BUDGETS AND BUSINESS PLANS

• September 28, 2023
• Adrienne Botha
• no comments

Eliminating complacency

Budgets and business plans under one heading? Yes, absolutely. This vital relationship between the two will be expanded upon. This is a pivotal key to your success.

If you have been interested in my other blogs & podcasts, you will by now reason that I  am not a business “as usual” person – I do not follow standard molds and shapes. So, let’s unpack this wonderful mechanism to help you attain a more profitable and sustainable business. The intention of this paper is to get you to adjust your way of thinking with regards to your annual budget forecasts and budget plans.  The ‘how’ and the ‘when’.

The usual standard is for a business plan to be prepared, perhaps twice, in the existence of a company.  One at the start-up (and normally to raise capital) and sadly, another one should the company experience financial woes, and go under Business Rescue.

Before I delve into this, I would like to share with you some of the problems inherent in not managing the budget process efficiently:

• Staff spend the budget to ensure that the budget is not reduced next year.
• The team are not compelled to source for better pricing – why should they?  There is sufficient budget allocation available to them.
• The budgets may be driving a habit of spending on items that are not necessary.  Perhaps things could be done differently and more innovatively!
• If insufficient money is available in a budget?  If your team has a close relationship with the suppliers, then it is possible to receive goods now and be invoiced in the new financial period. This practice plays havoc with your financials.  You are already going into the new period with a deficit.
• How you measure people is how they behave.   I have seen departments “borrow” their budget available to others.
• Bad debts are not provided for because they will fall outside of their constraints. 
• Staff’s KPI’s are often aligned with their ability to work within the budget and this reward system may create temptation for manipulation. 
• Purchasing inferior raw materials to keep within constraints of the budget – thereby damaging your brand.

… and the list is endless. 

The usual procedure is probably one where your budgets are reviewed annually based on a model and Business Plan that were formulated some time back. Budgets should not endure for periods greater than three years. It is best thereafter to go back to base zero and review your company. It drives innovative change and a fresh strategy. This approach will add a new dimension to your thinking and doing.   Business and the global environment change rapidly, and your review of budgets should align to outside determiners. This automatically drives disciplined awareness and change.

I strongly recommend outsourcing this process. A business consultant can look at the business holistically and without preconception. They are also not driving their own agenda, but yours. I encourage you to provide for this expense. Research and Development (R&D) should be a process in all businesses to allow for innovation to enhance your product/service offering. This drives discipline to constantly being ahead of the rest.  

My next blog will relate to the subject of “segregation of duties”, which adds value to this topic.

As always and keeping with the theme of my blogs, I promised to give examples that I have experienced pertaining to the advice that I provide.  So, here goes!

A while back, a newly qualified medical professional enlisted my services to develop a business plan. I was given one sheet of paper with a hand drawing of the concept of a medical product that the client wished to develop and take to market – the aim being to look after underprivileged people by providing remote medical assistance. The client had been invited to enter an annual competition which is championed by the Gauteng Growth and Development agency, called the Innovation Hub.  Their aim being to collaboratively convene, conduct research and widen their influence. Judges from all over the world take part in the final decision making. It is an exciting, prestigious but rigorous process which requires presentations and preparations. A Business Plan was required to evidence the intention of taking concept to market.

With scant data, all that I really had to work with was my client’s academic ability and passion.  Market research was absent.

I knew that my client’s secret to success lay in her academia and passion and that to do her justice, that I had to subtly steer her intended idea into a business model with various revenue streams. The client was the brand – not the product that she intended to develop and take to market. Also when we are young and idealistic, we do not realize the importance of making money – that is why we are in business.

The winning prize the Innovation Hub is currently R3 mill plus other benefits – obviously winning the prize is a great way to catapult your brand.  She won the competition, and it was a great joy to share with my client at the event the excitement of reaching her dream. 

The business plan not only gave her the platform that she needed to start her business, but it provided direction and support for her to proceed.  She is now living her dream.

“Vision is the source of hope and life” – Myles Munroe.

Thanks for reading this blog. Stay tuned for more insightful discussions on boosting your business’s success. Join us next week, and let’s keep growing together!