StrategyDriven Budget Development Article

Invest To Improve: Where To Spend Your Money In Business

If you run a business, continual improvement is probably top of the list of your goals. If you can continue to grow, make more money and improve the service you offer your customers, you’re on to a good thing. When you’re a company director, you have a lot of decisions to make, and it’s important to spend money wisely. Often, it’s essential to make the right decisions when it comes to investing your capital. If you want to invest to improve, here are some suggestions you may find useful.

StrategyDriven Budget Development Article

Investing in your staff

Most successful entrepreneurs have a team of people around them. Not even a superhero disguised as a business mogul could run every single aspect of a growing company, and as the boss, you may be reliant on tens, hundreds or even thousands of people. Your staff should mean a lot to you. Investing in them is a means of showing how grateful you are for their hard work and demonstrating that you have trust in them. Training is incredibly valuable for both the business and your employees. Training programs, courses and workshops enable your team to gain new skills and develop existing skills, and the outcome could be incredibly beneficial for your company. Consider how important confidence and the ability to speak with clarity and passion are for a sales team or how beneficial skills related to brand new technology or software could be to a cutting-edge e-commerce store. Training existing members of staff often enables you to offer more as a business without outsourcing or hiring additional employees, and it can also give your team more confidence and encourage them to want to develop their skill set further.

If you operate in a competitive industry, it’s worth investing money in trying to keep your star players. If your best workers start looking at roles and positions offered by rival companies, and you can’t compete, there’s every chance that you’ll lose them, even if they love their job. Consider salaries and employee benefits packages carefully and be prepared to outdo competitors if you’re desperate to keep your team together.

StrategyDriven Budget Development Article

Investing in business premises

Whether you work from home and you’re self-employed, or you have an office or a chain of stores or warehouses, you may reach a stage when you think about investing in new premises. Buying property can be incredibly lucrative, especially in the long-term, but it’s essential to make the right decisions.

If you’re home-based and you’re looking to improve your business, you may consider looking at a new location or a larger house or making your current home more suitable for work purposes. Location is incredibly important in business, and if you intend to work from home, your current location may not be ideally suited to what you do. If you’re a therapist or you specialize in consulting, for example, this probably means that you’re going to come into contact with clients on a daily basis. If you’re out in the country, this could put clients off if they have to travel to you or increase your running costs if you’re constantly driving into the city. If this scenario sounds familiar, it may be worth considering a move and having a look at new condos for sale. If the location is right, and the property works on both a personal and professional level, this could be an ideal investment.

If you run a company and you’re looking to expand or buy premises rather than renting, there are lots of factors to consider. If you’re buying, you need to make sure that the move makes financial sense. Consider the importance of location as a priority. If you’re opening a new clothing store or a café, for example, location is everything, and you should look for areas where footfall is greatest. If you want to buy a warehouse, you don’t need to be in the city center, but being close to transport links will be hugely beneficial. If you’re on the lookout for an office, but you don’t need to be close to the action, searching in the suburbs is a good idea. Once you’ve identified potential locations, consider the size of the premises and the cost. Set a budget at the outset, and don’t go for the first option. It’s worth shopping around, getting an idea of what’s out there and comparing different properties. Weigh up the pros and cons, be prepared to negotiate and consider the long-term benefits of each option. Buying property can drive down costs, as mortgage repayments are often lower than rental fees. You’ll also be putting money into an asset that you own, rather than lining somebody else’s pocket.

StrategyDriven Budget Development Article

Investing in growth

Every business owner dreams of getting to a point where their business is expanding, and the demand for products or services is increasing. If you’re doing well, you’re in profit and consumers want more, it’s worth investing money into trying to make your growth plans a reality. Spend money on marketing methods that work, develop products based on trends and consumer demands, and look at ways you can expand without increasing your running costs. Negotiate with suppliers, manufacturers and distributors and promote efficiency and productivity. If your business is booming, don’t forget to share the rewards with your employees. If they feel valued, they will be more likely to show loyalty and put maximum effort into their job.

StrategyDriven Budget Development Article

In business, you often have to speculate to accumulate. If you’re keen to hit the big time, you may have some pretty tough decisions to make along the way. One of the most important things to do is spend your money wisely. Sometimes, there are opportunities to invest, which could improve your business and ultimately lead to increased profits and better customer service. If you run a team, don’t underestimate the value of investing in your employees and giving them a platform to fulfil their potential. If you’re expanding, or you’re keen to attract more clients or reduce running costs, it may also be worth looking into buying new business premises. If you are heading in the right direction, consider which areas to invest more money in and plan a strategy carefully.

Hank Moore

The Big Picture of Business: Putting Budgeting Into Perspective, The Bigger Picture of Strategic Planning

Frame of reference is everything in business. Different people within the same organization have contrasting views as to the Business They’re Really In.

The term Budgeting gets tossed around in many ways. Budgets get blamed for gridlock. Budgets get politicized.

Budgets get more attention than the umbrellas under which they rightfully belong: Strategic Planning and Visioning.

Budgeting by itself is a minor piece of business strategy. By itself, Budgeting does not constitute full-scope planning and business strategy. Budgeting is a peg in the process.

Questions to follow in Budgeting as part of Strategic Planning and Visioning processes include:

  • Does this process increase your accountability to funding sources and to the public?
  • Are budgeting measures used to manage performance?
  • Is the performance management system focused upon outcomes?
  • Are the key measures the best representation of progress of the institution?
  • Can the benchmarking information be accessed regularly?
  • How well can management interpret and apply findings to the decision process?
  • Does your strategic plan adequately describe what you do?
  • Does the strategic plan provide necessary guidance to the activities you will measure?
  • How diverse is the planning committee?
  • Do performance measures provide an early warning system for problems?
  • How do you handle crisis management and preparedness?
  • Have you prioritized and fully defined key measures and non-key measures?
  • Have you done scenario planning of measures beyond your immediate control, i.e. external factors which profoundly impact your livelihood?
  • Do the measures address both internal management and external perceptions and accountabilities?
  • Performance measures should be included in contracts with all resources, such as adjuncts, vendors, suppliers. Supply chain management should be implemented. Quality management should be implemented.
  • Adjustments must be periodically made to target markets, definition of terms and modification of strategies.

Organizations start out to be one thing, but they evolve into something else. In their mind, they’re one thing. Other people think they are something else. Priorities change. Dedicated providers of the service stated in the original company mission become frustrated when they don’t understand the reasons for shifting priorities.

Most often, what organizations say they do in external promotions to potential customers actually ranks low on the actual priority list. That occurs due to the agendas of individuals who guide the organization…departing from the core business for which founders were presumably educated and experienced. Add to that the harsh realities of doing business and staying competitive.

Here is an average priority ranking for companies-organizations:

  1. Revenue volume and its rewards (bonuses for key management).
  2. Growth, defined as increasing revenues each year (rather than improving the quality of company operations).
  3. Doing the things necessary to assure revenue (billings, sales, add-on’s, marketing). Keeping the cash register ringing… rather than focusing upon what is being sold, how it is made and the kind of company they need to be.
  4. Running a bureaucracy.
  5. Maintaining the status quo. Keeping things churning. Making adjustments, corrections or improvements only when crises warrant (band-aid surgery).
  6. Glory, gratification and recognition (for the company and for certain leaders).
  7. Furthering stated corporate agendas.
  8. Furthering unwritten corporate agendas.
  9. Courting favor with opinion leaders.
  10. Actually delivering the core business. Making the widget itself. Doing what you started in business to do…what you tell the customers that you do.
  11. Doing the things that a company should do to be a good company. Processes, policies and procedures to make better widgets and a better organization.
  12. Customer service, consideration or follow-up beyond the sale.
  13. Looking after the people, in terms of training, empowerment, resources and rewards.
  14. Giving back to those who support the company.
  15. Advancing conditions in which core business is delivered.
  16. Walking the Talk: ethics, values, quality, vision.
  17. Giving back to the community, industry, Body of Knowledge.

People in the organization who do things below the top nine priorities have vastly different perceptions of the organization, its mission, their role and the parts to be played by others:

  • Some jockey for position… to make their priority seem to advance higher.
  • Some keep people on the low rungs in check, assuring that their priorities remain low.
  • Some become frustrated because others’ priorities are not theirs.
  • Some build fiefdoms within the organization to solidify their ranking.
  • Some do their job as well as possible, hoping that others will recognize and reward their contributions.
  • Some don’t think that they’re noticed and simply occupy space within the organizational structure.
  • Some try to take advantage of the system.
  • Some are clueless as to the existence of a system, pecking order, corporate agendas, company vision or other realities.

7 Steps Toward Getting Budgets Accepted More Readily:

  1. Commitment toward strategic planning for your function-department-company.
  2. Know your values.
  3. Refine your values.
  4. Control your values.
  5. Add value via internal services.
  6. Take ownership of your values.
  7. Continue raising the bar on values.

7 Stages in Making a Case for Business Funding:

  1. Link to a strategic business objective.
  2. Diagnose a competitively disadvantaging problem or an unrealized opportunity for competitive advantage.
  3. Prescribe a more competitively advantaged outcome.
  4. Cost the benefits of the improved cash flows and diagram the improved work flows that contribute to them.
  5. Collaborate with others.
  6. Maintain accountability and communications toward top management.
  7. Contribute to the organization’s Big Picture.

Rules for Budgeting-Planning:

  1. Use indicators and indices wherever they can be used.
  2. Use common indicators where categories are similar, and use special indicators for special jobs.
  3. Let your people participate in devising the indicators.
  4. Make all indicators meaningful, and retest them periodically.
  5. Use past results as only one indicator for the future.
  6. Have a reason for setting all indicators in place.
  7. Indicators are not ends in themselves…only a means of getting where the organization needs to go. Indicators must promote action. Discard those that stifle action.

Base Budgets on Value, Not on Cost

  1. Readily measurable values:
    • Time and cost of product development-service delivery cycles.
    • Reject, rework and make-good rates.
    • Downtime rates and meantime between downtimes.
    • Meantime between billings and collections.
    • Product-service movement at business-to-business levels.
    • Product-service movement at retail levels.
    • Product-service movement in the aftermarket (re-sales, repeat business, referrals, follow-up engagements).
  2. Values in terms of savings:
    • Time and motion savings.
    • Inventory costs.
    • Speed of order entry.
  3. Values in terms of efficiencies:
    • Meantime between new product introductions.
    • Forecast accuracy, compared to actual results.
    • Speed, accuracy and efficiency of project fulfillment.
    • Productivity gained.
    • Continuous quality improvement within your own operation.
  4. Values which benefit other aspects of the company operation:
    • Quality improved on behalf of the overall organization.
    • Creative new ideas generated.
    • Empowerment of employees and colleagues to do better jobs.
    • Information learned.
    • Applications of your work toward other departments’ objectives.
    • Satisfaction in your service elevated.
    • Voiced-written confidence, recognition, referrals, endorsements, etc.
    • Capabilities enhanced to work within the total organization.
    • Reflections upon the organization’s Big Picture.
    • Contributions toward the organization’s Big Picture (corporate vision).

About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

Budget Development Best Practice 1 – Maintain Confidentiality During Budget Development

Budgets are the financial representation of an organization’s business plan. As such, they convey a great deal of information regarding the organization’s direction - its ongoing operations, market pursuits, future investments, and staffing levels.


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Budget Development Warning Flag 1 – Division by Twelve Budgeting

Annual budget development is often time consuming and tedious, one of the evil necessities of managing a business. Subsequently, managers frequently seek shortcuts to reduce this burden; one such burden reducing action being the equal distribution of budget revenues and expenditures during each of the fiscal year’s twelve months.


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Hank Moore

The Big Picture of Business – Planning and Budgeting in Downsized Times

Getting the funds that you need from tight fisted management is an ongoing process. Cash outlays are justifiable either by dollars they bring in or dollars they stand to save for the organization. Cash outlays are always risks. Justify your risks in proportion to riskier ones they have previously funded. Validate your worth to the overall company operation.

Under the rules of supply chain dynamics, one must study your supplier relationships, formalize a plan of outsourcing and develop collaborations.

Methods of changing the way that you go for funds include:

  • Take money with you. Show returns or savings on previous appropriations.
  • Position your request as an investment, not a cost.
  • Sell management-clients on acquiring more returns on their investments, not just on making further investments.
  • Be visible when funds are flowing.
  • Reduce management’s risk in doing business with you.
  • Be a consistent producer of profit-improving outcomes, not just a spotty or hit-and-miss producer.

Corporate management has three alternatives for funding every department: (1) Must fund. (2) May or may not fund. (3) Will not fund. The three horsemen of funding are: (1) How much. (2) How soon. (3) How sure.

These are ways to advance your funding process:

  • Put money in management’s pockets.
  • Get to the front of the line for funding requests.
  • Acquire an upper-management mindset.
  • Condense the funding cycle.
  • Become top management’s partner in efficiency of operations.

Base Budgets on Value… Not on Cost

1. Readily measurable values:

  • Time and cost of product development-service delivery cycles.
  • Reject, rework and make-good rates.
  • Downtime rates and meantime between downtimes.
  • Meantime between billings and collections.
  • Product-service movement at business-to-business levels.
  • Product-service movement at retail levels.
  • Product-service movement in the aftermarket (resales, repeat business, referrals, followup engagements).

2. Values in terms of savings:

  • Time and motion savings.
  • Inventory costs.
  • Speed of order entry.

3. Values in terms of efficiencies:

  • Meantime between new product introductions.
  • Forecast accuracy, compared to actual results.
  • Speed, accuracy and efficiency of project fulfillment.
  • Productivity gained.
  • Continuous quality improvement within your own operation.

4. Values benefiting other aspects of the company operation:

  • Quality improved on behalf of the overall organization.
  • Creative new ideas generated.
  • Empowerment of employees and colleagues to do better jobs.
  • Information learned.
  • Applications of your work toward other departments’ objectives.
  • Satisfaction in your service elevated.
  • Voiced-written confidence, recognition, referrals, endorsements, etc.
  • Capabilities enhanced to work within the total organization.
  • Reflections upon the organization’s Big Picture.
  • Contributions toward the organization’s Big Picture (corporate vision).

7 Steps Toward Getting Your Budgets Accepted More Readily:

  1. Commitment toward strategic planning for your function-department-company.
  2. Know your values.
  3. Refine your values.
  4. Control your values.
  5. Add value via internal services.
  6. Take ownership of your values.
  7. Continue raising the bar on values.

7 Stages in Making a Case for Business Funding:

  1. Link to a strategic business objective.
  2. Diagnose a competitively disadvantaging problem or an unrealized opportunity for competitive advantage.
  3. Prescribe a more competitively advantaged outcome.
  4. Cost the benefits of the improved cash flows and diagram the improved work flows that contribute to them.
  5. Team the project.
  6. Maintain accountability and communications toward top management.
  7. Contribute to the organization’s Big Picture.

Reasons for Goal Setting:

  1. Human beings live to attract goals.
  2. Organizations get people caught in activity traps… unless managers periodically pull back and reassess in terms of goals.
  3. Managers lose sight of their employees’ goals. Employees work hard, rather than productively. Mutually agreed-upon goals are vital.
  4. People caught in activity traps shrink, rather than grow, as human beings. Hard work that produces failures yields apathy, inertia and loss of self-esteem. People become demeaned or diminished as human beings when their work proves meaningless. Realistic goals can curb this from happening.
  5. Failure can stem from either non-achievement of goals or never knowing what they were. The tragedy is both economic and humanistic. Unclear objectives produce more failures than incompetence, bad work, bad luck or misdirected work.
  6. When people know and have helped set their goals, their performance improves. The best motivator is knowing what is expected and analyzing one’s one performance relative to mutually agreed-upon criteria.
  7. Goal attainment leads to ethical behavior. The more that an organization is worth, the more worthy it becomes.
  8. Most management subsystems succeed or fail according to the clarity of goals of the overall organization.

How to Find Goals:

  1. Examine problems.
  2. Study the organization’s core business.
  3. Strengths, Weaknesses, Opportunities and Threats.
  4. Portfolio analysis.
  5. Cost containment.
  6. Human resources development.
  7. Motivation and Commitment.

Make Goal Setting a Reality:

  1. Start at the top.
  2. Adopt a policy of strategic planning.
  3. Strategic goals and objectives must filter downward throughout all the organization.
  4. Training is vital.
  5. Continual followup, refinement and new goal setting must ensue.
  6. Programs must be competent, effective and benchmarked.
  7. A corporate culture must foster all goal setting, policies, practices and procedures.

Priorities:

  1. Focus on important goals.
  2. Make goals realistic, simple and attainable.
  3. Reward risk takers.
  4. Recognize that trade-offs must be made.
  5. Goals release energy.
  6. Information leads to dissemination, leading to teaching-training, leading to insight, leading to understanding, leading to knowledge, leading to wisdom.
  7. View goals as long-term, rather than short-term.

Rules for Budgeting-Planning:

  1. Use indicators and indices wherever they can be used.
  2. Use common indicators where categories are similar, and use special indicators for special jobs.
  3. Let your people participate in devising the indicators.
  4. Make all indicators meaningful, and retest them periodically.
  5. Use past results as only one indicator for the future.
  6. Have a reason for setting all indicators in place.
  7. Indicators are not ends in themselves…only a means of getting where the organization needs to go.
  8. Indicators must promote action. Discard those that stifle action.

Developmental Discipline:

  1. Discipline at work is accepted, for the most part, voluntarily. If not voluntarily accepted, it is not legitimate.
  2. Discipline is a shaper of behavior, not a punishment.
  3. The past provides useful insights into behavior, but it is not the only criteria to be used.

Applying Developmental Discipline:

  1. Rules and regulations must be known by all employees.
  2. Disciplinary action should occur as close to the time of violation as possible.
  3. The accused person must be presented with the facts and the source of the facts.
  4. The specific rule that was broken must be stated.
  5. The reason for the rule being enacted should be stated.
  6. The accused person must be asked if he-she agrees with the facts, as stated. If the reply is affirmative, he-she should justify the behavior.
  7. Corrective action should be discussed in positive and pro-active terms.

Ways in Which Goals Improve Effectiveness:

  1. Defines effectiveness as the increase in value of people and their activities as resources.
  2. Recognizes that humans are achievement and success creatures.
  3. Goals infuse meaning into work and work into other aspects of life. Life is fully lived when it has meaning.
  4. One cannot succeed without definitions of success. One must expect something to achieve success.
  5. Failure is inevitable and is the best learning curve for success.
  6. One’s goals start from within, not from work situations. The goal-oriented person adapts to the work environments.
  7. Collaborations with other people create success. One cannot be successful alone or working in a vacuum.
  8. One is always dependent upon other people, and other people are dependent upon you.
  9. Commitments must be made to other people.
  10. One must view the future and change as affirmative, in order to succeed.
  11. Knowledge of results is a powerful force in growing and learning.
  12. Without goals, one cannot operate under self-control.
  13. Objectives under one’s own responsibility helps one to identify with the objectives of the larger organization of which he-she is a part. Sense of belonging is enhanced.
  14. Achieving goals which one set and to which one commits enhances a person’s sense of adequacy.
  15. People who set and are striving to achieve goals together have a sense of belonging, a major motivator for humanity.
  16. Because standards are spelled out, one knows what is expected. The main reason why people do not perform is that they do not know what is expected of them.
  17. Through goal setting and achievement, one becomes actualized.
  18. Goal setting creates a power of one’s life…especially the part that relates to work.
  19. With goals, one can be a winner. Without goals, one never really succeeds…he-she merely averts-survives the latest crisis.

About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.