Opportunities/Challenges Planning ⟨What-If⟩

Every business has opportunities and challenges throughout the year. By understanding the impact of these, you can better guide your business to success. Having a budget in place is the first step in creating your roadmap for the year. During the year external events may change the momentum of your business or you may be presented with an opportunity to greatly enhance your businesses profitability. In this section, you can plan for new opportunities and challenges and see the impact these would have on your plan for the year. If you are satisfied with how these what-if scenarios will affect your budget you can activate them and make small adjustments to your budget throughout the year.

Each opportunity presented throughout the year can have an effect on any or all of Sales, Cost of Goods and/or Total Expenses. These will affect your budget and momentum for the year going forward. To see the effect, you will need to distribute the effect in the appropriate months for which an opportunity or challenge will be faced.

Start by describing a Momentum Event. This will help you and your financial planner understand the event and what it means to you and your business. Next provide the yearly adjustment to Sales, Cost of Goods' and/or Total Expenses. To understand how the event will affect your yearly budget, you need to decide how much of the Sales, Cost of Goods and/or Total Expenses will come from Momentum or will need to be Budgeted.

To understand how to apportion to Momentum or Budget you need to understand that when you create your budget, you are looking to increase your company's profitability through increased sales and reduced costs. Each of Sales, Cost of Goods and Total Expenses will be increased or decreased from the prior year - This is your Momentum. This momentum is not attached to any single event, this is just what you are planning for. Any event may be covered by the Momentum you defined using your budget. For example, if you have an increase to Sales for the year of $200,000; you have a +$200,000 Momentum. If an unexpected opportunity arises, you can chose to include this opportunity in the Momentum defined by your budget or you can chose to increase your budgeted sales.

Your base momentum is defined by your budget when it is first created. By seeking out new opportunities you may simply be trying to meet the goal of the budget momentum you have defined or you may be seeing an opportunity for further growth.

If an opportunity/momentum event is planned during your budget planning phase you can safely set the impact or % to Momentum at 100%. This will not increase or reduce your budget, but simply inform you as to how close to meeting your budget momentum you are.

If an opportunity/momentum event is unplanned during your budget planning phase you need to decide how much of the increase or decrease will affect your budget and how much to allocate to your momentum. For example, if you had planned on a $50,000 contract with one of your customers; all that would be added to your momentum. However, if your client decided to double their order to $100,000 then 50% of that total should be used to increase your budget for the year. You can chose to have that unexpected $50,000 increase come from your momentum and thus reduce the workload of your sales team or you can chose to have that extra $50,000 increase your sales budget for the year. The choice is yours, but be aware that you can never allocate more to momentum than you have budgeted for so if you have used all of your momentum for the year and another opportunity arises you should allocate all that extra to your budget and increase your budget for the year. If this happens you can congratulate yourself and your team for exceeding your budget!