How to create a budget for a small business

Sep 23, 2025

Kyle Stinson

Myth: Budgets are complicated and unpleasant

Ok, deep breath. Before we get into this, here’s what you should know:

Truth: A budget is just a plan for your money. It doesn’t need to be perfect or take hours to make. In fact, building a budget is as easy as asking yourself a few key questions and following a few simple steps.

Perspective: Even if you’ve been running your business without a budget, creating one isn’t about fixing mistakes. It’s about giving yourself a clearer picture. It’s like switching on the headlights when you’re driving at night. You can drive without them, but it’s a lot easier (and safer) when you can see the road.

Inspiration: If you’ve started reading this, you’ve already begun considering the value of creating a budget. Know that you can do this. It can be simple, and it’s a mission you’ll be happy to accomplish.

Now that you’re motivated, let’s quickly start with the why before we focus on the how part of creating a small business budget.

Why you need a budget

A budget isn’t about restricting your business. It’s about clarity. A budget is an incredibly helpful tool, a road map, that lets you:

See your profit margins clearly. A budget shows the difference between what you earn and what you spend, so you can spot what needs adjusting.
Catch problems early. Without a budget, it’s easy to miss costs creeping up or sales dipping until it’s too late.
Set goals you can actually measure. When you have numbers in front of you, you can decide whether growth, stability, or savings should come first.
Unlock opportunities. A history of clear budgets helps when you want to apply for a loan, bring on investors, or just prove to yourself that your business is moving in the right direction.
Make better decisions. Giving yourself a tool to set goals and track results provides you with information, letting you make choices based on facts rather than hunches.

And now, back to the main attraction: Creating a small business budget.

How to create a budget for your small business (five steps)

You’ve probably looked at a few articles about this. Most of them are filled with accounting terms that make your head explode. This isn’t one of those articles. Instead, we’re going to hit on the fundamentals so you can feel empowered, rather than intimidated.

Step 1. Decide on your time frame

Budgets are built for a specific time frame. Most small businesses go with monthly, quarterly or annual budgets. But this is your business, so you decide what’s best. You can also choose to start with an annual budget that you break down into months. Or, vice versa, you can start with a monthly budget that you expand into an annual budget.

Step 2. Know your goals

As a road map, your small business budget captures your financial goals. These are your ideal destinations. Taking time to think about, frame and prioritize these goals helps you build your map. Ask yourself, do you want:

Hold steady, focusing on stability and consistency?
Hone in on key areas, like profit margins?
Work toward a major investment, like expansion, hiring or new products and services?

Step 3. Gather your data

Look at your revenue, expenses, and cash flow. In essence, what are all your sources of income and where are the places that money is leaving your business. If you don’t have all this info in one place, here are a few places to check:

Your business records, invoices, and receipts.
Accounting software, like QuickBooks or Xero.
Your payroll software and other business tools.

Step 4. Build your budget

Once you have your data, organize it into income and expenses. Then see if a monthly, quarterly or annual breakdown gives you the best visibility. From there, you can: