Small Business Budget: See a Real Example


Working on your small business budget but not sure where to start? Sometimes it’s helpful just to see a real-life example to help you create your budget. This post will show you:

  • A real-life example of a successful small business with all the numbers 
  • A budget template that can help manage tax time headaches
  • Fixed costs and variable expenses you’ll want to consider

Without further ado, see how Izzy—a designer and small business owner—runs her company’s finances using a YNAB budget for a calm and stress-free financial setup.

About

  • Name: Izzy K.
  • Age: 33 years old
  • Location: Maine 
  • Job: Customer Support / designer and small business owner 
  • Living situation: I live with my partner and our dog.

About the Business

  • What we sell: a line of fine jewelry and custom wedding bands
  • Business age: 5 years old
  • Distribution:  website, wholesale to stores, and custom work
  • Business setup: Single member LLC I do almost every aspect of the business myself – from production to shipping—but I do hire contractors (often talented friends!) on a project-by-project basis for photoshoots and web design projects.

Typical Business Revenue and Profit

  • Pre-covid revenue: $50,000-$90,000/year 
  • 2020 revenue: roughly $64,000
  • Profit from business: about $30,000/year in 2020

The pandemic cut down on wholesale orders, paused in-person craft shows and events, and delayed many weddings so my business slowed down a lot last year. 

Cash on Hand

  • Buffer fund: $1,000
  • Business true expenses: On top of that, I set aside funds monthly for things like my software subscriptions, raw materials, unexpected costs, and saving up for products or services that are billed infrequently or non-monthly.

The cash I have on hand varies a lot throughout the year. Jewelry, like many product-based handmade businesses, is a very seasonal business. The holidays make up a large part of my annual revenue. 

Debt: $0

  • I received the Paycheck Protection Program (PPP) loan and Economic Impact Disaster Loan (EIDL) assistance but they’ve both been forgiven so I don’t have any debt at the moment.

While I’m very thankful they’ve both been forgiven, applying was very stressful—the guidance kept changing! 

With the money from the assistance, I invested in a website redesign from a small design firm. Even before the pandemic I was trying to do fewer in-person markets, so this was a way of investing in building towards more online sales and supporting another small, creative business whose work I’ve admired. 

Average Monthly Inflow: $3K-$20K

Because fine jewelry is so seasonal, my inflows vary quite a bit. In my busiest months (November/December), I could bring in $20,000—while in one of my slower months (like March), it might only be $3,000. 

My Small Business Budget

Budget

Catego­ry Target Amount Notes
Draw + Contractor Pay
Owner's Draw $2,000 I pay myself a set monthly owners draw.
Contractor Pay / Line 11 $300 I put money here on a project by project basis.
Credit Card Payments
Capital One Card $0 I opened two credit cards with the lure of the business sign-up bonus. I'll probably phase out the Chase card.
Chase Card $0
Monthly Expenses
Shopify – line 8 $29 Website ecommerce platform.
Klaviyo – Line 8 – marketing $30 Email newsletter platform
Shipstation – Line 27 – software $10 This service gives me the ability to print and ship USPS and UPS packages from home.
Domains and Emails – Line 8 $10 Billed yearly, I save this much each month.
Planoly – Line 27 $6 Schedules and posts on Instagram automatically.
Adobe – Line 27 $30 I use Indesign, Photoshop, and Bridge the most.
MileIQ – Line 27 $6 This is a phone app that tracks business mileage. Swipe one direction for personal drives, swipe the other direction for business drives.
COGS – Part II
Materials – COGS line 38 $1,084 I budget for materials and supplies as needed. Metal prices vary quite a bit and I end up moving money around frequently.
Supplies – COGS Line 38 $38
Packaging – COGS Line 38 $94
Shipping – Line 27 $0
Quarterly Expenses
Quarterly Taxes $330 I calculate taxes needed based on sales, or based on the year before.
Sales & Use Tax – Line 23 $79 I collect sales tax for people in Maine (I'm small enough I don't have to collect nation wide) or when I travel to in-person events in different states. Whenever I get an order/purchase where sales tax needs to be charged I set that money aside in this category.
Variable Expenses
Flexible Funds $71 This is my cushion fund. I drop in leftover money from other categories here.
Marketing – Line 8 $0 Paid ads
Print Materials – Line 8 $50
Tools and Equipment – line 22 $60
Supplies – Line 22 $0
Office Expenses – Line 18 $0
Customer Returns – Line 2 $0
Shows/Travel
Vendor Fees – Line 10 $0
Display – Line 8 $0
Travel – Line 24A $500 Have an upcoming show in the fall.
Deductible Meals – Line 24 B $0
Infrequent Variable Expenses
Continuing Education – Line 27 $0
Commissions and Fees – Line 10 $0
Annual Expenses
Taxes and Licenses – Line 23 $7 LLC registration. Forms that happen once a year
Saving
Profit – 5% – March June September December $16 5% of sales goes in here. Have $543. Quarterly pay myself a distribution.
Buffer Fund $0 Capped off at $1,000
PPP Loan Repayment $0 Ready didn't need it.
Total Needed $4,750

About My Budget

My small business budget is set up in YNAB and it’s worked really well to measure my financial health and help with short and long-term planning.

I keep my owner’s draw category at the top of my budget to keep the number in front of me. I found early on in my business I was so excited about the idea of “business expenses” that it was easy to fritter money away. It’s all a tradeoff—every time I buy something, it could mean you can’t pay yourself as much, and I’m reminded of that tradeoff every time I open my budget. 

I file taxes as a sole proprietor (Schedule C for taxes). To make it easier for tax purposes, I set up my budget to include the corresponding line number of the Schedule C form. Accounting software like Quickbooks and Xero do these things behind the scenes, but I do it actively in YNAB. 

There’s an accounting firm called Sunlight Tax that specializes in accounting for creative small businesses that also provides a lot of education—I took a workshop with them and learned so much about better organizing my bookkeeping and how to create a business budget. The owner, Hannah Cole, was actually on the YNAB podcast talking about how artists and creatives can simplify their taxes

How I Manage Money with My Small Business

To manage money in my business, I use:

  • A business checking account
  • A checking account with Square
  • A high-yield savings account with Square
  • Two credit cards that I pay off in full each month
  • YNAB to budget and keep everything organized

I used Quickbooks Online in previous years as my small business budget—mostly because I thought it was what “real” businesses used and because it was what the accountant I was working with at the time recommended. But I found YNAB was even more helpful in decision making and planning. In YNAB I can see my runway based on the money I had in my accounts—literally the period of time I have until the money in my accounts will run out and what it will cover. 

Seeing my income and expenses in this light empowered me to invest in the website redesign project because I could see exactly what would happen in my budget if I moved money to a “website” category. I like that YNAB lets you take care of what you need to for tax compliance but also serves as a decision-making tool when you’re budgeting for your business.

Learn how to set up a business budget in YNAB.

A few times a week, I’ll pop into my budget to import and categorize transactions. Friday is my big day to do money things:

  • I reconcile my budget to my bank account to make sure they match
  • I move money around to cover any overspending (a key principle in zero-based budgeting)
  • Any other more irregular things (like paying sales tax or paying out invoices) I also do on Friday. 

I set up Square, Shopify, and Stripe to deposit once a week on Thursdays, so the money is there on Friday to allocate. 

With my business budget, I’m always a month ahead with expenses: when money comes in, I budget out a month before I fill up my owner’s draw category and start filling in other more “optional” categories. For example, when I flip into October, I’ll go into November’s set expenses and fill those up. 

For taxes, I’ve worked with an accountant before but this past year I did my own taxes because I’m very interested in them (thanks to Sunlight Tax!). I think generally it does make sense to work with an accountant and I really liked the one I worked with previously. 

Every quarter (September, January, April, June), I sit down and figure out my profit. Based on that number, I submit my estimated taxes. When it comes to April’s annual taxes, the self-employment tax I owe has already been submitted and I’m usually pretty close to the right amount.

How I Got into Running My Own Small Business

I was an English major and I’ve always been creative. I never set out to start my own jewelry line, but after working for a number of other design studios I decided to take the leap.

As a creative, I think I’d always been told I wouldn’t like the numbers side of running a business. I’d absorbed the narrative that creative people don’t like money. That’s not true and not helpful.

I went through a community-based entrepreneurship training during the first year of running my business that went over basic business financial topics like running a breakeven or cash flow analysis. It turned out I actually love the numbers side of the business—it’s so interesting. 

The business is now five years old, and the creativity never stops when I leave my studio. To me running a business feels like a holistic creative practice—figuring out logistics like shipping and packaging, determining how to learn the new skills I need, structuring my budget and constantly re-evaluating how to best use the resources I have available—it’s all deeply creative.

My Financial Goals

When it comes to business performance, I want to shift to more online-centered sales so I don’t have to travel as much as I had before the pandemic. I’d like to break $100,000 in revenue and make the business more profitable as time goes on too. Early on, I was spending money on accumulating equipment and tools, so much of the money I was making was going straight back into growing the business.

Personally, we’re saving for a down payment and I’d love to build a tiny house or freestanding studio in the backyard for my business. 

In the big picture, running my own business gets myself and my partner closer to our goal of financial independence, and having control over our time. 

I would rate my current business financial situation as a 3.5/5. I’m working towards building more revenue and streamlining the business to make it more profitable but I also feel truly proud of how far the business has come.

But I would rate my current peace around finances: 5/5. I feel clarity around what I want to do with my business resources and after having been in business for a few years not too many variable costs truly surprise me anymore.

You’ve been perusing small business budgeting templates, are you ready to turn one into the real thing? Learn more about using YNAB to manage your small business budget.

Learn More

Want to keep going? The budget nerds talk to Laura on how she uses YNAB and the Profit First method to manage their small business. The Profit First method transforms businesses from cash-eating monsters to money making machines, and YNAB helps you execute your plan.