Sounds Like a Plan: Yes, it’s that’s time of year. Let the 2011 programming and budgeting begin!

By Teresa Henderson, Executive Vice President, GM Dallas & Co-Manager Austin

Wikipedia gallantly defines planning as “… the organizational process of creating and maintaining a plan; and the psychological process of thinking about the activities required to create a desired goal on some scale.”

Most companies approach the planning and budgeting season with a less philosophical point of view and a more pragmatic frame of mind: what does our budget look like, what do we want to accomplish and how do we align dollars and goals to achieve success? And the managers inside those companies often grapple with a smaller question that looms large: where do we start?

Wikipedia also states that “(planning) is a fundamental property of intelligent behavior,” so this year why not activate the process in a smart way by analyzing the results of current programs versus the budget allotted to them? Which ones paid off in the form of leads, sales or increased brand awareness? Are there sacred cows in your marketing pasture such as legacy trade shows, sales meetings or other events that could free up budgets?

Can you identify smarter, more economical ways to maintain the nuts-and-bolts supporting programs that have to remain? Recently, we advised a client that her company could save – and redeploy – thousands of dollars each month by revising the use of wire service categories for press release distribution.

Are you in line with your online thinking? According to the 2010 Marketing Trends Survey, 47 percent of industrial marketers reported spending at least one-third of their marketing budget online in 2010. Three of the top four sources for leads for industrial companies were online channels, including the company website, email marketing and search engine optimization. Consider increasing your online programming if you want to connect with your audience in 2011.

Again from Wikipedia: “An important, albeit often ignored aspect of planning, (sic) is the relationship it holds with forecasting. Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like.” As you enter the planning and budgeting process for the upcoming year, keep in mind the milestones that are forecast for 2011. These could include product launches or product updates, new partnerships or mergers, expansion into new markets or entrée into new customer segments. Be sure to factor the support – logistic as well as budgetary – necessary to deliver success.

At the end of the day, smart planning and budgeting comes down to evaluating past initiatives, focusing on new objectives and choosing the right programs to achieve your goals. The process can be straightforward and less taxing if you stay organized, intelligently evaluate and plan against what’s forecast for the future.

So get to it, get it behind you and get ready to blow out the coming year!

In Control - You or Your Business?

by Duane Geyer, VOLLMER CFO

Do you control your business or does it control you?

Wall Street is down since the election. Unemployment is the highest it has been in ten years and rising. Japan has declared it is in a recession as has the United States. The Consumer Price Index and home values are dropping. Credit markets are tight. Everybody is asking the government for a bailout. Given all these conditions, how do a business owners/managers best control their operations? Prepare and work against a budget.

Begin with revenues – what you expect to come in. Be careful not to be too optimistic (you’ll see why in a minute). Start with what you know - existing clients who will continue with you in 2009. From there add potential new business (but again, don’t be too optimistic). Finally, add in a small portion of business which will come from “who knows where.” Add it all up and compare it to previous years for reasonableness. If it is more or less, how do you justify the change?

Next, plan the cost of running your operation. Spend a lot of time on employee costs (salaries, taxes and benefits); this is usually the urgent expense item. For other expense items, consider what you have done in the past and add in any changes you would like to make, such as new marketing initiatives.

Profit is revenue minus expenses. Calculate a Profit percentage (profit divided by revenue) and compare it to previous years and metrics published for your industry. This will tell you if revenues and/or expenses are out of line. Go back and adjust accordingly. Be careful not to spend all your expected revenue. If you plan revenues too optimistically, you may be tempted to pump up your expenses since you can still show a good profit. This could get you into trouble if you start spending too aggressively in the new year and the revenues you projected do not materialize.

Budget cash flow! Why? Because cash is king – no matter what the economy is doing, positive cash flow will keep your head above water. How? The simple answer is profits plus depreciation minus capital expenditure (computers or other equipment) minus loan payments. Too many small businesses only budget their profit and loss, only to wind up with not enough cash to pay their bills.

Budgets can be a lot of work, but they can also be an invaluable tool – especially in uncertain economic times. They are not an end all and be all; they are a guide. Comparing your actual results against your budget will keep you on track by revealing if your plans are realistic, or need to be modified. After all, it’s better to find out sooner than later what is happening to your business – it keeps you in control!