In this instructional video, federal grants consultant Stacy L. Chin walks startup founders through the process of creating a compelling SBIR (Small Business Innovation Research) budget. She frames budgeting not as a mere spreadsheet task but as a narrative that demonstrates the company’s ability to execute the proposed research. The video outlines a strategic workflow—starting with defining project goals, breaking them into tasks, assigning personnel effort, and then translating those into cost line items. Chin explains the three primary budget components: direct costs (salaries, lab supplies, consultants, travel, equipment, software), indirect costs (facility overhead such as rent, utilities, administrative support) typically calculated as a percentage of direct costs, and the small business fee (profit margin recognizing the startup’s risk). She highlights frequent founder mistakes—double‑counting, omitting fringe benefits, unrealistic salaries, weak linkage to the research plan, and under‑estimating indirect costs—and stresses that reviewers evaluate judgment, feasibility, and alignment with the research strategy, not just arithmetic correctness. The video concludes with a call to use her keepyourequity.co Excel templates that automate calculations for all budget elements, encouraging founders to focus on science and commercialization rather than spreadsheet mechanics.
Chapters
If I had a dollar for every founder who told me, Stacy, I have no idea how to build an SBIR budget, I'd probably have enough money to fund my own Phase 1 award. Budgeting is one of the most intimidating parts of the entire SBIR application process, not because it's difficult, but because no one really explains it to you in plain English. Instead, founders hear terms like direct costs, indirect costs, fringe and overhead fees, and G&A, and it suddenly feels like they need an accounting degree just to apply. But the good news is that you don't. So in this video, I'm going to break down 3 biggest pieces of the SBIR budget, explain what they actually mean, point out all the mistakes I see founders make, and then by the end you'll understand enough to build your own budget with confidence. So with that, let's get into it. Hey guys, welcome back to the channel. If you're new here, I'm Stacy L Chin, a federal grants and contracting consultant who's helped to raise over $50 million of non-diluted funding for startups developing innovations in biotech, climate, and defense. So for the past decade, I've reviewed so many SPR budgets that looked beautiful on paper but should have never been submitted. But the good news is that most budgeting mistakes are completely avoidable once you know what reviewers are looking for. And the biggest mistakes I see are like double counting costs, forgetting fringe benefits, underestimating direct costs, proposing unrealistic salaries, or just building a budget that has very little connection to the actual research plan. So if you're going after SBIR funding 2026 and beyond and are working on your budgets, make sure your budgets don't feel like a spreadsheet exercise. Rather, it should reinforce the story you're already telling in your SBIR application, because every dollar should have a purpose and every line item should support the work that you are proposing. And if reviewer cannot connect your budget to your research strategy, that's a red flag. And here's another red flag, especially for most first-time SBIR founders who don't realize this until it's too late. The budget isn't asking the NIH, the NSF, or DOW for money. Rather, it's another narrative that your startup actually knows how to execute. A lot of founders assume reviewers are just simply checking the math. They think reviewers are asking questions like, do these numbers add up, or did they calculate the total correctly? And that's just a small part of it. What reviewers are actually evaluating is your judgment. Does this budget make sense for the work you're proposing? Did you allocate enough personnel to complete the project? Are the salaries realistic? Did you underestimate your key costs? Does the budget align with every strategy or commercialization plan? Or does it just feel like someone just threw a bunch of numbers into a spreadsheet hoping everything works out? Because remember, reviewers aren't just funding great science, they're actually funding your company's ability to execute. And that means a well-built budget tells reviewers that you actually thought through the project, understand what it takes to deliver, and how you can responsibly manage thorough funding. And so in this In this video, we're gonna walk through each section of the budget. So don't think about this as filling out boxes in a spreadsheet, but rather think about this as another opportunity to build your confidence with the SBA reviewers. So when you're building your budget, don't just open the Excel sheet first. Frankly, when I work with clients on proposals, I don't even look at the spreadsheet until we nail down a strategy. First, define the project's goals, aims, or objectives, and then break those objectives down to tasks. From there, determine who's gonna do what, estimate how much effort each person should contribute, and then only then begin assigning costs and dollar values. In other words, the budget is a byproduct of your proposal plan, not the other way around. So if you build your budget this way, you'll find that it almost will write itself out because every number has a reason for being there. So in the rest of this video, I'm going to walk you through exactly what to plan out for your direct costs, your indirect costs, and small business fee, or otherwise known as the profit. But before we get into it, I want to ask you for a really quick favor. If you don't mind taking a second to subscribe to this channel, it helps us out tremendously to reach more founders looking for non-dilutive funding opportunities. It's completely free and one of the easiest ways to support us to continue creating content like this. And with that, let's jump into it. First, let's chat about the direct cost. If I asked you where 80% of your budget is going to be, would you know the answer? For most startups, that's going to be the direct cost. And understanding this is one category alone that can completely change how you build your budget. Direct costs are exactly what they sound like— expenses directly required to perform the work you're proposing. So think of salaries for your scientists, lab supplies, consultants, subcontractors, travel, equipment, software, or specialized testing. And here's a simple way to think about the direct cost. If your SVR project disappears tomorrow, would that expense disappear too? And if the answers are yes, then they're probably a direct cost. However, one mistake I do see founders all the time is trying to force every single expense into this category because it feels safer. But direct costs should do more than just fill a spreadsheet. They should tell a story of exactly how you're going to execute the science. So bottom line, when you prepare an SVR project, make sure you tackle this one first before you jump into the next category, which is the indirect costs. This is the biggest part of your budget that confuses more founders than anything else. In fact, I've actually seen startups unintentionally leave thousands or even tens of thousands of dollars on the table simply because they just didn't understand what the direct costs actually are. So this is what they are. These are the business expenses that keep your company running but cannot be easily tied to one specific experiment. So think about rent, utilities, internet, accounting, legal support, insurance, HR, office software, and administrative expenses. And here's an analogy I like to use: direct costs pays for the chef to cook your meal, while the indirect cost keeps the lights on the restaurants, and you need both to serve dinner. And one mistake I see founders make is to drastically underestimate these costs because they don't want their budget to look expensive. But if you don't recover the true cost of running your business, your company just ends up subsidizing the project out of its own pocket. So when building your budget, first tackle the direct cost. Once you have that total, the indirect costs are usually a percentage of that total, ranging between 20% and 40%. And if startups have a pre-negotiated indirect cost rate, this might allow them to even propose a larger percentage. But make sure to talk to your accountant or CPA first to see how to go about this. Now, once you have your direct costs and indirect costs wrapped up, it's time to move on to my favorite category, which is the small business fee. And this is usually the moment every founder asks the same question: what The heck is the small business fee? Small business fee is intended to compensate your company for taking on the risk of commercializing an innovative technology. It recognizes that the startup is assuming significant technical and commercial risk while developing breakthrough innovation. And one of the biggest mistakes I see founders make is either forgetting to include it or just not understanding why it exists in the first place. It's one of the easiest parts of the budget to overlook, but it can make a meaningful difference to your company's financial planning. And with that, I hope this was a helpful breakdown of how you should tackle your SBR budgets. If you look Looking for support? Check out our website at keepyourequity.co where we have easy-to-use Excel sheets to help with your SBR budgeting needs. They automatically calculate direct costs, indirect costs, fringe benefits, consultant costs, subcontractor budgets, and even the small business fee. And this also encompasses the same framework that we've used for hundreds of SBR applications. So instead of wondering whether your formulas are correct, you should spend your time straightening your science and your commercialization strategy. And with that, thank you so much for watching till the end of this video. I hope you found these tips helpful as you work to secure more non-diluted funding for your startup. And if you enjoy this video, I would greatly appreciate if you can like and subscribe to this channel so you can continue to learn new ways to keep your equity throughout your fundraising journey. And also, don't forget to check out our website for more resources, tips, and advice on securing non-dilutive funding. Thank you so much again, and I'll see you in the video very soon.
