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Battling With Budgets
In the current economic climate, many teams are facing budget cuts. This may mean that you have to cut back on some of your insight data sources and planned projects. If you don’t use a systematic way of assessing what to keep and what to lose from your budget, sometimes the winners are just those whose sponsors shout the loudest at you! And these may not be the most valuable projects for the business.
So, what’s the best strategy to adopt?
Anticipate
One piece of advice is to make sure you think beyond the current recession. What insight will your organisation need so that it’s well placed to compete when things start picking up? Don’t start cutting back until you’ve considered both the short and long term impact of those cuts.
Before you decide on cost-cutting measures, you also need to identify any items that might be funded by internal clients. If they can find the funding from another budget, you may be able to remove that aspect from your budget.
Prioritise
The best way of prioritising your insight budget is to look at the potential value of each piece of investment. Each piece of work should support a value chain. Some of the initiatives behind those value chains will have to be cut, so the accompanying research or analysis will also be chopped. But in an ideal world, all your other work should be justified in terms of its potential value. So, how do you do this?
All projects should be valued in terms of their impact on:
• Sales / Acquisition
• Retention
• Cross-sales / up-sales / share of wallet
• Cost savings
• Risk reduction
Explore the impact of each piece of work until you can see a valuable business benefit. If there isn’t one, it’s a prime candidate for cutting. If you can’t be specific about the potential impact of your work, estimate how much a 1% impact on sales or retention would be worth. Such estimates can form powerful arguments for preserving insight initiatives. If you can find the relevant core statistics, these rough calculations don’t take long. Justifying your work in terms of its impact on the bottom line will encourage people to take you seriously. (See details of our next ‘
Commercial Thinking’ training course on 26th March 2009 for guidance, encouragement and practice.)
Summarise
Produce a colour-coded summary of your budget. List your key projects and other areas of expenditure. Make columns for the scale of the potential short and long term risks and opportunities. If you colour-code the potential value as high, medium or low, you can immediately see the projects that could have the greatest impact.
You can add columns for the cost of each piece of work and for the relative impact of research or analysis on each initiative. This is a great little tool for guiding any budget reviews and can be used very effectively to defend parts of your budget. You might even want to do a rough colour coding first, as it will show areas where it isn’t even worth doing the maths. Here’s an example:
