A short message saying it is not a fit, ideally with a referral, is easier for both parties than an explanation. Reasons invite negotiation. If you say the budget is too low, you receive a higher offer for work you did not want. If you say the timeline is difficult, you receive a longer timeline. Every specific reason you supply is a condition the other party can attempt to remove, and then you are declining twice.
Answer within a day. A no that arrives quickly is a courtesy, because the person can approach somebody else while the need is current. A no that arrives after three weeks of silence is a cost you imposed, and it is remembered as such regardless of how graciously it is eventually phrased.
Refer where you can, because it converts a negative interaction into a useful one. Knowing who does good work at the edges of what you do is part of being useful, and an introduction costs nothing and is remembered longer than the refusal. It also builds the reciprocal habit in the people you refer to.
Notice the pattern in what you decline, because it is positioning information. If you are repeatedly turning down the same type of enquiry, your marketing is describing a business you do not want to run, and the fix is upstream rather than in the conversation. Consistently attracting the wrong work means the description is wrong.
The situations worth declining are recognisable early. Work outside your competence where you would be learning at the client's expense. Prospects who negotiate hard before anything has been agreed, who are reliably the highest maintenance accounts. Anyone unwilling to describe what success would look like. And work you could do adequately but would resent, which produces a poor outcome and a review that reflects it.
Saying no is a capacity decision rather than a rejection of a person, and treating it that way in your own head is what makes it possible to do it kindly and briefly.
Keep a short standard message and adapt it, because writing each refusal from scratch is what produces the delay. Two or three sentences you can send in a minute means the answer goes out the same day, which is the part that actually matters to the person waiting.