Business Budget Planner
Revenue, costs, and expenses in, profit and margins out.
Revenue minus all costs
Estimates for planning only, not financial advice.
A business budget turns revenue hopes into a working plan: what comes in, what goes out, and what stays as profit. Enter annual revenue, the direct cost of delivering your product, and your operating expenses. The calculator returns gross profit and gross margin, total operating expenses, net profit and net margin, plus each line as a share of revenue so you can spot the category eating your profit. With the defaults, $500,000 of revenue leaves $80,000 of net profit, a 16 percent margin.
How to Use This Calculator
Work top-down like a real income statement. Revenue is total sales for the year, before anything is subtracted. Cost of goods sold covers only the direct costs of what you sold: materials, direct labor, shipping. Below that, list operating expenses by category: payroll and benefits, rent and facilities, marketing, and everything else. Owner salary belongs in payroll, never hidden inside profit. The results show each line as a percentage of revenue, which is where the insight lives.
Enter annual revenue and cost of goods sold. The gap between them is your gross profit, the engine of the business.
Enter operating expenses by category. Include a real owner salary in payroll so profit is honest.
Read net profit and margins, then scan the share-of-revenue column. Any line far above its industry benchmark is your first cost-cutting candidate. Re-run monthly with actuals to track variances.
The Budget Math
Two margins tell two stories. Gross margin measures your product economics: pricing power and production efficiency. Net margin measures the whole operation, including how lean you run overhead. A healthy gross margin with a thin net margin means the product works but the operation is bloated; a thin gross margin means you have a pricing or cost problem no amount of overhead cutting will fix. Diagnose in that order, because cutting overhead cannot save bad unit economics.
Worked Example
A small e-commerce business does $500,000 in annual revenue. Cost of goods sold is $200,000, so gross profit is $300,000 and gross margin is 60 percent: strong product economics. Operating expenses total $220,000: $150,000 payroll (30 percent of revenue), $36,000 rent (7.2 percent), $24,000 marketing (4.8 percent), and $10,000 other (2 percent). Net profit is $80,000, a 16 percent net margin, comfortably above typical retail benchmarks. The review insight: marketing at 4.8 percent is light for a growth-stage store, and payroll at 30 percent is the line to watch as they hire.
Benchmarking Your Lines
| Budget line | Typical small-business range | Flag if |
|---|---|---|
| Cost of goods sold | 20 to 40% of revenue | Over 50%: pricing or supplier problem |
| Payroll and benefits | 25 to 35% of revenue | Over 40%: overstaffed or underpriced |
| Rent and facilities | 5 to 10% of revenue | Over 12%: location too expensive |
| Marketing | 5 to 10% of revenue | Under 3% while growth stalls: under-investing |
| Net margin | 10 to 20% healthy | Under 5% two years running: rethink model |
Benchmarks are guardrails, not targets. A software company will show near-zero COGS and high payroll; a restaurant inverts that. Use your industry\'s numbers where you can find them, and otherwise watch your own trend: margins moving the right direction year over year is the real test. When the budget is set, our burn rate calculator converts the monthly spend into runway, our contribution margin calculator handles unit economics and break-even, and our cash conversion cycle calculator shows how fast profit turns into cash.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is a business budget?
A business budget is a plan for what your company will earn and spend over a period, usually a year broken into months. It starts with revenue, subtracts the direct cost of delivering your product (cost of goods sold), then subtracts operating expenses like payroll, rent, and marketing. What is left is profit. The budget turns "we hope to be profitable" into monthly targets you can actually manage against.
What is the difference between gross profit and net profit?
Gross profit is revenue minus the direct cost of goods sold: what is left after paying for the product itself. Net profit subtracts everything else too, operating expenses, interest, and taxes. A company can have healthy gross profit and still lose money if overhead is bloated. In the worked example below, $500,000 of revenue with $200,000 of COGS gives $300,000 gross profit, but $220,000 of operating expenses leaves only $80,000 net.
What is a good net profit margin for a small business?
It varies widely by industry. Retail and restaurants often run 3 to 8 percent, professional services 10 to 20 percent, and software 20 percent or more. Compare yourself to your own industry, not to headlines about tech giants. The trend matters more than the level: a margin climbing from 8 to 12 percent over two years signals a healthy business even if the absolute number looks modest.
How should I split revenue across budget categories?
Common small-business benchmarks: cost of goods sold 20 to 40 percent of revenue depending on industry, payroll 25 to 35 percent, rent 5 to 10 percent, marketing 5 to 10 percent, and everything else under 10 percent, leaving 10 to 20 percent profit. These are starting points, not rules. A freelancer working from home has near-zero rent and COGS; a restaurant has both. Build from your real numbers, then sanity-check against the benchmarks.
How often should I review my business budget?
Monthly, without exception. Compare actual revenue and spending to the budget every month and investigate variances over 10 percent. Annual budgets set direction; monthly reviews provide control. Businesses that review quarterly or "when there is time" usually discover problems quarters after they started. The review takes an hour once the bookkeeping is current.
What is a budget variance and when should I worry?
A variance is the gap between budgeted and actual numbers. A 5 percent miss is noise; a 15 percent miss two months running is a signal. Worry most about unfavorable variances in the big lines: revenue shortfalls and payroll or COGS overruns. Favorable variances deserve a look too: consistently under-spending marketing might mean under-investing in growth.
Should my budget include owner salary?
Yes, always. Many small-business budgets hide the owner's pay inside profit, which makes the business look healthier than it is. Pay yourself a market salary as an expense line, then measure true profit on top. If the business is only "profitable" because you work for free, you have bought yourself a job, not built an asset.
How do I budget for irregular income?
Base the budget on your conservative average month, not your best month, and build a cash buffer of 2 to 3 months of operating expenses for the lean periods. Freelancers and seasonal businesses should budget quarterly rather than monthly where it fits the revenue rhythm. Never let a great month reset your spending baseline; that is how windfalls become lifestyle.
What is the difference between a budget and a forecast?
A budget is the plan you commit to: targets the team is accountable for. A forecast is your updated prediction of what will actually happen, revised as reality arrives. Run both: hold the team to the budget, but make decisions off the latest forecast. When the forecast drifts 10 percent from budget for two months, reforecast formally instead of pretending.
How much should a business keep as a cash reserve?
Three to six months of operating expenses is the standard guidance for established small businesses; earlier-stage or seasonal businesses should hold more. The reserve is separate from operating cash and exists for revenue shocks, not opportunities. If your budget shows profit but the bank account never grows, the money is leaking into receivables, inventory, or owner draws, and the budget review should find which.