SBIR Series: Budgeting, Compliance & Post-Award Basics
This is the final installment in our five-part SBIR series designed to help small businesses write better proposals and actually transition to Phase II/III. We’ve already talked about a Fit Brief (why you and why now), aligned it with the right agency and topic, scoped a defensible Phase I Mini-Plan, and crafted a go-to-market strategy in the form of a Commercialization & Transition One-Pager. Now it’s time to bring it home, by building a clean, compliant submission packet and setting yourself up to survive what comes after the award.
Budgeting and compliance might not be the sexiest part of SBIR, but they’re where a lot of great ideas get disqualified. One busted line item, one missing attachment, or one unchecked compliance box can mean your proposal never gets read, no matter how brilliant your tech is. This post breaks down exactly how to get your budget, submission, and post-award game tight.
Let’s start with the money.
Budget Anatomy: Know What You're Allowed to Ask For
SBIR budgets follow a simple structure, but the devil is in the details.
Direct Costs: Labor, materials, consultants, travel, and equipment used directly in the research. You’ll need clear labor categories, hours per person, and realistic hourly rates. Don’t just pad this section, review agency norms.
Indirect Costs: Overhead, G&A, fringe. If you don’t have a federally negotiated rate, you can often propose a de minimis 10% indirect rate. But some agencies let you justify a higher provisional rate.
Fringe Benefits: Can be included as part of indirect or broken out separately, just be consistent.
Profit/Fee: Most SBIR agencies allow a fee (usually up to 7%). This is your margin and isn’t audited like indirect costs.
Avoidable Red Flags:
Charging for “proposal prep” or general marketing (unallowable).
Submitting a budget that exceeds the max cap (common rookie move).
Lack of written justification for labor or materials (lazy = rejected).
Workshare Math: SBIR vs. STTR Rules Matter
If you’re doing an SBIR, the small business must do at least 67% of the work in Phase I (and 50% in Phase II). STTRs require formal collaboration with a research institution, with 30–60% of the work handled by the small biz.
That means you need to show:
Total LOE (level of effort) split between your firm and subcontractors.
Why each sub is needed and how they contribute to the core R&D, not just admin or non-research work.
Hint: Prime–sub relationships are fine. But if the university is doing all the thinking, that’s a problem.
Submission Checklist: Don’t Lose Over File Names
You’d be shocked how many proposals get kicked for submission errors. Each agency has quirks, but here’s a cross-agency checklist to stay out of trouble:
File names and formats match the solicitation (e.g., “Volume1_Technical.pdf” not “myproposal_final.pdf”)
All budget justifications are attached as separate files
LOIs or MOUs from partners are dated, signed, and specific
Facilities section includes who owns what, where the work will happen, and whether it’s approved for animal/human subject research
Compliance boxes checked for export control, data rights, IP, etc.
Your UEI, NAICS code, and small business certs match across SAM.gov and your proposal
Post-Award: Start Strong to Finish Clean
Let’s say you win. What now? You don’t want your first invoice to bounce or your progress report to trigger an audit.
Here’s what you need in place:
Invoicing system aligned to budget categories (labor, materials, indirect)
IP & SBIR data-rights legends stamped on everything you submit
Calendar reminders for reports (monthly, quarterly, final)
Internal compliance log: export control, animal/human subjects approvals, IRB/IACUC if required
Clean accounting: If you want to go after Phase II or other federal funding, your books better match your budget
Pro Tip: Set this up before you win. Agencies don’t like “we’ll figure it out later.”
You now have a full toolkit:
Fit Brief (to evaluate opportunity alignment)
Agency/Topic Dossier (to pick the best target)
Phase I Mini-Plan (a tight, testable work plan)
Commercialization & Transition One-Pager (go-to-market and Phase III path)
Submission Packet & Post-Award Playbook (compliance, budget, reporting)
That’s not just a proposal. That’s a GovCon growth engine.
Bring This to the Next Step
Save your Submission Packet and Post-Award Playbook. These become your Phase II foundation, from updated workshare and budget to measurable transition milestones. Use them to write stronger follow-on proposals, respond to agency feedback, and prepare for sole-source lanes under SBIR Phase III.
Want to build on this?
In case you missed it, check out our first part of our SBIR Series
If you aren't a Squared Compass partner, what are you waiting for? From getting your business set up with specific government set aside programs at both the State and Federal level, to being empowered by a Fractional Capture team to win government contracts, to receiving tailored government contract opportunities Squared Compass delivers immense value which helps propel our partners to success. Schedule a chat with our team today.
