Strategic Budgeting for Growth
Introduction
Budgeting is a critical process for any company, especially for early-stage startups and small businesses where efficient allocation of resources can significantly impact growth and sustainability. Benson Street Advisors assisted an early-stage tech company in developing a robust and flexible budgeting process to align with their strategic goals.
Objectives
Develop a comprehensive budget that aligns with the company's strategic goals.
Ensure departmental budgets are realistic and in line with industry benchmarks.
Provide greater visibility and control over financial resources.
Enable flexibility to adapt to changing market conditions.
Approach
Initial Goal Setting and Data Collection:
The company's C-suite set priorities and goals for the year, which had been approved by the board. These included:
Increasing topline revenue
Securing new logos
Launching a flagship product by year end
Extending cash runway
Our responsibility was to guide the development of a budget that would support these goals. The process began by working with each department leader to create a budget envelope that considered both direct and indirect costs. The budget envelopes served as guardrails, not rigid constraints, allowing for flexibility.
To accomplish this we collected multiple inputs from each department head using a standardized template, asking about:
Expected increases in headcount
Existing tools they used, and any tools they might require in the coming year
Their flex capacity needs (contractors, project-based work)
Budget Development and Analysis:
Using historical expense data and the inputs gathered from department heads, two forecasted Profit and Loss (P&Ls) statements were created to offer greater granularity and detail for analysis:
1. P&L by department
2. P&L for the entire company
For both P&Ls, expenses were bucketed into their appropriate general ledger account (Salaries and benefits, commissions, contractors, professional services, rent, subscriptions [software], marketing, travel, office expenses), and the rollup of department level P&Ls matched the company P&L.
Alignment and Adjustment
A two-pronged analysis was performed to ensure that:
The forecasted company P&L aligned with the board-approved plan.
Forecasted department level spending/budgets were in line with industry best practices.
Based on this analysis, multiple adjustments were made to each department’s forecasted P&L. The updated budgets were then shared and discussed with department heads for further refinement.
Final Approval and Implementation:
Final department budgets were presented to the C-suite for approval. Post-approval, the focus shifted to monthly monitoring of planned versus actual spending at the department level and internal KPIs, performing adjustments and re-forecasting as needed.
Results
Improved Organization: A more detailed and measured budgeting process was established.
Greater Visibility: Enhanced visibility into the business’s investment decisions.
Flexibility and Agility: The budgeting process allowed the company to adapt to changing market and customer conditions.
Resource Optimization: Freed up time and money to be reallocated towards hitting management objectives.
Conclusion
By implementing a structured and flexible budgeting process, Benson Street Advisors enabled the early-stage tech company to achieve greater financial control and strategic alignment. This process provided the foundation for sustainable growth and efficient resource utilization.
Ready to optimize your budgeting process and drive strategic growth? Contact Benson Street Advisors today for a free consultation and discover how our tailored solutions can benefit your business.
