Think of the last significant personal or professional goal you achieved, how did you get there? Did you just wing it and things happened to fall into place? Or did you map out the steps you needed to take to succeed? Far too many businesses rely on being pointed in the right general direction and then adjusting with the prevailing winds rather than having a true strategic plan to guide them along their journey.
Does this sound familiar when it comes to your annual budgeting process?
Let’s just take what we’ve done this year to start and then we need to grow sales by at least 10% because that’s what the Board will be expecting and let’s grow expenses by a similar amount. Ok, now let’s back into how we’re going to get the 10% through either new initiatives or growth in our customer base.
A slight improvement on that would be incorporating some trend analysis to help guide the sales and expense targets, but this is still focusing strictly on the past to guide your future targets. This is the equivalent of the following weather forecast:
Based on last week’s temperatures being slightly above normal, we’re expecting this week to be another beautiful week – sunny, with highs in the 80s.
Maybe it is perfect weather for the coming week, but you don’t really know because you haven’t done the work. People are relying on your forecast. What happens if there’s actually a big storm system moving in and no one is prepared for it?
Most businesses expend significant effort and energy to develop an annual budget but get minimal value out of it. This is because it’s not truly tied to their strategy and what they’re doing operationally. It’s easy enough for the finance team to make the numbers what they need to be and turn this into a math exercise, but how does that help your company? Take a look at the graphic below and honestly assess which column best describes what you’re doing today.
Now, think about what this process could look like and the value you could get by engaging your team in:
- reviewing market trends
- understanding competitive threats
- analyzing customer insights
- identifying real opportunities for growth
- operationalizing the above in order to execute the plan
It may not be easy and definitely requires some time and effort, but the value and alignment you get as a result is priceless. Most likely your budget for 2018 is either already finalized, or nearly so, but don’t let that be an excuse for not taking action. With the start of the new year, resolve to challenge yourself and your team to treat this as an opportunity to take a hard look at your business and develop a truly integrated strategic plan that serves and supports your long-term vision, that unlocks growth, and prepares you for whatever may lie ahead.
– Michael Nelson, Senior Director
Here’s the good news – you don’t have to GO it alone. Our GO-Grow™ team works closely with yours, delivering actionable strategic plans in a matter of weeks versus the months it typically takes organizations. Contact us to learn more.