Creating a budget may not be one of your highest priorities - especially in the early days of your company. Many founders wonder: Isn't it much more important to focus on building your product, hiring the best talent and defining your go-to-market strategy? We get that. However, investing some effort into your budget can be incredibly beneficial, especially during times of heightened risk and uncertainty.
A well thought out budget has a multitude of benefits: first and foremost, it can serve as your company's commercial roadmap. It is also one of the most crucial and simplest instruments of strategic alignment for all decision-makers and stakeholders of your company.
While some stakeholders may misuse a budget to show you what is not working, ideally it will help to align your business goals within the company as well as across your shareholders. A good budget will ensure that you'll have sufficient liquidity to fund your current and future plans, help identify and understand what’s working, as well as locate unnecessary cost drivers.
A good budget will help you to answer the following questions:
- What do you want to achieve (top-line goals, margins, profit, etc.)?
- When do you want to achieve it (monthly / quarterly / yearly development, seasonality, etc.)?
- How will you achieve your goals (e.g. product releases, pricing decisions, hiring key personnel, increasing marketing spend, etc.)?
- How will you finance it?
Readings
Our portfolio company Layer has not only built great tools for budgeting across teams and platforms (such as in Excel and Google-Sheets) but also created a lot of content around the topic.
A good starting point is the following 7-step list for the creation of a startup budget:
If you want to dive a little deeper, we recommend that you download the free budgeting survival guide (don't worry, it’s only 11 pages long):
Templates
As with most things when building a start-up - since it is a lot about learning by doing, please find three budgeting templates that we consider very helpful:
