Why are we talking about budgeting in May? I’ll tell you why. I spoke to a new multimillion-dollar professional-services client last week and this is how the conversation went:
Me: “Hey, when’s the last time we checked in on your budget?”
Them: “Oh, we decided not to do one.”
Me: “Cool. What is your revenue roadmap? How do we know what and when we’re hiring? WHAT ARE YOU DOING?”
A budget is a roadmap for how you think your business is going to progress over a period of time, whether that’s a year or three years or five years. It’s a plan for how to get where you want to go. When you don’t know where you’re going, you don’t just get in a car and drive, you map it out. Think of a budget as a Thomas Guide (IYKYK) or Waze for your company’s financials.
I have another fast-growing agency client that earned about $4.5M in revenue last year. They told me their goal for this year was $10M. While I super-appreciated their optimism, I wondered how they planned, realistically, to get from $4.5 to 10M.
We worked on a roadmap to figure out what it would take to get there. For every $1M of revenue, we’d need X, Y and Z, and for every $2M, we’d need additional A, B and C. They had that part really buttoned up. But when we started to dive into their average contract size and how many contracts they’d have to bring in to get to $10 million, that number was ridiculous, unless staff members were somehow able to produce 36 billable hours in a day. PS- If you’ve somehow figured that out, PLEASE CALL ME!
A budget helps you find out things like that. In the face of those numbers, my client understood they were not being realistic, so we decided to look at $7M instead of $10M. The budget helped lay it out: “If we do $7M in revenue, how much are we going to need to spend to get there and when? And what is that going to leave at the end of the day for us, as owners of the company?”
If you hate the B word, call it a roadmap or a guide or a flergenbergen. But whatever you call it, you have to do something because you can’t grow a business without one.
Need help creating a meaningful budget? Let’s talk it through together.