SBIR Budgets: Tips for Applicants

SBIR budgets

Image courtesy of

December came and went in a whirlwind here at The Isis Group – SBIR/STTR applications from the NSF and NIH were due in the same week! This cycle, we had several applicants ask about how to set up their budget to make the most of their SBIR dollars. Here are some tips.

The first thing I advise clients is to ask for the full amount. For NSF SBIR Phase I applications, it’s $150K, and for NSF STTR applications as well as NIH SBIR and STTR, it’s $225K if your topic falls on NIH’s exemption list from the SBA (most biomedical proposals do). You may very well lose money during Phase I, so this is very important. With solid justification and after getting a green light from the program manager, higher amounts may be allowed at NIH.

The next thing is to make sure that you can accomplish your aims with that (little) amount of money. Reviewers will look at your aims to make sure you’re not totally off-base with what you’re proposing for that (little) amount of money.

Next, sit down with the budget forms (and a calculator). Assuming you are a first-time applicant with a $225K budget, first deduct your company’s 7% profit (~$15K). This is the maximum amount allowed without question, and is your company’s money to spend as you choose (think: patent fees). Then, calculate your 40% overhead (~$60K – under “Indirect Cost Type”, write F&A). This is the maximum amount allowed without question from a first-time applicant that has not yet been audited. Your overhead rate will likely be higher (hence, the losing money in Phase I “reality check” noted above) and eventually you will be audited and/or will negotiate your higher overhead rate in Phase II. The government accounting experts at Jameson & Co. tell applicants, “Don’t leave money on the table!” by not requesting your full overhead and fee. So now you’re down to ~$150K from a $225K award. NOTE: if you’re really feeling rich, it is acceptable to deduct up to 25% fringe. This will cover health insurance for the PI and staff. But normally, this can be covered in your overhead rate.

Now, revisit the second tip. Make sure you can accomplish your aims with that (little) amount of money.

Next, deduct any outsourced studies, supplies, consultant fees, scientist salaries and other items needed for the project. The purchase of equipment costing >$5000 is expressly unallowed for NSF and discouraged for NIH Phase I budgets.

So now what you’re left with is the PI’s salary. Don’t get depressed! You really are worth more than that! Consider the fact that for a 6-month proposal period, you may only be spending 1.2 – 3 calendar months of your full-time effort on the project. I probably don’t need to mention NIH’s salary cap (which took a hit this year, sending it back to 2005 levels).

In my next post, I will discuss the companion budget justification. Until then, don’t hesitate to contact The Isis Group with any questions you have!

Tags: , , ,

4 Responses to “SBIR Budgets: Tips for Applicants”

  1. Dennis says:

    I have a quick question regarding the NSF Phase I SBIR. Is there a two-month cap on the PI and Senior Personnel’s salaries? This is what I read in the “NSF Proposal and Award Policies and Procedures Guide” document, but wasn’t sure if it applies to SBIR as well. Thanks.

  2. isisediting says:

    Hi Dennis,
    There is not a 2-month cap for PI and Sr. Personnel salaries for SBIRs. NSF likes to see that a company or academic is not solely supported by NSF and is able to obtain funding elsewhere.

  3. Tejaswi says:

    We have a negotiated rate with the DoD of x% overhead and y% G&A. The way we usually calculate is we apply overhead first and then G&A to the total and finally a fee to all of it together. Our overhead includes fringe benefits and some other costs.

    Do overhead and G&A both fall under indirect cost?

  4. isisediting says:

    Yes, they are both indirect. The way you are doing it is correct.

Leave a Reply