business budget

How to Make a Business Budget You Will Stick To

Do you run for the hills every time you hear the dreaded b-word? Does the b-word make you feel constricted? Like all the fun is going to get drained out of your life and you’ll be handcuffed to a boring spreadsheet full of numbers?

You are not alone! Budgets have a really really bad rap. Somewhere along the way, budgets became synonymous with all work and no play and something you def don’t want to spend your precious time making.

how-to-make-a-business-budget

Yet, making a business budget can greatly improve the quality of your financial life. A business budget is more than a spreadsheet full of boring numbers telling you what you can and can’t do- it also represents your business goals.

Say what?

Yes, making a business budget is a financial goal setting process. You aren’t just saying what you will and won’t spend your money on, you’re saying what you value most in your business and how you will support its growth.

When you begin to think of making a business budget as a goal setting exercise, rather than a document that will constrict your financial life, budgeting becomes waaaaaaaay easier, and dare I say it, fun.

Shifting your mindset around how you see your budget’s impact on your business is the first step in making a business budget. From here, you can approach the technical aspect of making a budget from a place of openness rather than a place of “talk to the hand.”

Now, let’s make your business budget:

Step 1: Identify your income streams and how much you make

Make a list of all of the ways you make money. Do you sell digital products and coaching packages? Do you teach yoga classes and host an annual retreat? Do you do one-on-one consultations with individuals and corporations? Put these distinctions on your list.

Go through each income stream and write down how much you make from that income stream and how often. You may have regular monthly income and irregular income.

Using this information, determine what you consider your average monthly income. Some people like to include their irregular income and divide it by 12. Other’s like to completely leave out their irregular income and only include their monthly income. Do whatever feels most comfortable to you and your budget.

Use this budget spreadsheet to list your business income.

Step 2: Determine your fixed business expenses

Gather 3 months of business statements (both bank and credit card) and go through every transaction, highlighting all of your fixed expenses.

Fixed expenses are expenses that you must pay every month. These may be expenses that are recurring (like software subscriptions) or expenses that you legally obliged to pay (like your rent or credit card debt). If you pay it every month, and the amount is fixed, highlight it.

Next, make a list of all your recurring monthly expenses with their amounts. Find the natural groupings. For example, if you spend money on Dropbox, Microsoft Office, and Evernote every month, you can group those together as Software.

Add your fixed expenses to the budgeting spreadsheet.

At the end of the Fixed Business Expense section, your fixed expenses will be totaled. This number is an important baseline for your business because it represents the minimum your business needs to earn to cover its expenses.

Step 3: Determine your variable expenses

The next step is to go back through your statements and look at all the expenses that aren’t highlighted. These are your variable expenses.

Variable expenses are all the extra things you spend money on within your business. They can be things like business lunches, office supplies, and small investments you’re making along the way. Look for natural groupings and start to add up your variable expenses.

One important note here is to be realistic about your spending.

The number one reason people can’t stick to their budget is because they underestimate their numbers. This is why we start making the budget based on your actual numbers. Later, we will adjust the budget, but for now, start with what you are ACTUALLY spending, rather than what you THINK you’re spending.

If you’re feeling confused about what to track as business expenses, check out this primer on tax deductions: What Are Tax Deductions & Why Are They So Damn Important

Step 4: Determine your annual expenses

Make a list of all of the expenses you pay annually. You want to be sure you account for these in your budget so that when it comes time to pay them, you aren’t hit with a case of the “oh craps”.

If you’re using the budget spreadsheet, at bottom of the Annual Expenses section, it will total your annual expenses and divide that total by 12. This is what you need to budget for monthly in order to have enough money in your account to cover your annual expenses.

Step 5: Set savings and debt repayment goals

Now it’s time for the fun stuff- adding your savings and debt repayment goals. If you have business debt, you want to start there. Decide how much you want to put towards your debt every month and add it to your budget. You can always pay more if you make extra money but start with the bare minimum you want to pay.

Next, move to the savings section and determine what you want to save for and how much. Here are some examples of what people include in their savings goals:

  • Taxes: The general rule of thumb is 25-30% of your net income
  • Reinvestment in your biz: 10% of your net income
  • Checking cushion: What you want your business checking account to float at
  • Vacation and sick pay: What your business will pay you when you take time off

Step 6: Make adjustments

Review your budget and look to see if it’s realistic. Do you actually have money to pay yourself with? Are you spending more than you’re earning? Can you sustain this budget throughout the year?

If the answer is no to any of these questions, then it’s time to make adjustments.

Start with the variable and annual expense section of your budget. Where can you cut back?

Next, look at the fixed expense portion of your business. Are these expenses absolutely necessary for your business? Do they serve the growth of your business? Are there a lower cost or free options that can replace these expenses?

Finally, review your savings and debt payoff goals. What changes can you make so that your budget is sustainable?

Step 7: Review your budget vs actuals monthly

I like to think of Step 7 as the lost step because it always gets lost in the what’s next of life and rarely gets done. Don’t let this step get lost! It’s probably the most important step in ensuring that you stick to your budget because it forces you to hold yourself accountable to your budget and see if your budget is realistic.

Every month, take 30 minutes to review your budget and, in the actuals column, write in your actual spending. Notice where your actuals and your budget don’t coincide. If you are overspending, decide if your need to adjust your spending or your budget (it is possible that your budget is just not realistic). If you are underspending, reallocate funds into another part of your budget.

If you can’t commit to doing this step every month, at least do it for the first three months after you make your budget so you can be sure your budget is up to date and realistic.

business budget


Okay, budget boss- it’s time to go forth and make your business budget! Don’t forget to download the free budget spreadsheet which will walk you through each of these steps.


Andi Smiles is a professional bookkeeper and small business consultant. She has a passion for helping small business owners develop a transparent and loving relationship with their finances and writes about all things solopreneur finance on her blog the BFF course.