When you work at a large company, every year the middle managers go through an arduous budgeting process. It’s a very important component of managing at a big company — you need to justify your future quarterly expenditures and try to predict all of the things that you want to do in the coming year. My boss at Adobe was brilliant at the budgeting process. His creative brain and analytical thinking always enabled us to have big budgets to do lots of different projects. He was great at getting the money, and we always found a way to spend whatever was allocated to us for the year. Often, we would have to spend a lot of money at the end of the year. That way, we could justify asking for the same amount (or more) for the coming fiscal year.
At a start-up, it’s a lot different. Rather than think about what we trying to accomplish in the next year, we focus on what we’re trying to accomplish in the next quarter. We don’t have to “ask” anyone for budget money because I control all of the spending in the company. And while we have broad pro forma spreadsheets, we can quickly make decisions to re-allocate funding to a new project.
Let me provide you with an example of how this plays out at a start-up. You may have heard that Punchbowl is hosting an big event this week called “Punchbowl Mixer” (quick aside: there are a few spots left, so RSVP now if you want to attend). Our Marketing Manager is handling all logistics and purchasing for the event. Before Punchbowl, she worked at a university. Like most big businesses, this university has annual budgets and each department is allocated a percentage of the funds. As she’s been planning for Punchbowl Mixer, she’s wondered aloud a few times, “what’s the budget?” She logically wants to know how much money she can spend for the event.
My response to her has always been “spend as little as you can.” I’ve asked her to think in “start-up mode” and look for creative ways to put on this event for as little as possible. She’s done a great job — not only do we have co-sponsors for the event, but we are borrowing tables and screens for free. We’re hosting a huge event and it’s going to appear that we spent a lot more money that we actually did.
While it’s true that the event expenses will come from a line item in our pro forma budget called “Brand Marketing,” in a start-up we don’t think about how much money we have that we could spend. Instead, we think creatively about the most cost-effective ways to spend the least amount of money. We continually make judgement calls about whether or not the expenditure is “worth it.” We think about every dollar we spend, and assume that we may not have the money in the future. We act like it’s our own money that we’re spending, and are thoughtful about each expenditure. And you know what? We’re still able to host an awesome event.
Big companies have line-item budgets, and managers often optimize their spending to meet the budget. Start-ups don’t need these kinds of budgets. Instead, be thoughtful about each expenditure and handle the money like it’s your own. You’ll spend a lot less money.
November 8, 2010
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