’Tis the season for annual budgets

Annual budgets are not fun. They are hard to do and very distracting. But, the upside of this drill is huge and makes it worth it.
Obviously it’s a good discipline if it’s done well and provides a black and white backbone for the company to operate, but even more importantly, it becomes a great instrument to use to (re)align, focus, communicate and (re)commit to your strategy.
Growth is not a strategy
We all know that companies want to grow, whether it means grow revenue, customers or profit. But growth is not a strategy; it’s an outcome. And as strategies evolve, connecting the dots and bringing everyone along with it is a challenge.
Determine your goals
Your company’s refined strategy, objectives and goals need to be in place so that the budget can be built to support the key initiatives to drive and accelerate the strategy. This alignment between the strategy and budget is paramount
You need to think about where the company is in its evolution and flush out what is critical to accomplish over the next 12 months. What are you solving for?
This question enables focus and ultimately allows your company to succinctly communicate to all associates your top initiatives that support the objectives for the upcoming year.
Communication is key, companywide, as budgets are developed and finalized — it provides context as to why some things made the budget and other items did not.
Keep your priorities straight
Prioritizing where the company is and determining a focus on a few items, versus spraying and trying to do too much, builds momentum.
Whether you’re solving for product verification, revenue growth from a specific product line, gross margin expansion, EBIDTA, building a critical mass of customers, revenue mix, product mix, etc., the very thing you are striving for should define the key initiatives for the upcoming year.
This approach also could be called managing to phases; it’s the stake in the ground that enables the entire company to focus on what’s important.
As things come up during the year, as they always do, being disciplined to evaluate how they help accelerate what you’re currently solving for (the stake in the ground) is important.
Because if these “inbounds” don’t align with your initiatives, they need to be parked until the right time — or you can intentionally change the stake.
Stick to the plan
Your company may be in a phase requiring investments in a part of the business as you continue to evolve, and thus impact net income. Or you may believe you can accelerate revenue growth by increasing headcount, and thus expenses. That’s OK.

It’s all part of your plan. You’re reinforcing the strategy, based on what the company has currently prioritized and is solving for, in order to create long-term growth and overall value.