Budgeting and planning is fun! Am I crazy???

Please tell me that you think budgeting and planning are fun too! This article is NOT going to be all about finance acronyms. When I went through Bynder’s budget process last year, there were a lot of financial terms used. What I realized is, that when you strip away the financial lingo, budgeting is quite interesting. In essence, it comes down to understanding a business, having a holistic mindset, connecting the dots, being analytical and making key decisions. I was involved in the creation of the budget for my company in 2018 and 2019. Both years were very different and fun in their own ways.

When you compare the budget from 2018 to that of 2019, the numbers are greater and you need to execute differently. If you have an analytical mind and a broad business view, budgeting becomes more exciting at scale. You are making more trade-offs, and every department needs to be aligned. At scale, evolving a company is not about incremental headcount relative to growth, but rather changing the way you work. You can start leveraging the economies of scale by automating processes, and rethinking the way that you work.

Therefore, when you create a budget for a growth stage company, it is important to reflect and rethink internal operations. At the start of the year you must prepare a budget along with the operational plan to support it. For startup companies, the focus should be on creating a profound, data-driven budget. This is a laborious exercise to do for the first time! During this exercise, it is vital that all assumptions tainted by bias are discarded.

This is my take on the exciting part of budgeting in a growth stage company.

For example, the number of new logos can be a priority, however, making your sales target by selling large contracts to a small base of customers comes with a risk. When customers leave, churn increases. Therefore, it is important to secure as many logos as possible, and not target large contracts alone. Once you have a large base of customers, it means you have hit product market fit. This allows the priority to shift to net retention, giving an opportunity to upsell to that base. High number of logos and net retention results in higher multiples of your valuation. Choosing between either of these priorities depends on company’s position.

The top priorities set by the executive team serve as a guide to where the company wants to be. To set the company up for success, you need to create a plan for achieving ambitious growth goals. There are different ways to analyze this, and in our case we combined the top-down and bottom-up approach.

Then define how much extra staff you should hire to hit that target. Also, where would you like to locate your sales reps. This is dependent on where your customers are and the employee costs related to the location. Last but not least, the speed of expanding a sales team is dependent on your hiring capacity. There are many ways to build the team for success, which can be challenging and fun to figure out.

The key thing in budgeting and planning is to ensure that departments are aligned. It is important to understand your options in relation to creating a budget. There are different ways to create a budget; top down or bottom up approach, or a combination of both. Top down is basically a budget that is created by your executives with some input from budget holders. A bottom up approach is a system where budget holders create their own budget and the executive team reconciles all the different budgets. The advantage of bottom up approach is that there is an increased motivation due to ownership of the budget, but the budgets may not be in line with the corporate targets and other department strategies. Top down budgeting creates one budget at one time, so you don’t need to go through the phase of combining budgets from several departments.

When you are in a startup company, there is usually one budget holder. Transitioning into a growth stage company means a shift towards multiple budget holders. This is one of the many challenges faced during the shift.

Often, people associate difficult with not being fun… but that’s not always the case.

Bynder shifted from startup to a growth stage. It was a very demanding phase to go through as a company; balancing growth and profitability as opposed to a growth at-all-cost strategy.

It was fun to explore all the models, and see how each decision affected the rule of 40.

I enjoyed the process so much that I’ve decided to learn more about the financial words that confused me at the start. I am now taking a course on Coursera called “Business and Financial Modeling”. The course introduces spreadsheet models, modeling techniques, and common applications for investment analysis, company valuation, forecasting, and more. I’m really enjoying the course and there’s so much for me to learn. If this topic interests you, I would highly recommended checking out courses in this topic.

As always, feel free to get in touch to talk about the fun, budgeting stuff ;)!

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