Many clients struggle with how to start building their budget. Many mistakenly think that they should come up with new costs to fill the budget to the cap when in reality the best way is to start at $0 and incrementally build costs into the budget in order of importance. Trust us, you will find enough legitimate costs to utilize every dollar. Our advice to clients is to start building budgets from the bottom up.
Begin with personnel. Personnel is the most important aspect of any budget because without them there is no one to complete the work. Personnel costs go beyond salaries. Personnel costs should also include fringe costs (money set aside to pay employer taxes, provide training or mandatory sick time, and other costs having W-2 employees incur for the employer). We typically advise a fringe set aside of at least 13% but many companies set this rate higher. In addition to W2 employees, many budgets will also feature consultants or 1099 employees. These employees will not be on the payroll but will instead receive a lump sum of grant dollars for completing agreed-upon tasks throughout the project. Often when clients start to put together their personnel budget they inevitably realize there are additional roles that will need to be filled beyond the employees they currently have. Employees tend to be the most expensive commodity in any project. This is completely normal. For grants like SBIR, personnel costs (as opposed to equipment or supplies) are expected to be the primary expense.
While major equipment is an unallowable cost in many proposals, supplies are almost universally allowed. Most projects regardless of industry or goals will require some sort of supplies. To be clear, supplies differ from equipment in that they are consumable items that will not outlast the life of the grant. Many small businesses find when they begin writing the grant that they have larger supply needs than originally anticipated. Think about what consumable commodities will be required to complete the scope of work.
Miscellaneous budget items
The next type of cost to consider in a budget includes miscellaneous items that are required for program success. This includes computer services and web subscriptions, administrative and accounting/payroll services, and dissemination materials. These miscellaneous items are often thought of last despite being vitally important to the overall success of the project.
Though less prevalent since the pandemic, travel is often a vital expense in a budget. Whether that means travel to a conference or allowing remote employees to meet and collaborate in person, by plane, car, or bus, travel is an allowable expense in most cases. The important thing to remember when determining travel costs is to itemize. Show area hotel rates and airline fees in your travel estimate and list how many people will be traveling, the destination, and the purpose of travel.
Many businesses have overhead costs and these are frequently allowed within most proposal budgets. The de-minimis rate is 10% and companies may need official documentation (government or university documents that identify the negotiated cost) to surpass this. Overhead can include rent and other operating costs.
Leftover budget dollars
In the unlikely event, you have any money left on the table consider increasing salaries, adding more needed equipment, hiring an accountant or evaluator, or hiring an additional consultant in the form of an industry expert advisor. Starting with the true essentials ensures the budget will be built to accurately reflect business needs and not be hastily spent in an effort to use all allocated dollars.
We work with high-growth startups and organizations that support the startup and innovation ecosystem. We build highly specific non-dilutive funding menus, provide proposal preparation services, and measure outcomes of funding through evaluation. Schedule a consult call with us HERE.