“Shark Tank” Your Budget Process

The irrational battle for budget project approval happens every year. The game is played within most companies like a game of cat & mouse.

Financial and Business analysts scramble across siloed departments to put together hypothetical budget numbers for projects with heavenly returns on investment. This game is real, a F1000 company I worked with did an internal audit of manpower used to gather budget numbers for a single transformation project, and the cost was just over $1 million dollars.

Targets are linked to remunerations, so traditional budgeting is an emotional process.

Targets are linked to remunerations, so traditional budgeting is an emotional process. Budgets can be a battle for next year’s pay package and promotions for many. Can it still be unbiased? Probably not.

In this game, deploying rationale and objectivity can be forgotten. Reworking the budgets over and over to squeeze within targets adds to inefficient processes. Embedded in business practices, this traditional process is very difficult to challenge.

Venture Capitalist Approach To Budgeting

Companies should look at the Venture Capital due diligence process for non-biased evaluation before budgets are sought after. The CFO is equivalent to the CEO of a venture capital fund, and needs to make non-biased investment decisions.

  1. Understand The Team: Venture Capitalists first ask, who is the team? What is the team’s ability to execute? This needs to be answered before any budgets are gathered.
  2. Strategic Approach: Development plans are used to understand the company’s strategic approach and to know the various plans to understand outcomes and risk.
  3. R&D Risk: Investor questions will also include issues related to the new product or service. With technologies, skills required for development and related risks need to be understood.   If it has been developed, investors will require details to scale the product or service.
  4. Subject Matter Experts: Mark Cuban on the TV Show Shark Tank does a good job inquiring about any needed subject matter experts or partnerships for the company to be successful.
  5. Unique Positioning: Venture capitalism is doing enough research and preparation to avoid investing in an idea that is doomed to fail.

In Summary

Change your traditional budgeting process and think more like a Venture Capitalist.  Before any time and effort is spent on gathering and re-working budget numbers, make sure your organization knows its execution ability, management support and outcomes for risk.

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