Who wants to talk about the line items in their budget?

Impressive – you’ve made it this far. I’m sure the excitement of budget line items brought you here.

This means either you are looking for tips on optimizing costs and investing in the right parts of the business or you are bored and thought the article had an awesome graphic (it does).

In speaking with Finance Leaders that are planning for 2019, the most challenging part about budgeting and planning season is that FEELING.

You know the feeling that makes you want to replicate your approach from the previous year because it got the job done but you know deep down you can’t, because it wasn’t that great.

It was time consuming. It took your team more than 3 months and 6 budget iterations (rounding down) to get the budget approved and finalized last year.

Oh and the company missed its growth targets.

Internally, HR needs a new Applicant Tracking system.

It’s been a request for 3 years - luckily Jackson your CHRO takes rejection well.

IT has been meeting with different companies in an effort to reduce your cloud hosting costs.

Their budget is always growing but they are so crucial in helping the business move forward.

You are also growing the Product team again, but only a few of them even come into the office.

Why do they have desks here again?

That unused space is an expense that you wish you could cut but your building management team said they gave you a great deal on the space and you don’t want to cut back, or seem like you are cutting back.

Add that to the fact that the competition in your market is growing quickly too.

How'd those two new organizations grow and capture so much market share?

Did they invest heavy in marketing?

Did they upgrade their systems to automate internal processes?

Preparing the budget seems like a daunting task because is so crucial to how the business moves forward. It ties Corporate Planning with Spend and Performance.

McKinsey shared an article on how important it is to “Optimize Costs” and “Maximize Your Investments” across the board.

Obviously that’s true, but where do YOU begin?

Apples to Apples

How many of you utilize benchmarking to assess your resource allocation across the business?

There are a few professional associations that provide SG&A benchmarking data to their members. There are some that are specific to an industry as well.

But benchmarking is challenging because each company is so unique. Your Company is unique.

Sure, you have a software offering but you are based in Michigan and offer consulting services as well.

Who else works with companies like mine?

What about benchmarking with the big organizations such as Deloitte, PwC, and Hackett Group?

That’s a big investment but probably worth it. How many people have ever complained about receiving insight from Deloitte?

Before you engage consulting firms that certainly won't want to stop at just the benchmarking, assess what you want to gain from an exercise like this.

Being able to benchmark your spend and headcount across all lines of business (Finance, HR, IT, Marketing, Sales, R&D, Legal, Procurement, Real Estate and Strategy) will help you understand where your peers are investing as they grow and is an important investment for your business.

Really good benchmarking companies will also look at technology spend and other expenses associated with each line of business.

Now finding your “Peers” is the challenge.

When you benchmark, your peers shouldn’t be just those in your industry. Things such as Revenue, Employee Headcount, Legal Entities, Business Units, Global Locations and more should also be taken into account.

So, if there is a company that keeps calling you about SG&A benchmarking, ask them first what your peer group would look like. Don’t let them get away with just saying “Companies in your Industry”.

What about the other line items?

So you completed the SG&A Benchmarking exercise and now that you have visibility into how other companies spend across the business, what other areas can you find savings? 

What about the office(s) we have?

Can you benchmark Corporate Real Estate like SG&A?

A recent report by Gartner stated that 77% of potential savings are found in service-related areas such as Security, Janitorial, Repair & Maintenance, and Parking to name a few.

But those are a lot of line items to comb through. Remember, we don’t want to add any extra effort here. 

Another plug for benchmarking.

"What a business needs most for its decisions — especially its strategic ones — are data about what goes on outside it. Only outside a business are there results, opportunities and threats.” — Peter Drucker

Real Estate Benchmarking, like SG&A, can give you a better view of the areas that your company may be overinvested or an understanding of how other companies are utilizing their space.

Benchmarking your Real Estate costs will not only help for the 2019 budget but it will help you forecast for the future on things such as workplace utilization, space needs, and conference room sizes.

Taking the time to maximize your Real Estate investment will also drive up employee engagement.

Jackson in HR will appreciate that.

If you are worrying about the time investment, DON'T.

Companies that offering benchmarking do a lot of the lifting on their end and it typically only takes the time of filing out a survey with them.

And then…

You’ve got your 2019 baseline figured out, and now you can spend your time discussing resource allocation.

While only the beginning, these benchmarks will help you have more meaningful conversations with other business partners and ensure you are tying budget to performance metrics.

I must warn you, once you get a baseline for your business costs, it’s almost guaranteed that you will want to know more. 

What about my Finance team’s performance?

I wonder if I can benchmark that.

Do I want to know that?