Making a budget, frankly, kind of sucks. It’s not fun to sum up your entire organization to a few in-flows and out-flows of cash. You always feel like you are missing something and you never feel that the document is all that useful when life actually happens.

If this sounds like you, then I share my deepest empathies. I’ve made a few budgets in my time and they’ve almost always been nothing more than an exercise in futility. I make them, they are “looked at seriously” by others in my organization, and then we never speak of them again.

But it doesn’t have to be like that! Done properly, budgets are a great way to visualize your organization. Money is fundamental to keeping the doors open, figuratively and literally, so try out a budgeting approach that resonates with your organization.

What in God’s name is a budget and what is their purpose besides making me feel poor?

There are two primary types of budgets: Full-service budgets (I’ll call these Vision Budgets) and Zero-based budgets (I’ll call these Survival Budgets).

As the names suggest, a Vision budget is all about accounting for everything you could possibly want to achieve your vision. Slack premium for everyone over the free version? Check. A contact email, a help email, and a header email for every “department”? Check and check; thanks, Google. Note that this does not mean frivolous expenses – having premium Slack is great for archiving messages and having additional email names is about looking as professional as possible.

The way I think about Vision Budgets is that with a Vision Budget, all your manual workarounds are covered by paid products. You don’t have to have 3 people monitoring one email account for different types of tickets because you can pay for 3 separate email accounts. That kind of thing.

Survival Budgets are all about spending the bare minimum to achieve your target outcomes. This means that, when faced with the “spend more time vs. spend more money” conundrum, you will often elect to spend more time. Note here that this isn’t about starving yourself or spending 3 weeks on a mission-critical action you needed done in a week; you do need to provide the value your organization aims to (or help those that you are focused on in the way they need to be helped).

Instead, think of Survival Budgets as a factor of capacity. With a Survival Budget, you have the minimum required to continue operating without lowering capacity.

A side note: budgets should be one page. More detail, if needed, can be added on further pages, but you should have a basic understanding of the organization by looking at one page.

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How am I supposed to start this “budgeting” process you speak of?

You might want to start with a Survival Budget. We all need to be realistic here; as much as I’d love to do my business driving in a Mercedes, a Honda will do fine. Now, if I was driving around foreign dignitaries, then a Mercedes might actually be a realistic minimum expense (they’re used to Rolls Royce’s, after all) – but maybe I’ll buy a used Mercedes in my Survival Budget and a new one in my Vision budget. Make sense?

Starting with a Survival Budget also makes it easier to add things on from a value-perspective. You’ll often find that you don’t need to get the super premium version of everything if you have found a legitimate workaround that is cheaper.

Once you have a Survival Budget and need to move to a Vision Budget (or create both for an investor/board meeting), consider these things when you are picking the more expensive versions of something:

  • Does it save you time?
  • Does it make you incredibly more effective at your core organizational objectives?
  • Does it put everything into a central location, making institutional memory saving easier?

The main idea is that a Survival Budget will give you the basics, but a Vision Budget will act as a catapult to achieving your organizational mission. You can still succeed on only a Survival Budget, but realistically your progress will be hampered.

What’s the difference in what goes into a Survival vs. Vision budget?

I’ll just say this up front: neither of these budgets will be 100% accurate or able to predict real life, so always have a Miscellaneous expenses category for expenses you are not sure how to estimate up front. I’ve seen budgets where Misc is 5-20% of the overall budget, usually with some context about why they are not sure how to categorize or estimate the other expenses.

With a Survival Budget, it’s all about identifying the costs that, if you don’t pay, will cause your organization to fail. This failure could be failure to operate (hard to send email campaigns without emails) or failure to achieve your mission (hard to offer financial assistance if you have no finances with which to offer assistance).

Be aware of workarounds as well: What can you do with your time or extra effort in order to save money? When I was starting my first business, I’d willingly walk up to an hour just to save $3.25 on the subway (Uber was out of the question at the time). I would email or have phone meetings – thanks, smartphones – and write down business ideas/read up on the client I was going to meet, but there was an option that allowed me to not spend money so I took it.

In a Survival Budget, workarounds must be used in every available instance to minimize costs without reducing capacity, but be aware of external costs. All that walking, for instance, wore out my shoes pretty quickly.

A Vision Budget is basically a Survival Budget plus all the money you can spend on premium products or services so that you don’t have to do your workarounds. In my case, I estimate I’d take the subway for half my meetings and an Uber for the other half (or perhaps Uber there and subway home, given time constraints). So my Vision Budget would have a much higher transit cost allocated than my Survival Budget.

Vision Budgets do add one more thing that Survival Budgets largely don’t look at: Growth expectations. Right now I’m on the cheapest phone plan – I’d usually keep this plan in both budgets since it has enough data/text/minutes for me to run my business. However, I might be more willing to amp up my estimated mobile spend in my Vision Budget so that I can get a top of the line phone (longer battery, higher quality functions, etc.) and a premium plan that has faster data or more reliable service.

It’s not a workaround, per se, but me thinking ahead to what I need to achieve my vision in the longer term. It certainly doesn’t warrant a 10x on your mobile costs, but it could be justification to go from a $300 mid-range smart phone to a $700 one with double the battery life.

technology diversity

Once you’ve created your budgets (starting from Survival and expanding to Vision), keep these things in mind

  • Your budgets should be in a similar range: if your Survival Budget is $10k and your Vision Budget is $150k, one or both of your budgets is not accurate
  • Don’t inflate: If a less expensive option completes everything you need it to, don’t add a super fancy version with more features than you’ll ever need for the sake of your “Vision Budget.”
  • Be realistic; your backers will thank you and you’ll thank yourself during hard times
  • Don’t fall into budgeting traps: A budget is meant to be a visual of your organization’s monetary flows. It is NOT:
    • A showpiece made to impress someone
    • A base for organizational decisions – it’s a tool of an organization
    • Written in stone – life happens and it can be adjusted

The budgeting process can be fun, but it needs to be focused on making sure you know precisely what you need to survive and thrive. At it’s best, a budget is a strategic tool to help you understand your organization from a new lens. At worst, it’s a useless document and a waste of time.

Here’s to making the best budgets.

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