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Build a Better Budget: How to Plan for Growth in the New Year

It’s budget season! We’re heading into the home stretch of 2023, and it’s time to put together a plan for financial success in the new year. Effective budgets are strategic tools that put your money to work for you, helping you achieve your goals, manage your assets, and position your company for growth.

If corporate budgeting sounds intimidating to you, don’t worry. We have the resources you need to assess where you are now, determine your goals, and create a budget that puts you in a strong financial position. Here’s how to do it.

Assess Your Financial Data

Successful companies take data seriously. They know how to capture the right data, and they use it to inform budget decisions and projections. As you begin planning your budget, have a heart-to-heart with your financial data, including year-over-year numbers, key metrics, cash flow strategy, and your balance sheet. Use this data to:

• Evaluate Opportunities and Risks – Conduct a SWOT analysis to determine where your company is doing well (Strengths), where it needs some work (Weaknesses), where you are ready to grow (Opportunities), and where you may encounter risks (Threats). With this information, you can design a roadmap for the coming year. Use your analysis to determine where you need to invest additional resources, how you can avoid potential pitfalls, and where you can take advantage of growth opportunities.
• Analyze Historical Trends – Take a closer look at your year-over-year trends and consider seasonal ups and downs and cyclical patterns. Use this data to evaluate where your business has been successful and where you might need to make changes. Drill down into the specifics driving each trend and figure out how your analysis should shape your budget assumptions.
• Study the Market – Research your close competitors and use your data to determine where you have competitive advantage – or where you would like to gain that advantage. Think about how the economy is affecting your bottom line or customer loyalty, any talent or supply chain issues you’re facing, and whether your tech and infrastructure need to be upgraded. All these things will guide you in fine-tuning your budget as you set your goals.

Identify Strategic Goals

Based on your analysis, identify some high-level goals for your business in the coming year. For example, maybe you want to expand into a new market, become tech-enabled, or reach a revenue milestone. Determine what actions will help you outperform competitors in the market and beginning breaking them down into tangible goals:

1. Financial – Examine important financial indicators like income, profit margins, fixed expenses, variable expenses, one-off costs, and the cash flow data from the previous year. Determine where you need to make changes and set goals in the following areas:
   • Revenue strategy
   • Go-to-market strategy
   • Pricing
   • Customer retention
2. Operational – Look at key business operations like sales, purchasing, supply chain, recruiting, and HR to identify areas of investment:
   • Do you need new systems and processes in these areas?
   • Should you outsource any of these operations?
   • Do you need to reorganize any teams or departments?
3. Technology – Technology is the key to a faster, more efficient business. With the right tech tools, you can automate inefficient processes, break down data silos that inhibit analytics and reporting, standardize key functions, make more accurate forecasts, increase data visibility, and much more. Start with these questions:
   • What is your tech strategy?
   • Do you need to upgrade technology (ERP, CRM, HR, FinTech, sales enablement, etc.)?
   • What support do you need for implementation?
   • Should you work with an external project manager or implementation consultant?
4. Talent – Consider where your talent resources are stretched, decide how much money you have to invest in talent, and create a plan to attract, retain, and engage the right team members.
   • Decide where you need additional talent
   • Determine whether to fill the roles internally or externally.
   • Consider alternative options such as contract workers.
5. Growth – Where do you plan to invest in growth in the new year? Can you meet your goals organically, or will you need to consider a merger or acquisition? Consider key business growth strategies such as:
   • Organic Growth – Do you plan to expand product lines, increase volume, add to your workforce, open a new location, etc.?
   • Strategic Growth – Are there specific initiatives in the works such as entering a new market or adding a new line of business to maximize growth long-term?
   • M&A – Are you planning a merger or acquisition to help you reach new markets, add new areas of expertise, or increase revenue opportunities?

Make a Strategic Plan

Effective budgets can’t be planned at the last minute. When you start early, you have time to analyze all the data, think through opportunities and goals, plan your strategy, get buy-in from stakeholders, and zero in on the granular layers of the budget that will position you for success.

As you plan, consider the two most common budget strategy approaches:

• Top-Down Budgeting – Start with your overarching strategic objectives, and then tailor the budget to meet those goals. Determine what significant adjustments should be made to achieve competitive advantage and growth. This approach is aspirational: what do you want your business to look like in the future? Where are the challenges? What should you include in the budget to reach those goals?
• Bottom-Up Budgeting – This is a granular, detailed budgeting strategy that starts with existing data such as costs, trends, cashflow, and expenditures. Using this data, you’ll justify each line item layer by layer to design a strategic, meaningful budget.

Both top-down and bottom-up budgeting are important for charting your course in the coming year. We recommend that you use both approaches to create a realistic budget that still incorporates your long-term vision.

A scenario-based budgeting tool helps you with this process by projecting results and identifying potential risks based on different scenarios. You can adjust the inputs to see how specific changes in your budget will affect the outcome.

Start Now!

The best time to start your budget for next year is right now. The earlier you start, the more confident you will feel about your plan when you kick off the new year in January.

Need help analyzing your data or planning your budget? At Atlantix, we specialize in designing actionable solutions to position your company for financial success. Contact us today to start the conversation!