Budget Season: Avoiding the Ax

By Mike Gauss on | November 10, 2010 | Comments (0) | Share

Preface:
This blog post is all about the money; not just any money, but the favorite type for investors, entrepreneurs, business owners and anyone who wants a raise, bonus or commission, ROI money. To my friends whose work is about making the world a better place, not making a profit, everything I will share has application in your area of calling too. If the correlation is not clear to you, send me a note and we can discuss the ideas further.

The Opportunity:
Now, let’s make some money together. November through January is the time when we have an opportunity to reap the rewards of the past nine months and put into place a plan for financial growth and success for the next year. My CFO and accounting friends love this time of year because it is all about numbers. However, the rest of us, with passions in the areas of creativity and people, tend to cringe and groan. It is the time for budgeting, vendor and employee reviews, negotiating contracts and writing business plans.

During this season, we need to dedicate a portion of our life in Excel, making spreadsheets, Gantt charts and graphs. It is also the time that decision makers reward our efforts with tough questions and rate the importance, priority and value of our work. We try to make it personal, but it is not. It is just business. In fact, it is business done right.

Get Our Mind Right: Back to the Basics:
Many of us would assess this time with a SWOC analysis—strengths, weaknesses, opportunity and challenges—as a challenge if not a weakness. Just a little shift in our thinking will make this a time of opportunity and strength for us. All we need to do is get back to the basics.

Simply defined, business is the exchange of goods and services for a fee. Don’t be afraid to talk money because if you are not talking about money, you are not conducting business. Side note—if you are not receiving a fee for the goods or services you are providing it is called charity. Fear of talking money has caused many business conversations to become charity conversations leaving one or both parties dissatisfied.

Business success is a simple formula of revenues exceeding expenses, also known as profit. Here is where my CFO and accounting friends will chime in that my definition of business success is too simple. Many successful businesses intentionally control profits by investing in goods and services that offer the potential for return. Thereby defining success needs to include assets and liabilities, depreciation, passive income and net worth projections.  Stop, my CFO and accounting friends are right, however, I think we can all agree that focusing on the basics of revenues exceeding expenses provides the money needed to hire one of them to help with the rest. However, they did start down a path we will talk about in a few moments, that being investing, investment and the income or return on the investment.

This brings us to the toughest basic truth in business; we are all expenses. Vendor or employee, investor or business owner we all want a piece of the revenue and/or profit pie. As an expense, we all face the cost-cutting ax, Ouch!

Becoming the King of Our Destiny:
So how do we take being an expense, which is generally perceived as a challenge or even a weakness of the business, and turn ourselves into being a business opportunity? Easy really, we change our title to investment. More accurately, we become an investment that promises a return. The long and short of it is we need to be discussing ROI—Return On Investment. Side note—roi, in French, means king. France is also home to one of the first stock exchanges, the 12th century courtiers de change. Is it any wonder that ROI is also king of the investor and entrepreneurial vocabulary today?

To become King ROI, we need to go beyond just a promise. We need to provide the decision maker/investor with the metrics by which they can track our performance and gauge return. This brings in the business basic of having a fully developed plan. It also means that we need to write the plan in a way that is both truthful and transparent. The core of our plan needs to be properly defined objectives. Those objectives need to have a clearly identified measurement/quantity and a time period in which it will be achieved. It may even be important to make sub-objectives. If several different strategies and tactics are employed to achieve a single objective, we need to consider defining the expected results of each activity. This will be very important if we don’t meet or exceed the overall performance.

Putting the Ax Away:
Kings (and Queens) can still loose their heads; see King Charles the First, Lady Jane Grey and Mary Queen of Scots. There are five things to keep the ax away and the purse string loosened:

1. Be Prepared
   Even if we did not start 2010 with a proper plan and metrics in place, we can pull together some information that will show that we were an investment and not an expense this past year. This will require cooperation from others, the sales and accounting departments. In fact, going forward we are going to need their cooperation with our metrics, so make let’s make them allies now. We need to acquire as detailed information as we can about revenue streams that our work affects. What all this preparation comes down to is having the proof points to validate your position as an important investment.
2. Call the Meeting
   Nothing inspires confidence in an investor more than a confident investment. By asking for the meeting, we demonstrate that we value our work and others should as well.
3. State the Intended Outcome
   This is a business conversation, so we need to get talking about money fast. This also shows confidence and lets the decision maker know what decision they are being asked to make. In the world of sales, it is called assuming the sale. Like it or not, we are all salespeople. We are constantly selling ourselves to others, consciously or sub consciously. Successful salespeople generate revenues for businesses. Therefore, if we assume the sale up front, we demonstrate both confidence and the fact that we understand that business is about making money and sales is how it is done.
4. Demonstrate the Value
   This is the big ROI discussion. If we ask for a percentage increase in fee, we must demonstrate clearly what the investor will get for the money. We need to show the positive affect we have on revenue streams.
5. Ask for the Commitment
   Don’t give the decision maker the opportunity to sharpen the ax. By definition, a decision maker is a person whose job is to make decisions. They are in this position because they have demonstrated their ability to make good decisions quickly. We need to end the conversation with a clear decision on the topic we presented.

So, if you follow this advice, will it guarantee you get a fee increase or raise? No. Will it guarantee that you get a contract renewal? No. Will it guarantee that you still won’t face the ax? Again, no. Even Donald Trump has gotten the ax, more often then people think. Then, why go through all of this work?

Two simple reasons: the first for me is mental health. I may not always agree with the decision that is made, but if I know I shared all of the information to prove my position, then I have done all I can and I am able to move on with no regrets. Second is skill development. Some day I plan to be the top decision maker. To make this happen, I have to have the skills to make successful decisions. When it comes to business, those decisions live and breathe ROI and the measurements that prove it.

The ax is out there, but being friends with the king or better yet being the king, is always the best first step in avoiding the ax. This is what we mean at Articulon when we say "Never Stop Challenging."