Budgets. The mere mention of them can cause entire departments to suddenly come down with the flu. It can sometimes feel like we are on one endless budget cycle—one that starts 6 months in advance (hey, we need a draft lots of folks can provide input on), goes through 900,000 revisions and scenarios, and then at some point, leads into potentially monthly reforecasts when cash flow doesn’t line up to within 3% of initial forecast… No wonder everyone gets so sick!
Many of us may be in budget season as we speak. It’s now almost the exception to the rule that someone actually lives on a calendar year. Trying to keep track of clients’ fiscal years can be a fun mental exercise for some of us consultants to stay alert…
But I digress. The thing about budgets is that as they keep getting more complicated—integrated programs, cross-department planning, multiple vendors, hundreds of affiliates with revenue share to be accounted for, and all sorts of big unknowns like “the economy”, can make for one complicated spreadsheet (with multiple tabs mind you). And that’s just version 1, scenario 1, baseline growth rate, pilot affiliate roll up.
As we swim in the complexities, I thought it might be useful to point to some of the less complicated details that can be easy to overlook, but, when not accounted for, can make a pretty big impact to the bottom line, especially the expense side of things, that, frankly, no one wants to have to explain to the Board. If you’re going to have to build a 97 page deck, you don’t want it to be because:
- You guestimated your expected performance next year. Sure, sometimes a guestimate is all you have to work with, like when starting up a brand new program from scratch, but, that should never be your go to if you have a program with past performance indicators and are able to understand your file composition. Know your file, forecast its performance, and understand its dynamics.
This is what can provide you a realistic expectation of future performance. Ok, so maybe this first point is not a small detail, but rather key to a good budget.
- You are planning to do testing in direct mail and didn’t account for the cost. Considering throwing in a calendar with that label package you mail? Even if you only mail that to a 50,000 test panel, at the added cost of say $.50 a calendar in a test quantity, and then bigger envelopes, etc, etc, art, etc etc, did you budget that extra $25K you are going to need? The test may be totally worth it, and you could even come out with more cash in hand, but if you didn’t plan for it, you’re going to have to find that testing money somewhere….Also:
- Evaluate and plan for an overall increase in the cost of paper, etc, as necessary. The years of cut throat production prices just to stay in business seem to behind us.
- Speaking of which, if you’ve got a DM winner from last year you plan to roll out with but it’s a more expensive package, don’t forget to budget in that extra few pennies per piece
- Postage expenses: so, most of us don’t live on a calendar year, but postal costs do tend to go up annually…. Even if we stop cowering from the constant threat of an exigent rate case, if you’ve mailed anything out first class out or first class back you can mostly count on that being more expensive come January 1st. Take a look at your budget—anything going in the mail in the new year with a nice first class stamp on it? Plan for that. A million pieces at an extra $.01/per piece is an extra $10K that has to come from somewhere.
- It’s not just direct mail. Planning to send out more email? Expand your site? Do something integrate mobile? That’s great! Even better if you have the in-house talent to do so, so you’re not expecting to have to pay someone. But, have you checked if you are nearing your usage limits? Or the number of pages you get? Are you going to have to buy up? Probably a good thing to budget for before it turns out you can’t host that special content area, or email out whatever campaign. And that cool Twitter campaign, possibly using some processor who might charge a higher % than you’re used to? Don’t forget to discount that from the revenue.
- Freemiums: man, are those things expensive in test quantities. Think about your testing themes for the year ahead of time. Planning something big offline? Always consider where you could combine and test online, TM, etc. And not in a “hey, we have a bunch of X leftover lying around, why don’t we throw it in over here and see if it works” kind of way (well ok, sometimes we all do that), but wouldn’t it be great to say “hey, I could never afford to test this as part of my online sustainer acquisition budget, but since offline is ordering 10,000 of these, the vendor is willing to throw in 200 for online for free!”
- Side note: fulfillment costs for freemiums. The expense that if unplanned for, can be the bane of an otherwise successful campaign.
- Bonus tip: Always have a slush fund.Stuff happens. Opportunities come along. Or, gaps appear. Someone leaves. A crisis happens. A slush fund may be the difference in the content for that 97 page deck for the Board….