office space, add up the cost of leasing or buying a facility. 

The price of securing office space depends on the preferable location. The area of your office will influence the price you pay as well.

The price of office space starts at around $300 per month per Employee. So the costs could be over $1,230 per person if you want to sip overpriced lattes in New York or Combutcha in SF.

Technological Expenses

They include a website, information systems, and software, covering accounting and point of sale (POS) software. You might consider outsourcing these functions to other companies to save on payroll and benefits.

Gear and Supplies

Every business requires some form of equipment. The question here is “to buy or to lease.”

Even if you have enough cash to buy equipment, inevitable expenses may make leasing to buy later a more suitable option. On the other hand, regardless of the money position, a lease may not always be the best option, depending upon the type of equipment and terms of the lease. Check out what your peers are doing to get the picture.

Remember, even online microbusinesses need access to a computer with the Internet. Other businesses may have much more complicated equipment needs that could cost tens or even hundreds of thousands of dollars.

In the meantime, get the idea of equipment cost for different market segments

  • Health care: $27,000
  • Warehousing and transportation: $16,000
  • Arts and entertainment: $16,000
  • Service-based businesses: $14,000–$18,000
  • Construction: $14,000
  • Hotels and restaurants: $100,000
  • Real estate and rentals: $75,000
  • Insurance and finance: $50,000
  • Retail establishments: $30,000
  • Support for other businesses: $11,000


Whether you do your marketing in-house or find an outsourcing company, it will cost you a lot.

According to the SBA, it can take up to 7%–8% of revenue.

Caution! If your profit margins are less than 10%, you may adjust your marketing budget until those numbers improve.

Inventory (25%–35% of Operational Budget)

If your company plans to market products, you’ll need to have some inventory on hand to fulfill orders. 

To evaluate their costs, start by determining how much product you anticipate selling in 12 months. Then, divide that number by 10 to keep 10% of your annual inventory needs in stock.

For example, you plan to sell $60,000 in inventory over the next year. If you were going to keep 10% of that number available to sell to customers, you’d have to buy $6,000 in inventory.

Employee Expenses

The cost of labor consists of wages, salaries, and benefits.

Undercompensating employees can end in low morale, rebellion, and bad PR, which can be fatal to a company.

Payroll (15% to 50% of Your Budget)

The best investment in your company’s interest is making the people who work for you happy.

On top of salary and wages, factor the following adds up into your company’s payroll expenses:

  • Commissions
  • Bonuses
  • Perks
  • Paid time off
  • Overtime pay

Additional Startup Cost Reflections

When things go South, most companies fail because they lack the money to deal with unexpected problems.

The startup costs for a sole proprietorship differ from those for a corporation. If you are playing chess and not checkers, a partnership’s fees include the legal cost of drafting a partnership agreement.

Other costs that may apply include fees for filing articles of incorporation, bylaws, and terms of original stock certificates. Having a good lawyer pays off, primarily when your knowledge of the corporate world only consists of watching Suits.

Launching a new business can be invigorating. However, you might be overwhelmed and neglect the details. And we all remember where the devil is. Above anything else, be mature, ask for help, and consult with others who have traveled this road before.

Lessons learned 

Developing a startup budget will not help you get out of the startup roadkill scathe free. It enables you to make informed decisions in the long run. Check out a few more reasons to set up regular budgeting:

  • You can choose the perfect timing when to hire employees, buy supplies, and otherwise invest in your business.
  • You can scale using accurate business data and detour fundraising too early or over-borrowing.
  • You can evaluate your break-even point and adjust variables on the go.
  • You can forecast cash shortfalls or negotiate with suppliers and lenders before it’s too late.
  • You can track retained profits ahead of time and develop a plan for them.
  • You can pinpoint extra cash that goes into your startup’s emergency fund.
  • You can create accurate financial statements, like a balance sheet or income statement, to communicate with investors and lenders.

The “HOW TO” part

Gather your tools and set a target budget

Grab a notebook and create your startup budget. Or, ditch the manual labor and get budgeting features in suitable business accounting software. You can integrate your other financial tools, such as your business bank account, and your budget will update automatically.

Starting from basics, a spreadsheet program like Google Sheets or Microsoft Excel will make you a financial girl boss on a budget. Or search the web to find free startup budget templates to utilize. In any case, you will have to customize them. Or you can schedule a meeting with Fuelfinance team, and we will do them for you.

Establishing an upfront budget plan will help you stay on target as you add up your good-to-have buys. Remember to factor in a starter emergency fund. Connoisseurs suggest having cash to cover at least three months’ expenses. Although it may seem like a lot at first, budget what you can for contingencies. 

List your essential startup costs

We have already covered that startup costs are your expenses and assets you buy before launching your company. These are the priority purchases.

Now, let’s revise and dig deeper. First, there are two kinds of startup costs you’ll need to account for: 

  • Startup assets: property, furniture, inventory, computers, vehicles, and security deposits are one-time purchases of liquid and non-liquid assets. Startup assets, also known as capital expenditures, aren’t tax-deductible.
  • Startup expenses: are the expenses that you pay before opening. They may be fixed or variable. For example, rent and payroll are considered startup expenses before you launch. Keep in mind that these expenses are tax-deductible.

Startup costs include office space, organizing fees, trademarks, and patents. 

Break down as many expenses as possible and differentiate between lump sums and installments. Include not only “website costs.” List a web domain, content management system, app subscription, design, photos, and anything else you may buy separately.

Choose your fixed costs.

They are also known as overhead costs. Unlikely your mental state, they remain the same each month. 

A new company could have monthly costs like: 

  • Payroll and benefits
  • Business insurance
  • Internet and phone services
  • Professional services
  • Bank fees
  • Website hosting
  • Rent or mortgage

Group the money spending related to each fixed cost. For example, if you hire an in-house designer, they require more than a salary and benefits. They’ll need equipment for the job, like a desk, laptop (ok, hopefully, they will have one), and design software.

Estimate your variable costs

They depend on your sales and production, so they don’t typically have a set monthly cost. However, these costs generally go up as you scale up, and vice versa.


  • Raw materials
  • Advertising spend
  • Shipping costs
  • Business income taxes
  • Transportation
  • Supplies
  • Travel and events
  • Freelance services
  • Utilities

Newbies can ask for quotes from manufacturers, contract workers, and third-party logistics providers (3PLs) for many of these costs. Or, google the industry averages. Mind that time of the year and season influence each cost. 

Round everything up to give your budget some realistic padding. For example, if a subscription service is $12.26, you could allot $15-$20. Some suggest doubling or tripling estimates for categories that tend to fluctuate, like marketing and advertising or Steve from the legal department. 

Calculate your monthly income

Forecast your returns for each type of income source. If you do not have the data to operate correctly, come up with two scenarios of revenue projections: an optimistic forecast and a conservative prediction. 

You can use a marketing trick, “customer personas,” to estimate how often each one of them will buy your goods. And keep in mind the factors like your total addressable market, potential market share, and current market conditions.

Check out a list of potential revenue and funding sources:

  • Product or service sales
  • Business or corporate credit card
  • Loans
  • Savings
  • Stock&investments profit

Time to see whether your startup costs and operating expenses match your initial target budget. 

Maths up your total costs, then examine and modify.

Go back through your expenses and tag each item as must-haves or nice-to-haves. And then decide which costs you can reduce or save for later, starting with discretionary expenses. 

Good budgeting for a better business

It all may seem overwhelming, so do not be afraid to ask for help and assistance where needed. A kind reminder that business budgeting and accounting go hand in hand. Please read our article on accounting for startups.

PS, we have included some basic templates to get you started.

Taking the time to write out your initial startup costs is a sleek move. Saving your time by trusting a team with a lot of experience is also a smart move. So we will be here when you need some guidelines with your spreadsheet.

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