Learning how to make a budget for a small business doesn’t mean a spreadsheet full of guesses. The best starting point is already in your books: what the business actually earned and spent this year, month by month.
The short answer: to make a budget for a small business, start with last year’s reconciled profit and loss by month, plan income by type of work, plan costs that move with the work as a share of income, plan fixed costs month by month, add known changes, and compare budget to actual every month.
What a simple small business budget looks like
A useful budget fits on one page, with twelve monthly columns and these rows:
| Line | How to plan it |
|---|---|
| Income, by type of work | From last year’s months, plus the growth you expect |
| Materials, subcontractors, direct labor | As a share of the income they go with |
| Fixed costs (rent, insurance, software, office wages) | Month by month, with known increases |
| Planned purchases and loan payments | In the month they happen |
| Profit | What’s left, month by month |
Try it
Next year’s budget, month by month
Example numbers to start. Put in your own; nothing you type leaves this page.
- Income
- $0
- Costs
- $0
- Profit
- $0
Step 1: Start with clean numbers
A budget built on books that are behind, or full of uncategorized transactions, plans the wrong year. Before you start, make sure the year is reconciled and reviewed. Our year-end checklist covers what to finish.
Step 2: Look at the year month by month
Run a profit and loss for this year by month. Most businesses have a rhythm: busy months, quiet months, a month when insurance or a big renewal comes due. The budget should follow that rhythm, not divide the year by twelve. For seasonal businesses, our post on cash flow in a seasonal trade shows how to plan around it.
Step 3: Plan income by type of work
If your income is split by type of work in the books, plan each line separately. Growth rarely comes evenly from everything you do. Decide which work you expect to grow, and by how much.
Step 4: Separate costs that move from costs that don’t
- Costs that move with the work, such as materials, subcontractors, and direct labor, rise and fall with income. Plan them as a share of the income they go with. Our gross profit guide explains why that share matters.
- Costs that stay about the same, such as rent, insurance, software, and office wages, are planned month by month, with any increases you already know about.
Step 5: Add what you know is coming
A new hire, a vehicle you plan to replace, a price increase, a loan that ends. Put each one in the month it happens.
Step 6: Compare budget to actual every month
A budget is only useful if someone looks at it. Each month, compare what happened with what you planned, and ask why the biggest differences happened. QuickBooks Online Plus and Advanced include budgets and a budget-versus-actual report, so the comparison can come straight from the books. Our monthly review checklist shows where it fits.
Frequently asked questions
One page: income by type of work, the costs that move with the work, fixed costs, and planned purchases, for each month of the year, built from last year’s actual numbers.
Start from last year’s profit and loss by month, adjust each line for what you expect to change, and add known purchases and increases in the months they happen.
It is a personal budgeting rule. A business budget works better built from your own books, since every business has its own mix of costs.
Use it anyway, and adjust the lines you know won’t repeat. A real year, adjusted, beats a guess.
In December or January, once this year’s books are complete enough to trust.
Start with a conversation
Our monthly clients review their numbers with us each month, which is where a budget earns its keep. If you’d like that, request a free consultation. Prefer to call? 781-924-1489.