If you’re never quite sure where to start when compiling your budget, here are a few ideas to help:
1. Jack Welch Approach
A personal favourite of mine! Jack simply asks 2 questions:
• How can we beat last year’s performance?
• How can we beat the competition?
An awesome approach!
You can simply add a % to last year’s results. This is quick and simplistic, however it won’t explore the full potential of your area of the business.
3. Zero-Based Budgeting
You literally start from Ground Zero. You assume nothing about customer behaviour, buying patterns, suppliers etc, and take a completely fresh look at the market place, look at where the company wants to be, who its ideal customers are – a fresh look at everything.
Although times consuming, this can be a very revealing and powerful budgeting technique that could help transform your business.
If this is an overwhelming approach to compiling the budget, zero-base a few revenue or cost lines instead and take a fresh look at different areas of your business unit each year.
I hope this is a good starter for ten for you 🙂
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