Strategic budgets also should be built with flexibility in mind.įounders and finance leaders know that in business, little goes according to plan. It asserts that you want your business to survive many years into the future (you do, right?), and asks, “What would be the best use of funds this period, based on the long-term organizational goals we’ve decided on.” Strategic Budgets Must Be Flexible Strategic budgeting is long-term focused. It asks, “How much money do we have to spend next month” and bases decisions purely on that answer. Standard (read: poor) budgeting is based on the short-term. Strategic Budgets Are Focused On The Long Term The best strategic budgets are based on three principles. Strategic budgets ensure product teams can allocate and attain more resources more wisely. A strategic budget accounts for these long-term growth needs.įor example, if you’re a SaaS business or physical product creator, your business revolves around product development. To achieve these goals, you may need to implement new processes, purchase new software, or increase your resources. Your company looks into the long-term when setting goals. With strategic budgeting, it’s much more about considering what you might be able to achieve with that spend, and analyzing different scenarios to build a spending allocation that best positions you for organizational growth. It’s about more than just looking at how much money you have to spend, and then splitting it between departments. Strategic budgeting takes this a step further and is a way of creating a budget based on the overarching goals of your company. What is Strategic Budgeting?Ī budget is an estimate of incoming revenue and outgoing expenses for the coming financial period (such as the next month or year). We’ll also give you a comprehensive guide to building your own strategic budget, so you can put what you learn into practice. In this article, we’re going to discuss what strategic budgeting really means, and how it differs (quite a bit, actually) from simply pulling together a budget based on how much money you have available to spend. This brings us to the point of today’s lesson: strategic budgeting. Okay, maybe “wrong” is a strong word, but they for sure could be budgeting a lot more strategically. The thing is, many startups are doing it wrong. Budgeting is one of the most fundamental yet crucial aspects of running and growing a business.
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