How a Budget Can Make or Break Your Idea

Creating a budget might feel unnecessary, but spending an hour or so doing it will be worthwhile (at least if you have some simple template to start from!). It will help you figure out if you need to raise capital in the future, when you can take out a salary and how much you can spend on acquiring new users.

What do you mean by budget?

As a startup, you are primarily interested in money in, money out. So that's what we are talking about.

1. How much do I need to spend in the coming X months?
2. How will I finance this?

Then, I usually throw in some business-specific numbers in the same budget sheet.

Such as unit economics ("how much will we make selling one subscription/product?") and key performance indicators needed for calculations in the budget. More on that later.

I'm not sure I'll make a budget…

Consider this if you run a SaaS. Eventually, you will likely have to acquire customers, which costs money. The payback time could easily be one year into the future. If you want to grow slowly, you can wait one year to get back the money you invested and re-invest.

If you want to grow fast, on the other hand, you will need to raise capital. Then you will need a budget.

A budget also helps you think and prepare for costs in your startup. There's always more than you initially thought.

Lastly, you will sometimes also realize that your business will need to make more money and that you should start something else. Sadly, I've seen it happen, but on the other hand, it saves A LOT of time.

How do I get started?

Budgets follow a flexible template since they differ greatly depending on your business. But here, you can download a good-enough template I’ve used for my coffee startup Curato Coffee. Make a copy, play around with it, and read the notes in selected cells.

Takeaways

• A budget can sometimes tell you to move on to the next idea, which is sad but saves time.
• It's good to think about your costs, so you don't get into a position where you have to pause your startup or raise money in a hurry.
• If you run a SaaS gaining traction, odds are you will want external funding and thus need a budget.

Are you in the habit of setting up a budget when starting a new business?