Use the books as the starting point
A useful budget should be grounded in actual business activity where possible. Historical revenue and expense patterns can provide a starting point for future assumptions.
Separate fixed and variable costs
Understanding which costs change with activity makes planning more useful.
Recurring fixed operating costs
Variable costs tied to sales or volume
Planned one-time purchases
Debt or financing obligations
A reasonable cash cushion
Update assumptions
A budget is a planning model, not a promise. Revisit assumptions when pricing, staffing, customer volume, or major costs change.