by Jonathan Simpson
Publication: One-to-One, Winter 2006

THE REWARDS OF BUDGETING AND STRATEGIC PLANNING FOR YOUR BUSINESS

If fiscal year and calendar year are the same cycle in your business, 2007’s budget planning process might well be at hand for you. Pat yourself on the back if you’ve already dealt with it, but for many businessmen and women it looms, taunting them, daring them to do more than dutifully get out their dart board and dust off their crystal ball.

“Get this formality out of the way, then its back to business as usual” is the attitude taken as they file into the conference room. You don’t need a crystal ball to see those same perplexed prognosticators by year’s end disappointed with results, unhappy in their work, and feeling less job security. If you can relate to this from years gone by, here is your challenge: Buy back your budget. Why use the words “buy back”? Because it’s going to cost you. But, here’s the deal; it will cost you more if you don’t.

PLANNING

Buying Back Your Budget_piggy bankIf you’re with me up to this point, brace yourself. You can’t take a serious crack at the budget without first undergoing some strategic planning. This is one of those “be strong and very courageous” moments. Strategic planning does not happen in a vacuum. With the right group of people and agenda, it will be enlightening to examine who you are, where you want to go, what you’re good at, what you’re not so good at, what your competition is doing, what your clients are telling you, what the market trends are, and other key issues. Who knows, maybe you’ll discover an unmarketed service that was a hidden profit center? But be prepared to have your stored up, brilliant ideas tested. They should be.

Before your session gets too caught up in blue sky or down roads to nowhere, remember this exercise must be leading to a focus. You will soon be laying out your budget, so the discussion should be directing you toward where to invest company money so as to obtain the highest return. You also are trying to avoid being blindsided midway through the year, so, for instance, when your industry has changed software, you’re not in a panic playing catch-up.

YOUR BUDGET AS A GUIDE

When you are ready to put numbers to the plan, don’t view your budget as restrictive just because it is giving you boundaries. It’s there to guide you away from pitfalls. It’s a beacon calling you back when you’re heading off course. Remember, money can be reallocated during the year when situations warrant. Keep your original budget on file, knowing that the budget is really a living document with flexibility because you can’t foresee everything that is going to come up. Plan to make adjustments. A good budget will require discipline, provide accountability, and be a motivational instrument so long as you keep it in front of you.

Should you find that income and expenses will run closer than you thought, you will probably need to go a step further and project monthly cash flow. It’s better to know ahead of season if you’ll need to make loan arrangements.

In his book Good-to-Great, Jim Collins says: “In a good-to-great transformation, budgeting is a discipline to decide which arenas should be fully-funded and which should not be funded at all. In other words, the budget process is not about figuring out how much each activity gets, but about determining which activities best support the hedgehog concept and should be fully strengthened and which should be eliminated entirely.” (Note: the “hedgehog concept” is about being the best at what you do, not just good.) The author goes on further to give an illustration using Kimberly-Clark, who decided to eliminate their paper business, sell the mills, and invest all of the money into emerging consumer business. Budgets are great illustrators of opportunity cost. Funding one area is a choice to not fund another. Choose wisely.

THE COST

Buying Back Your Budget_calculatorThis is where we come back to the “it’s gonna cost you” part. When you tamper with the budget, you are most likely making a change in the way someone does his or her job or maybe eliminating a job altogether. When you cut their funding, be ready to hear about it. Realize that you may be forcing change upon yourself. Are you willing to pay the price? Will you be able to persuade the once sunny, now sullen faces around you that you’ve made the best decision for the company?

If you mull all of this over and begin to doubt that you are able to make the right decisions, don’t worry…you’re on the right track. You’re probably right; you may not be “smart enough.” Not on your own. Now it’s time to turn to the One who sees the beginning and the end all at once, who has the power to bless, prosper, and grant favor among men; who established and rules the universe, yet cares about your budget and your business. If He is for you, who can be against you? Did He bring you this far to watch you drive off a cliff? No! We know that fruitless fig trees anger Him, but God’s Word also tells us that Jacob held on until he got the blessing.

Maybe you’re not the only one on the strategic planning team who realizes the need for wisdom and discernment from the Father. Seek out that other person or persons and pray together–but don’t stop there. You’ll need prayer throughout the year. Have a blessed 2007, and be strong and courageous!