BUILD A DEFENDABLE BUDGET.
Create a budget that will serve as a dependable guidepost and align your leadership team on next year’s goals for the business.
(1) Learn the best practices for getting started and keeping momentum during the budget process
(2) Set yourself up for success to get the budget approved by the right people in a timely manner
(3) Keep the budget relevant and help your team recalibrate when the business veers off-track
Budgets Drag.
Keep your budget process on track with our timeline and checklist.
With a little timeline management and process in place, budget season doesn’t have to be a nightmare. The Ideal Budget Process starts early, allows space for collaboration, and gets everyone on the same page before the approval meeting (so there are no surprises).
Start early - It is rare (if ever!) that we have heard any finance leaders from our companies say, “I wish I started this budget later.” The true things that take time can start sooner than you think, including: getting buy-in from other leaders on your management team, establishing goals for the following year, figuring out the hiring plan for a growing business, and designing compensation plans to incentivize next year’s goals. For a normal fiscal year budget process, we to see like our finance leaders creating the game plan by September and start seeing it in action come October.
Allow space for collaboration - When pushing to get a budget done, we often see the fatal mistake of our finance teams creating the budget in a silo from the rest of the organization. The strongest budgets we see come from a process that involves the leaders across all of the functions of the organization. By getting buy-in from your leadership team early, you’ll be able to create the time and space for collaboration and helpful feedback loops to make the budget a realistic and useful planning tool. You’ll also be able to help every department meet (and exceed) the expectations for budget approval.
Gets everyone on board for approval - Stop me if you’ve heard this one: you finally finish a budget draft to have a meeting to go over it with the board in mid-December, only to put the approval on hold until January. After a few weeks off, the board needs a follow-up meeting to review the budget again, only to make a ton of suggestions and changes. February is already around the corner with no approval in sight.
Bring the board along early and often to avoid this all-too-common timeline slippage. No finance leader wants to go from budget season to audit season without a break - by getting the board involved in the most important budget drivers and decisions early, you can head into an approval meeting with no surprises.
Avoid common mistakes
Listen to members of our investment team talk about where they’ve seen the budget process go wrong, and how to avoid common pitfalls.
Budget expectations
Below are a few of the “need-to-haves” for a strong budget
Bottom-up Revenue Build
One of the benefits to running a recurring revenue business is that revenue is fairly predictable (although, we know there are exceptions to the rule). We believe that starting from customer-level data is the best way to estimate future revenue.
Zero-Based Budgeting
Since when has, “because that’s what we’ve always done” truly cut it? Zero-based budgeting helps our companies assess the costs they have today and decide what is right for the business tomorrow. As our companies grow, they often change out tools, need to add lots of new faces, and cut costs from time to time - let’s make our budget reflect that.
Sound Justifications for Spend
Budgets can help give the freedom to leaders to finally invest in areas of their team and in tools, but everyone needs to clearly understand the “why” before there can be a “yes”. Help your functional leaders understand the potential ROI and reasoning behind their proposed spending.
