Planning a Budget for a Proposal in 5 Easy Steps (+ Example)

Do you need to write a budget proposal report? I’ll show you how. We start with the 5 easy steps to plan and write your budget proposal. Then I’ll show you a worked example (from a fictional proposal but you will be able to see how to apply this to your project).

A proposal budget is similar to a project budget, but with a very different goal.

A project budget is meant to guide you step-by-step throughout the project phases, and is meant to be changed and adapted (within limits, of course) to what happens during the project itself.

Why is a budget proposal important?

A proposal budget aims to convince the evaluator who reads your proposal that you have a solid grasp of your plan and that you are worthy of being trusted with funding.

Granted, if the budget you build in the proposal phase is carefully put together and everything goes according to plan, you will end up using that directly as your project budget, but for the purposes of this article, let’s just stick to the proposal phase.

(For more on how to create a project budget, this article has all the info you need.)

So, how do you convince an evaluator that your idea will work?

First, you need to explain your project and process well in the narrative of your proposal. This is key to doing a presentation to management.

Second, you need to provide solid justification for the costs you will incur in each phase. Not only a solid justification, actually, but also a synthetic one.

In a nutshell: the evaluator needs to be able to read a one-to-two-page document and feel reassured enough to give you the £600k or whatever it is that you need. In this article, I will show you exactly how to do that.

The contents of a budget proposal

Before you get started, one of my top tips is to get all the information you need. The contents of a budget proposal are:

• A solid project schedule (normally a Gantt chart)
• Estimated costs per work package/person that summarize into overall labor costs
• Other resource costs for subcontractors and expenses
• Any other costs you need to deliver the proposed work.

I’ll explain each of those below. You’ll also need some narrative to add in about what your project is and why it’s worth doing: the budget aspect is only one element of an overall proposal.

If you have a budget proposal template, it probably has all the sections you need already. If not, it’s easy enough to make your own template. Sometimes the people evaluating the project have provided me with the template to use, so you may find you’re stuck using their format anyway.

Before you get started, focus on the ‘why’

Why are you creating this budget proposal template and filling it in with data? Because you want funding for your project.

Your proposed budget will:

• Show how much the project will cost (important to build financial transparency and manage expectations).
• Show the value being delivered (important so decision makers understand the bigger picture behind the costs).
• Allow the selection committee, stakeholders or senior leaders to compare projects (important so they can see why your proposal offers value for money over other projects).

Make sure you include a clear project description, goals and outline so that readers can see why this proposal is important and worthy of the investment.

The narrative really supports the numbers — plus, people take in information in different ways and some of your evaluators will appreciate the story.

Step 1: Build a Gantt chart

Gantt charts are loved and hated. It is undeniable, however, that they are the clearest overview you can get of a project in its entirety.

If you’re trying to convince the evaluator, then plot every work package and task on a Gantt chart and provide him or her with a clear picture of what will happen when. This will also tell them that you have thought the project activities carefully.

The Gantt chart is one of the documents every project needs — but for now, at this point in the work, you won’t need to complete every one of those in detail.

Step 2: Add person-days per company

This is a core point. In order to estimate costs well, you first need to estimate the amount of work you need to put into each activity you have planned.

Not only that: you need to estimate who will do the work. I don’t mean who personally (name and surname), I mean what type of person or role will work on each task.

Is it developers? Is it marketers? Is it researchers? Each role profile has a different hourly rate and a different pace of work. And don’t forget the cost of the project manager!

Get accurate estimates and then plan your direct costs in the form of person-days accordingly.

Note: If you are part of a consortium of organizations putting forward a bid for a project, remember to separate these estimates per company, as you will also need to present the budget broken down per company.

In the example below, Almira has been allocated 656 person-days for work package 1.

Step 3: Estimate labor costs

Once you have the duration and the person-days or hours for each project task, it’s time to write down how much their work would cost.

To do this, you simply need to multiply the hourly or daily rate of each category of personnel in each company by the amount of days/hours they will be working.

If you want, you can also work with a weighted average. As for the daily rate, if you are not familiar on how to calculate it, take a look at the end of the article as I’ve included a brief how-to for you.

In the example below, Almira’s 656 person-days have been broken down into four staff categories with four daily rates.

Multiplying daily rates by person days per category and summing the four totals gives the budget allocation for Almira for WP1 (540,25*122 + 489*255 + 262*255 + 125*24 = 260.415,50).

Step 4: Add subcontracting and travel costs

Subcontracting and travel expenses are the two other categories of costs you need to take care of. You can add a third category “other” to use for whatever costs are still left out (e.g. purchasing specific equipment).

For travel costs, multiply the number of travelers by the cost of a return ticket to their destination. Slightly overestimating the costs is a good idea to build in a bit of contingency.

Some templates will ask you to specific exactly how much contingency as a percentage you’ve added (just be aware that in my experience you are then sometimes asked to take it out!).

After you have that, add a daily allowance for each traveler. We call these per diems. They are an allowance that covers the incidental expenses of being away from home.

If you don’t have estimates for daily allowances you can refer to the official ones used for the OECD staff (available here). Remember to note what work package each travel is grouped under.

For subcontracting you need to indicate who you will hire, in what work package and for what. There’s a table that shows what that looks like in real life in the worked example below.

Step 5: Add other costs

So far, we’ve focused mainly on people costs, and the majority of successful projects rely heavily on people so that is where most of your costs are likely to be.

However, there might be other costs, and here are some examples from projects that I’ve considered in the past:

• Other direct costs: software, materials, administrative costs
• Indirect costs: insurance, office space, cloud-based storage, server fees or other IT fees.
• Taxes (don’t forget these!).

Typically, indirect costs are overhead costs that relate to the cost of doing business and running your organization and wouldn’t be passed on a client as part of the proposal (or counted in an internal proposal). However, they are useful to inform what day rates you should be charging out staff: the higher your indirect costs, the higher the day rate for one of your resources should be.

Bring it all together

Presenting all the budget items in a clear and simple way is the number one requirement of a good proposal.

Include any budget justifications as narrative alongside your numbers, especially if you are concerned that the numbers don’t speak for themselves.

For example, talk about why you need a specialist resource for a work package and how they will support knowledge transfer back into the team so it’s clear why you have higher-than-expected resource costs for that element.

You’re combining resource management, schedule management and project financial management (important project management Knowledge Areas) to prepare a package for your proposal that no one will be able to resist!

Example of proposal budget

Here’s an example of a proposal budget.

Our Consortium proposes a total price of € 2,223,471,26 (19% VAT excluded) for this project, distributed as follows:

• Staff Costs: € 897.231,26
• Subcontracts: € 260,00
• Travel Costs: € 980,00
• Other costs: € 000,00

The tables below provide a further breakdown of the budget. (WP stands for ‘work package’ in the tables below.)

Overview

The table below shows the overview. This is what you’d put at the beginning of your project proposal document to show the overall costs at a glance.

Partner	Staff Costs	Subcontracts	Travel	Other	Total
Almira	740,829	3,560	8,100	–	752,489
KatCo	353,181	189,200	3,600	–	545,981
2quarter	89,100	1,500	72,000	–	162,600
Miree	516,121.26	15,000	7,200	–	538,321.26
Lerei	198,000	–	1,080	25,000	224,080
Total	1,897,231.26	209,260	91,980	25,000	2,223,471.26

Staff costs

Here’s the worked example table of the staff costs which you would drop into you project budget proposal template.

For each work package (which would be detailed elsewhere in the proposal documentation), we have said which individual and company would be incurring what cost.

Then the staff costs per work package are totaled across the line, and then the total per work package is summed at the bottom.

Remember, this table is just staff costs, not the overall cost of the work package.

	Almira	Katco	2quarter	Miree	Lerei	Total
WP1	260,415.50	12,817	6,600	39,204.70	195,400	514,437.20
WP2	71,562.50	117,254	38,650	206,721.89	–	434,188.39
WP3	65,991.50	63,635	14,450	102,768.75	–	246,845.25
WP4	342,859.50	159,475	29,400	167,425.92	2,600	701,760.42
Total	740,829	353,181	89,100	516,121.26	198,000	1,897,231.26

Subcontracting

We also need to include detail of subcontracting costs, if your budget plan relies on other parties to complete the work. In the example below, the table shows the partner, the work package they will be involved in, the total cost for that element and then what the cost is for.

Subcontracting costs include things like external consultancy fees, survey agency payments, any fees related to contractors using special materials, a creative team and so on.

Partner	WP	Total	Description
Almira	WP1	1,560	External consultant
Almira	WP2	2,000	Survey agency payment
Miree	WP3	15,000	Special materials’ contractor fee
KatCo	WP4	189,200	Commercial subcontractor for assembling
2quarter	WP3	1,500	Creative team

Travel Budget

All partners except Lerei will be sending 2 people to each meeting. 9 meetings have been planned, totaling 18 travelers per partner (9 for Lerei).

We can show the travel budget in another table. The example travel budget for this project is shown in the table below. It sets out the partner, the work package where the travel costs will be incurred, the cost per traveler and the number of people who will be traveling at that time. There is also the total cost and the description.

Travel costs are generally people going to meetings. The more you can demonstrate your expertise in running a virtual team, the lower you can make these costs (although they may be offset by some extra tech or licenses required for remote working software).

Partner	WP	Travellers	Cost per Traveller	Total Cost	Description
Almira	WP1	18	450	8,100	9 Meetings in WP1
KatCo	WP1	18	200	3,600	9 Meetings in WP1
2quarter	WP1	18	4,000	72,000	9 Meetings in WP1
Miree	WP1	18	400	7,200	9 Meetings in WP1
Lerei	WP1	9	120	1,080	9 Meetings in WP1

Other costs

The listed cost of €25,000 is for the purchase of a specific accounting software package for WP1.

Make sure you record any other indirect costs that don’t fit neatly into the categories above, adding extra categories of expenses as necessary.

All these tables are going to be in the back of your proposal documentation as an appendix, so there should be plenty of space for you to include everything you need. This is also important for transparency.

Timing

The picture below outlines the timing of the project throughout the 41 planned weeks as well as the deliverables throughout the project.

This is a worked example of a Gantt chart for this example project. Your timings are obviously going to be different, but you can see that the tasks are listed per work package with a number of weeks duration clearly marked.

The Gantt chart is relatively high level and for the purposes of communication rather than for project tracking and monitoring.

Worked example: hourly rate calculation

It’s easier to understand if you consider this worked example.

Your hourly rate must be related to the actual working hours you have in a year (this is based on The European Commission’s Horizon 2020 Methodology). Follow the steps in the table below to get started.

Annual worked hours
(A) Working days per year	261
(B) Annual holidays (days)	30
(C) Bank holidays (days)	10
(D) Sick eave and others (days)	10
(E) Working days per year: A – B – C – D	211
(F) Working hours per day	8
(G) Annual working hours: A x F	2,088
(H) Hours worked per year: E x F	1,688

In summary, you work out the working days per year, then take off annual holidays, bank holidays and an estimate for sickness absence and other days out of the office e.g. training.

That gives you the number of working days per year your resource will be available. Then work out the working hours per day. Typically this is 8 hours per day.

With the number of hours per day (8) and the number of working days (around 210) then you can calculate the hours worked per year.

Hourly rate calculation

Once that is taken care of, it is time to estimate the hourly rate. To do this you need to have the following information for each person:

• Employee’s salary
• Employer’s social security charges per year per employee
• Other direct costs per employee (Lunch tickets, car, telephone…)
• Overhead (if any)

Sum the above costs and divide the total by the hours worked per year to obtain the hourly rate.

Get the proposal approved and ready to submit

When you’ve finalized the narrative and the numbers, you’re ready to submit! The proposal should be in good shape, ready to help readers make an informed choice about whether the authorize the funding.

Hopefully you’ve done a good enough job to make it clear that your project is financially viable and the numbers support the objective.

Want to keep reading? Check out the only guide you’ll ever need for Project Estimating.