50/30/20 vs 70/20/10: Which budgeting rule works best for your early-stage startup?
The 50/30/20 rule works best for startups with low operating costs and room for experimentation. It allocates 50% to operations, 30% to growth initiatives like marketing and product development, and 20% to reserves. This framework supports early customer acquisition without locking cash into rigid categories.
The 70/20/10 rule fits startups with heavier infrastructure needs. AI companies, engineering-heavy products, and businesses with significant payroll costs often need 70% for operations. This isn't poor discipline; it reflects the genuine operational demands of technical industries.
Your choice depends on your current stage. Low-overhead startups benefit from 50/30/20's flexibility. Infrastructure-heavy companies need 70/20/10's operational focus. Most founders refine their ratio after twelve months when spending patterns become clear.
The key is matching your budgeting method to your business reality, not forcing your business into an arbitrary framework.
Read the full breakdown of how to adapt these ratios to unpredictable revenue
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Which budgeting ratio currently guides your spending decisions?