The last quarter of the year is the right time to start next year's budget. You have nine months of actual results, you know which customers are coming and going, and there's still time to make decisions before January.
Here's the same four-step process we use when we start a budget with a client.
Step 1: Annualize your year-to-date actuals Pull your P&L through September and scale it to a full year. Nine months of results divided by nine, times twelve, gives you a rough 2026 run rate.
It won't be perfect, but it's grounded in what actually happened, which makes it a far better starting point than a blank spreadsheet or a growth percentage picked out of the air.
Step 2: Adjust for what you already know will change Now walk through the run rate line by line and ask: what will be different next year?
Customers. Are new clients signed or likely? Is anyone leaving?
People. Build a simple payroll schedule (who you pay, and how much) and add planned hires. Ask whether a role could start part-time.
New recurring costs. That software you bought in October isn't fully in your 2026 numbers, but it will be in 2027.
One-time items. Remove last year's unusually profitable job if you don't expect a repeat. Add equipment, materials or other investments you're planning.
If you know your gross margin by line of business, use it here. Adding $500,000 in a line that runs a 15% margin looks very different from adding it in one that runs 40%.
Step 3: Spread it across the months Dividing the annual total evenly by 12 is a fine start. But most businesses aren't that smooth. If you have a big summer or a slow winter, look back at the last few years and see what share of revenue lands in each quarter. Then shape the monthly budget to match, and plan staffing around it, including seasonal or part-time help instead of carrying a full-time role all year.
A monthly budget lets you compare each month's actuals to plan and track year-to-date results against where you expected to be.
Step 4: Lock it in, and review it every month Once it's set, leave it alone. That can feel wrong, but the budget's value is that it records what you expected. Changes during the year belong in your rolling forecast.
Then build the habit: every month, compare actual results to budget and ask why they differ. Sometimes the answer is good news. Costs running 20% over budget look alarming, until you see revenue running 50% over. The goal isn't to hit the budget exactly. It's to know what changed, and make conscious decisions about it.
How ambitious should the goal be? Break a big number down before you judge it. A growth target that looks impossible as a percentage can turn out to be five new clients a quarter, or one or two large ones. Once you see what it takes, you can decide whether it's realistic. A stretch goal can motivate a sales team, as long as you also plan spending around a realistic case.
Want a hand? Spara helps owners and leadership teams build budgets, then tracks budget-to-actual in the monthly reporting package. Get in touch.