How to Write an SBIR Budget: A Step-by-Step Guide

The SBIR Budget: More Than Just Numbers

Your SBIR grant budget is one of the most scrutinized sections of your proposal. A well-crafted budget demonstrates that you understand the scope of work, have realistic cost expectations, and can manage federal funds responsibly. A poorly prepared budget can sink an otherwise strong proposal.

SBIR Budget Limits by Phase

Before building your budget, understand the funding limits for each SBIR phase:

Phase I Budget Limits

NIH: $275,589 (standard) or $425,132 (with research institution subcontract)
NSF: $275,000
DoD: $50,000 - $250,000 (varies by component and topic)
DOE: $200,000 - $250,000
NASA: $150,000

Phase II Budget Limits

NIH: Up to $1,842,264
NSF: Up to $1,000,000
DoD: $500,000 - $1,750,000
DOE: Up to $1,600,000
NASA: Up to $850,000

For detailed information on agency-specific funding, see our guides to NIH SBIR, NSF SBIR, and DoD SBIR grants.

Key Budget Categories

1. Personnel (Direct Labor)

Personnel costs typically account for 50-70% of an SBIR budget. Include:

Principal Investigator (PI): Must show adequate time commitment (typically 20-50% effort for Phase I)
Key Personnel: Other scientists, engineers, and technicians with their roles clearly defined
Fringe Benefits: Health insurance, retirement contributions, payroll taxes (typically 25-40% of salary)

2. Equipment

Items costing $5,000 or more per unit with a useful life of more than one year
Must be necessary and not already available to the company
Equipment purchases are scrutinized heavily, so provide strong justification

3. Travel

Trips to agency meetings, conferences, or customer sites
Include airfare, hotel, per diem, and ground transportation
Limit travel to what is directly necessary for the project

4. Materials and Supplies

Lab supplies, chemicals, software licenses, computing resources
Items under $5,000 per unit
Should be directly tied to specific technical tasks

5. Consultants and Subcontractors

Consultants: Individual experts providing specific expertise at a daily or hourly rate
Subcontractors: Organizations performing a portion of the work (universities, testing labs, etc.)
SBIR Rule: The small business must perform at least 2/3 of the work for SBIR (1/3 for STTR). Understanding the difference between SBIR and STTR is important for budgeting subcontract work.

6. Indirect Costs (Overhead and G&A)

Overhead: Facility costs, utilities, administrative support allocated to the project
General & Administrative (G&A): Company-wide costs like accounting, HR, and management
If you have a negotiated rate with DCAA or your cognizant agency, use that rate
If not, use a reasonable provisional rate (typically 40-100% for overhead, 10-20% for G&A)

7. Profit/Fee

SBIR contracts (DoD) typically allow a profit/fee of 7-10%
SBIR grants (NIH, NSF) do not include profit

Common Budget Mistakes to Avoid

These are among the most frequent SBIR application mistakes related to budgets:

Math errors: Triple-check all calculations. Reviewers notice arithmetic mistakes.
Budget-narrative mismatch: Every cost in the budget must be explained in the budget justification, and vice versa
Unrealistic rates: Labor rates that are too high or too low raise red flags
Missing categories: Forgetting to include fringe benefits, indirect costs, or necessary travel
Over-budgeting equipment: Requesting expensive equipment that could be leased or accessed through a subcontractor
Exceeding limits: Submitting a budget above the agency's published maximum

Budget Justification: The Narrative

Every line item in your budget needs a corresponding justification explaining:

What the cost is for
Why it is necessary for the project
How the amount was calculated

A strong budget justification reads like a story that connects your technical plan to your financial plan. Reviewers should be able to see exactly how every dollar supports the proposed research.

Agency-Specific Budget Tips

NIH Budget Tips

Use modular budgets for requests up to $250,000 in direct costs per year
Include detailed justification for each personnel role and level of effort
Account for salary cap limitations on PI compensation

NSF Budget Tips

NSF is strict about allowable costs. Review the NSF Proposal & Award Policies & Procedures Guide
Include subaward budgets separately
No profit is allowed on NSF grants

DoD Budget Tips

Budget to the specific topic's funding limit, not a generic amount
Include profit/fee (7-10%) as contracts allow it
Be prepared for DCAA audit of your accounting system

Matching Your Budget to Your Technical Plan

Your budget should be a financial mirror of your technical approach. For each task in your work plan:

Identify who will perform it (personnel)
Determine how long it will take (level of effort)
List what materials and equipment are needed
Note any travel or subcontractor support required

This creates an internally consistent proposal where the budget and technical plan reinforce each other. This consistency also extends to your commercialization plan, which should reference budget items related to market research and customer engagement.

Need Help With Your SBIR Budget?

Budget preparation is one of the most common areas where SBIR grant writers add value. An experienced consultant knows the agency-specific rules, common pitfalls, and how to build a budget that strengthens rather than weakens your proposal. The best part? SBIR grants are non-dilutive funding that never needs to be repaid.

Contact MJP Grant Consulting for expert help with your SBIR budget and proposal.

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