What is a proposed budget?
What is a proposed budget?
Simply put, it’s a document that lays out the allocation of funds for a company or specific project.
Budget proposals are used at all levels of society.
In the US, the president submits a budget proposal to Congress each fiscal year. It lays out the president’s priorities in regard to spending on initiatives.
You need a budget proposal to attract investment and justify costs to any stakeholders.
Budget proposals that are well-written and researched are vital for any business plan.
What is a proposed services budget?
A proposed services budget details the costs of delivering services.
A business providing office cleaning services, for example, may use one. It would be part of their pitch to prospective clients.
A proposed services budget is useful for managing client expectation vs. client budget.
This is especially true when dealing with the government. It shows why you, as the service provider, need to charge what you charge to meet their expectations.
Let’s consider the office cleaning business again. It has a contract to clean the main city council offices.
The local government wants to extend that service citywide. They hope to make savings as part of their budget process.
It’s a new window of opportunity for the cleaning business. They’ll need a budget proposal that justifies what they want to charge.
This is done by laying out changes to their expenditures. The proposed services budget will illustrate amendments to their direct costs as a result of a bigger project.
The city council will understand the need for profit and so will be accepting of what the cleaning business needs to charge them—as long as the city budget allows.
Key factors in how to write a budget proposal
Let’s explore how to write a budget plan.
There are many ways to format your proposal, but we’re going to concentrate on the content.
1. Cost of wages
Identify who will be working on the proposed project.
Their wages represent a cost to your company, and you must take them into account.
To calculate the total budget for wages, determine how much you pay each team member per hour.
Then estimate how many hours they’ll spend on the project.
2. Research and development costs
There’s a variety of costs associated with readying your company to take on a project.
While you can’t transfer these costs to any single client, you ought to take them into account.
These costs could include:
- Special training
- New technology
- Development of new initiatives
- Market research.
3. Travel budget
The project may require your team to travel. You should include associated costs in the final budget proposal.
Ask yourself the following questions:
- Will your business need to provide transportation?
- Will you need to rent or lease any vehicles?
- How will team members get to job sites?
4. Operational expenses
Your operating budget will also consist of indirect costs.
These aren’t directly associated with the specific project. They still need calculating for your budget proposal submission.
These costs may include:
- Social media marketing
- Other employees
- IT maintenance.
These are the day-to-day costs of doing business. Keep them in mind to ensure your budget proposal includes all costs incurred by your company.
5. Profit margin
Your business can’t survive without making a profit.
Therefore, calculate the profit margin you expect from the project. This is especially important if the proposal is designed to woo investors.
How to create a budget proposal template
Below is a simple step-by-step guide for creating a budget proposal.
If you want to know how to create and sign a sales proposal, click the link.
Before beginning your budget proposal, gather the relevant information. Work out your salary, travel, and operational costs.
2. Describe the project
State the general details of the project here. Lay out why your organization should take it on.
3. What’s your mission?
This section details why your company should undertake this project.
You want to impress upon the reader why the budget you’re proposing is worth it.
You should include what you hope to achieve, how you’ll achieve it, and why you’re best placed to do so.
4. Breakdown of costs
This section itemizes expected costs. Include both direct and indirect costs.
Direct costs consist of those associated with the project. Indirect costs would cover things like utilities or legal expenses.
5. Summary of costs
Always include a summary of costs when drawing up a budget for a project proposal.
It provides a quick reference for costs under any major category.
6. Explanation of costs
This may be the most important section of your budget proposal. Justify your costs.
You need to show why each item you’ve budgeted for is necessary.
Specify how each cost contributes to achieving your stated goals.
Detail when you expect you’ll incur each cost. This varies depending on the nature of the cost.
For example, travel costs may be expected occasionally, whereas operational costs are ongoing.
Also, propose a date for project completion.
If the project is ongoing, propose a date for a budget review. Costs can change over time.
8. Profit margin
State the benefits you hope your company will receive.
Whether your proposal is for a client or an investor, it must be a viable proposition.
Budget proposal example
This example was created from a PandaDoc budget proposal template. It shows what part of the labor costs section could look like.
Efficiently manage costs with a proposed budget
So what is a proposed budget calculation for?
It’s to give prospective clients and investors a clear breakdown of the overall cost of a project. It also helps you determine your total costs.
During the writing of a budget proposal, you may identify cost savings. This is good.
Profitability is much easier with efficiently managed costs.
PandaDoc can help you draft accurate, effective budget proposals in minutes, and collaborate on them with both your team and your clients.
Sign up for a free 14-day trial to learn more.