Don’t Let Your Budget Be Your Boss

This is the time of year when everyone gets budgeting on the brain. You pull a team together, the team pours itself into budget analysis and forecasting and the rest. If you’re on budget, it’s “all good.” If you’re off budget, it’s lots of head-shaking and remorse. I’m not opposed to projecting sales and expenses and knowing where you want to lay your bets; but I am opposed to making your business all about the budget.

Nothing drives me crazier than a leader who leads through the almighty budget. As we say at ScalePassion, the leader’s goal is not to “hit the budget.” The goal is to lead with purpose. The goal is to advance the ball. Sometimes you advance the ball one yard; other times you click off a good run of 35 or 99 yards and change the world.

How should you look at your budget this year-end?

The budget is there to help achieve your business’s purpose. It’s an important, and even critical, tool to help you achieve your purpose, but your budget doesn’t instill meaning or satisfaction in your work. It doesn’t energize you in a self-sustaining way. With this in mind, here are some dos and don’ts for you to consider as you look forward to planning next year’s budget:

Don’t: Turn your budget into your gospel of good versus bad to the extent that everything else is of secondary importance to “hitting” your budget.

Don’t: Tie your employee compensation to budgeting. It's a horrible practice. I’ve worked with, and worked in, companies that tied compensation to budget only to miss the budget by March and crush morale for the rest of the year.

Do: Use budgeting as a vital learning tool to understand the difference between what you thought was going to happen and what happened. I like to do a six-quarter rolling budget. Or if you're a smaller company and don't have as much data, maybe do a four-quarter rolling budget. As you get good at it, you can add a quarter, drop a quarter. Every month spend 45 minutes to an hour learning and adjusting assumptions.

Do: Project sales and expenses but keep it high level. I'm not so opposed to projections but I am to the amount of time, effort and energy that goes into it. Stay agile. We don't forecast down to the penny. We round to the 1,000s to keep the general direction in mind without losing our focus on the bigger picture.

And what is the bigger picture? Keeping your team motivated and engaged and fulfilled. Keeping your business growing and evolving into something that does things the right way. Rewarding investors who invested in you not only for a return but also for making a difference in the world.

Can we at ScalePassion help you achieve these real goals? Yes, we can.