Updated June 2, 2021
Budgeting and strategy — two important processes that go great together!
If you’re an early second stage company, you might not be doing either. If that’s the case, you have a chance to leapfrog over many later-stage companies, because many do either budgeting or strategy, but not both.
Strategy
Strategy is a qualitative process in which you assess your situation and draw conclusions about what parts of your business have the best opportunities to develop or worst problems to fix.
Budgeting
Budgeting is a quantitative process of allocating resources based on the conclusions you draw in your strategy process.
Strategy Only Focus
If you have strategy without budgeting, then you haven’t really determined how you will handle all the commitments you want to make. Later, when it comes time to spend money, there will be lots of things that need money. If you haven’t decided during your budgeting process what gets money and what doesn’t, then you will make a (hopefully) tactical decision. If you’re lucky, it will still be a good investment. If you’re not lucky, you’ll find you’ve spent your money on the wrong thing.
Budgeting Only Focus
If you have budgeting without planning, then you will just get more of what you’ve always had, which is usually 10-20% better….Until one year you realize that it’s not 10-20% better, and you’re not sure why, and you’re not sure what to do about it. If you haven’t decided in your strategy process what deserves investment, you’ll find yourself realizing too late that, “more of the same” only works for a limited time. If you’re lucky, you’ll find a new path without too much investment. If you’re not lucky, the weak area of your business will become a quagmire that costs you a lot of money.
The winning Combination of Strategy and Budgeting
Just as a peanut butter cup combines chocolate and peanut butter in one deliciously convenient package, you have the opportunity to combine strategy and budgeting. They’re take a little “out of the box” thinking, and some effort. But, the end result could spell a hugely rewarding return on that investment of time! By applying strategy, you have the chance to evaluate where you were, where you are, and where you are headed as a business. By applying budgeting too, you know exactly where your resources of time, energy, money, and team, need to be applied for the biggest returns on the resource investment. With these powers combined, you can unlock the ability to experience consistent and predictable growth for years to come.