Bud­gets have a bad rap.  Just the word bud­get makes peo­ple cringe.   Peo­ple equate bud­gets with images of some­one look­ing over their shoul­der, los­ing their free­dom, being restrict­ed in their activ­i­ties, or not being wor­thy of mak­ing a deci­sion.

The “prob­lem” with bud­gets is in the process or deliv­ery of them, not the bud­get itself.  If a bud­get is done well it becomes a year­ly ral­ly­ing point for your team.   It cre­ates buy in to the com­pa­ny goals, account­abil­i­ty through­out the year, and rea­sons for cel­e­bra­tion!

Gen­er­al­ly bud­gets are cre­at­ed by the account­ing and finance depart­ment, and giv­en to the rest of the team.  This goes over about as well as your Moth­er telling you what to wear when you are 14.  You are well beyond need­ing some­one to pick out your clothes and you nat­u­ral­ly feel resent­ful, and com­plete­ly imposed upon. 

Imag­ine this sce­nario instead:  You are 14 and your Mom gives you $500 to build your wardrobe for the next 6 months. 

Lets look at the pos­si­bil­i­ties.  How can you par­tic­i­pate in expand­ing your capac­i­ty to have more new clothes?  What odd jobs in the neigh­bor­hood might you find to gen­er­ate extra income?  What do you have now that works, you like, fits and you want to keep wear­ing?  What essen­tials, like under­wear, are need­ed?  Beyond the essen­tials, what oth­er choic­es do you have? 

Would you feel more empow­ered and engaged in this sce­nario? 

Might you be more will­ing to work to make your wardrobe a source of pride? 

Might you feel a sense of accom­plish­ment in com­plet­ing this exer­cise and exe­cut­ing it? 

Of course, the answers are obvi­ous.  Then why do we con­tin­ue to insist on a top down approach?

prosperityinc_000014186302mediumYou can empow­er and ener­gize your team in the same way.  Start by involv­ing them in set­ting accept­able and ide­al goals for rev­enue.  This is a great oppor­tu­ni­ty to edu­cate every­one on how they con­tribute to rev­enue, and get their buy in on what is essen­tial.

For exam­ple, at Mack­ey Advi­sors and Ignite Pros­per­i­ty, all of our busi­ness comes from refer­rals.  The will­ing­ness of a client to refer is direct­ly tied to their lev­el of sat­is­fac­tion with their per­ceived val­ue of our ser­vices.  The ser­vice deliv­ery team is key to build­ing rev­enue and once they under­stand this fun­da­men­tal fact, they can align their think­ing and actions accord­ing­ly.

On the expense side of the bud­get, you can engage your team as well.  Divide your bud­get into major cat­e­gories, like mar­ket­ing, fringe, over­head, etc. and give one per­son or a team the task of bud­get­ing that area.  Edu­cate them on what has been done in the past, and give them the free­dom to build a bet­ter result. 

At the end of the day, there are some calls that you as the CEO will have to make.  There are invest­ments that have to be made to dri­ve the busi­ness to the next lev­el and you have to decide which of those are the right ones to take on.   In addi­tion, make sure to con­sid­er your risk, invest­ment and busi­ness out­look to deter­mine your per­son­al goals for net income.   

Once every­one giv­en his or her input, bring it all togeth­er.   Like­ly, you will be pleas­ant­ly sur­prised at the result.   If things don’t quite fit and you have to cut, keep the com­mu­ni­ca­tion open and make it a dia­log so you con­tin­ue to gain buy in.

Month­ly, update your team on the results rel­a­tive to bud­get and keep the com­mu­ni­ca­tion open about how to improve and achieve your bot­tom line.

It is real­ly this sim­ple.  With­out edu­ca­tion, train­ing and input into under­stand­ing the com­pa­ny goals, how is you team expect­ed to know when they are suc­cess­ful.

By tak­ing the time to edu­cate and involve your team in set­ting and achiev­ing com­pa­ny goals, they under­stand clear­ly the suc­cess line, and their role in get­ting there and how they score.  Which is the most pow­er­ful sce­nario?  Which gives you as the CEO the free­dom to focus on big­ger strate­gic objec­tives that can take your com­pa­ny to the next lev­el?  The answer is obvi­ous!  So take the plunge and engage your team in the bud­get­ing process.