3 Tips for 2022 Budget Planning

What are your biggest known/unknown challenges heading into 2022, and how will you account for them?

• Inflation?
• Supply Chain disruption?
• Employment?
• COVID19?
• (Fill in the Blank)?

I advise all my clients to prepare three budgets: Best Case; Worst Case; and Likely Case.

However, we have significant headwinds as we try to plan for 2022.

You are excellent at delivering your product/service. However, you may want to improve your financial skillset, and you just need a little guidance.

During my career, I have reviewed thousands of financial statements from a variety of industries and life cycles. Therefore, I would like to offer the following tips as you prepare for 2022.

Tip #1: Pricing.?Do you have price increases built into your budget??Pricing is about value, not cost.?Before you have a pricing discussion, double down on your value proposition. Inflation is happening and your margins are eroding if you don’t account for it.

Tip #2: Profit Margins. Selling more products or services may not be the answer.?Especially with the supply chain issues.?You can improve profit margins in several ways.?First, ensure your highest margin products/services are getting the most attention from your team.?Maybe it’s time you cut back or discontinue lesser margin or unprofitable products/services.?Just like a light when it’s focused can cut through steel, a laser focus on profit margins is time well spent.?Secondly, consider charging more upfront to create cash flow.?Check out my last article on Price Engineering for additional tips.?Lastly, price increases will help with profit margins, but so will complementary or add-on services.?When your customers buy from you, are they automatically offered these complementary services?

Tip #3: Strategy, Tactics, and Execution. Once you’ve built your three budget scenarios, develop 1-3 focused strategies.?Each strategy should be supported by 3-5 tactics.?However, most businesses don’t fail to build strategies and tactics.?They fail to execute to perfection.?Spend equal amounts of time and energy on all three to ensure a successful 2022.?I’d rather see an average strategy executed to perfection than a great strategy, poorly executed.?

If you would like additional information, please contact me at [email protected].

Sincerely,

Patrick