Start Your SBIR/STTR Budget by Knowing the Basics
What’s your opinion? Does your SBIR/STTR project drive the budget or does the budget drive the project? Yes, this is a trick question. Actually, an appropriate budget is one that is in harmony with the proposed work, serving as an important guidepost in assessing a project’s feasibility in light of company resources. So the answer is neither; they are intrinsically connected…or should be.
When I counsel entrepreneurs as they build budgets for their SBIR/STTR proposals, I start with a mantra of:
KEEP IT REAL – Veteran reviewers can smoke out an inappropriate budget.
KEEP IT ACCURATE – Budget items can raise questions that cause reviewers to take a second look at the proposed work for compliance.
KEEP IT HONEST – Don’t pad the budget. It offends the intelligence of the reviewers.
Budget Basics for Getting Started
Costs types form the backbone of your accounting system, so before you begin, get familiar with what they are and what they include:
- Direct Costs – Items, services or labor used solely for your project and not for any other contract or corporate purpose. Examples include: salaries, equipment, travel, supplies, consultants and sub-awards/consortia.
- Indirect Costs – Items, services or labor used to support or complete your project, but also used for the other projects/activities. Indirect costs are things like fringe benefits (payroll taxes, insurance, pair leave, etc.) and overhead expenses (office supplies, rent, phone, etc.)
- Unallowable Costs – The cost of things like patents, interest expense, advertising and marketing that are necessary for business but can’t be paid for with federal SBIR/STTR dollars.
Understand the different roles on the project; who does what? These can include:
- Senior (PD/PI) and key (senior scientist, programmer, etc.) persons
- Other personnel like administrative assistants, technicians, etc.
- Consultants, who provide advice or services for fees
- Contract employees, who are self-employed and paid by the hour, and
- Sub-awards that, by agreement, do a portion of the project work vs. fee for service organizations that are vendors providing routine services.
Educate yourself on any limitations or guidelines specific to the solicitation; i.e. salary limits, indirect rates, budgets caps, project length and so forth.
Armed with an understanding of these basics you can proceed with planning your budget, which should reveal whether your company can take on the project at hand without losing money in the process. Remember that you will need to prepare a detailed, written justification for the budget you submit and it will need to be appropriate and convincing. To repeat BBCetc’s oft sited advice on the bottom line of budgeting:
- Start Early
- Read The Solicitation
- Understand the work to be done, who will do it and all associated costs.
Purchase Kris Bergman’s full webinar on SBIR/STTR budget development.
Kris Bergman is BBCetc’s Consultant for Grants & Contracts Management.