Rolling For Growth
There you were a couple of months ago buried under a mound of paperwork, getting prepared for 2012. Your schedule was absorbed by meetings; meetings with managers, phone calls, voice-mail, email, calendars, spreadsheets. It’s an annual ritual that business goes through called “Budget Season” - the time of year where we all play our hand at being Nostradamus. While going through this annual process and looking over projections for the coming year, you’re not happy. The revenue growth is not where you, or worse yet, someone upstairs want it to be. So, you begin to slash – people, products, services – anything to make the bottom line look better. What always struck me as odd about this process is the fact that it’s forecasting vs. fairytale. Tell me honestly that you had the slightest clue what this year was REALLY going to look like by way of revenue. Tell me honestly that you can afford cuts without consequence. Tell me honestly that the final budget you assembled, regardless of how perfect it looks on paper, is anywhere near reality. I first wrote about this topic for Radio & Television Business Report back in October 2008 because I continued to watch media companies put together annual budgets calling of for revenue increases across the board in the year to come, regardless of how awful the year prior was. Predictably they’d miss their first quarter projections, and then all chaos would break loose, and set a horrible tone for the rest of the year. At Remerge we work with a wide array of businesses, across a large spectrum of industry. From music to media, restaurants to retail… and the budget process remains the same. Why? Many would agree that the way we conduct business has changed, so why not the way we look at business budgeting?
Whether it’s a wobbly economy or a rapidly changing digital landscape, there is no way you’ll have an entirely accurate picture in October of what next April is going to look like for your business. I’m not suggesting you should not have a plan – just not one based in pure wishful thinking. I guess that’s why I was so delighted to read about Steve Player in the February issue of Entrepreneur Magazine. Player has become a champion of the rolling forecast. Steve reminds readers that Jack Welch, the former CEO of General Electric, wrote that budgeting "brings out the most unproductive behaviors in an organization." Historically, corporations have tied incentive pay to their budgets, Player says, creating a conflict of interest among employees who are more committed to hitting a target number than to moving the company forward. Regardless of the size of your business, or the type of industry your business competes within – it’s not as much about being “better” as it is being “different”. Consumers decide on difference – and that difference makes one brand or business better than another in their eyes. A good first step for defining your difference may just be budgeting on a rolling forecast, allowing your company the flexibility it needs to truly grow. Take a moment to read the Entrepreneur article and see if you agree. Chuck Francis remerge