![\"\"](\"https:\/\/i2.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2020\/03\/best-case-worst-case-assumptions.jpg?resize=690%2C488&ssl=1\")
<\/figure>\n\n\n\nBest and worst-case scenario<\/h2>\n\n\n\n
When you\u2019re creating a budget, you base it on a set of assumptions. You\u2019re not working with facts since it\u2019s impossible to know facts about the future. One of the biggest assumptions is that your level of growth is going to be steady during the next couple of years. If this turns out to be false, you\u2019ll end up with a budget that doesn\u2019t fit the situation you\u2019re in.<\/p>\n\n\n\n
Change the assumptions that are the basis for your budget, and develop several scenarios. The least you can do is produce the base, the best, and the worst-case scenarios<\/a>. This will give you a set of budgeting and planning options to use in case your current budget fails.<\/p>\n\n\n\n How do you plan for the best and worst-case scenarios? The easiest way you can do this without obtaining an MBA is to change the inputs. Change the number of clients you\u2019re planning to acquire in a certain time period, the average check, the lifetime value of a client, customer churn, etc.<\/p>\n\n\n\n Set these values to the maximum and to the minimum, and see what estimates you end up with. But don\u2019t set all the values in the worst-case scenario to zero and all the values in the best-case scenario to 100%. Instead, go for values that are significantly lower or higher from what you expect to see.<\/p>\n\n\n\n As another precaution, assume that the first two to six months of running a business may represent the worst-case scenario. Starting out is always extremely tough, and it takes some time to fine-tune marketing. <\/p>\n\n\n\n If you don\u2019t want to suffer shortages in cash flow, plan for this period and be sure to have a buffer in the budget.<\/p>\n\n\n\n With the growth in customers, comes growth in resources you need to use to produce your products. You have to be realistic about the tempo of the latter. If you start buying more resources and hiring more people before they can add to the value, you\u2019re wasting money. If you do that too late, you risk losing clients.<\/p>\n\n\n\n To lay down a perfect budget for scaling resources, you need to have a crystal clear understanding of how many resources you need. This is significantly easier to do than figuring out how many clients you\u2019re going to have in each month of running the business, though.<\/p>\n\n\n\n Think about your company in terms of workflows. Figure out how many workflows can your team manage now, and how much the workflows are going to increase when the business starts attracting more clients.<\/p>\n\n\n\n For a typical SaaS company, the biggest change would be from allocation resources to marketing and development to switching to support. As a SaaS product starts getting more clients, marketing and development workflows may stay relatively stable for some time, but the number of people talking to support is going to grow exponentially. This warrants a staff increase.<\/p>\n\n\n\n Another major shift in resource budget is when your team gets so big you need to upscale the office space. That may need more time and money than you previously thought, and you need to put that into your budget. Also, don\u2019t forget about overhead expenses like the utility bill that will fluctuate throughout the year, and office expenses that will grow as you hire more people.<\/p>\n\n\n\n Your business may have different needs as it scales, and you have to think them through. For example, a data management tool for coursework <\/a>and other writing assignments would eventually need to upscale the server hardware to deal with the upstream of clients. A Whitelabel company would have to deal with a severe shortage of personnel as there are increasingly more clients. <\/p>\n\n\n\n Find the milestones that mark significant increases in the resources you need and plan the budget accordingly.<\/p>\n\n\n\n In the perfect world, you\u2019d be enjoying a low, flat tax that you don\u2019t need to spend hours calculating. Unfortunately, the reality is not as pretty as economists\u2019 dreams. You have to take taxes into account when budgeting.<\/p>\n\n\n\n As your revenue grows, you need to pay increasingly more taxes. The bigger the area you cover, the more sales tax licenses you need to get and pay them to different states. Then, some states don\u2019t charge a sales tax on your goods. Others charge a sales tax on delivery, so you need to take that into account.<\/p>\n\n\n\n Use free tools like SmartAsset<\/a>, hire an in-house tax expert, or use a tax attorney to estimate how your tax spending is going to grow in the future.<\/p>\n\n\n\n Marketing budgets are on the rise, especially for SaaS companies. If you\u2019re a SaaS startup, you can safely expect your marketing budget to grow faster as you progress to take a bigger share of the market.<\/p>\n\n\n\n If you run a small B2B company that only needs a couple of good clients per quarter to keep growing and you\u2019re content with that, you may not need to think about marketing that much. However, if you\u2019re a B2C company that needs thousands of people to grow, marketing costs are going to grow exponentially.<\/p>\n\n\n\n But you\u2019re not paying money for nothing. Salesforce, one of the leading CRM platforms, spends 46% of their revenue on marketing. This is the price they pay to get a 25% increase in the revenue in one year. The important thing here is that while the marketing budget grows, the cost of acquiring a lead may fall due to the brand being more and more recognizable.<\/p>\n\n\n\n When you\u2019re budgeting for marketing costs, calculate what do you need to do in terms of marketing to hit goals for each quarter and include the cost into the budget. Don\u2019t forget to budget for the best and worst-case scenarios.<\/p>\n\n\n\n If you run a company that sells physical products, it\u2019s going to be another strain on the budget. You can\u2019t predict the costs of purchasing the key resources if it\u2019s done manually. Suppliers and contractors change, so does the price. These fluctuations can sometimes be deadly for your bottom line.<\/p>\n\n\n\n Organize the procurement process<\/a> to make it uniform, less costly, and predictable. This will help you include more reliable numbers into the budget.<\/p>\n\n\n\n No company is going to grow exponentially. Even in the early stages, you\u2019re guaranteed to meet some bottlenecks that stunt your growth. The most common ones are the need to scale the processes that were previously tied to specific people, lack of people resources, and building a consistent online presence.<\/p>\n\n\n\n Don\u2019t let the common problems catch you off-guard. Plan ahead for them and adjust both your budget and your business strategy to deal with them.<\/p>\n\n\n\n The easiest way you can do that is to switch to the worst-case scenario for 2 or more weeks for each period of time you expect to see a bottleneck. <\/p>\n\n\n\n Human thinking can be too wishful to be realistic about the future. Every startup owner who leans to the creative, not orderly side of things knows that. You often get this amazing idea, but when it comes to selling it, there\u2019s much less demand than you expected.<\/p>\n\n\n\n Partnering up with a person who can control your creative side is a great idea, but If you want to make a really accurate forecast to plan your budget, you need to invest in machine learning.<\/p>\n\n\n\n It\u2019s even more profitable now that you can use Amazon AWS<\/a> for better, cheaper forecasts. You get access to machine learning for as little as $200 for a thousand of forecasts, which opens the doors for next-generation planning. Use the forecasts to predict market trends, demand for certain products, and business goals you set.<\/p>\n\n\n\n To budget for this, however, you\u2019ll not consult with an expert who can give you a better estimate of what it would cost.<\/p>\n\n\n\n Good companies plan, the best companies monitor their performance and change the plan on the go if it doesn\u2019t fit the real situation. All companies that IBM <\/a>deems performance accelerators do that, so should you.<\/p>\n\n\n\n Include analytics in your budget and don\u2019t hesitate to change your plans completely if they appear too unrealistic. It may feel awful to scrap all your plans in the middle of the operation and get back to the drawing board. But remember that improving on a plan that doesn\u2019t work is always better than continuing with it.<\/p>\n\n\n\n This is when the first step comes in handy. If you have budgeted and created business plans for multiple scenarios, you won\u2019t have to go in debt or close shop the first time you experience cashflow difficulties.<\/p>\n\n\n\n Budgeting is a guessing game that can be improved by scenario analysis, thinking ahead, and using machine learning. Invest in automation now, and you won\u2019t have to improvise to solve a crisis. You\u2019ll have a ready decision on your hands.<\/p>\n\n\n\n![\"\"](\"https:\/\/i2.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2020\/03\/scaling-resources.jpg?resize=690%2C690&ssl=1\")
<\/figure>\n\n\n\nScaling the resources correctly<\/h2>\n\n\n\n
![\"\"](\"https:\/\/i2.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2020\/03\/taxation.jpg?resize=690%2C445&ssl=1\")
<\/figure>\n\n\n\nScaling taxation<\/h2>\n\n\n\n
Expect your marketing budget to grow<\/h2>\n\n\n\n
![\"\"](\"https:\/\/i1.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2020\/03\/procurement.jpg?resize=690%2C484&ssl=1\")
<\/figure>\n\n\n\nCut costs with procurement automation<\/h2>\n\n\n\n
Plan for bottlenecks<\/h2>\n\n\n\n
![\"\"](\"https:\/\/i2.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2020\/03\/artificial-intelligence-machine-learning.jpg?resize=690%2C439&ssl=1\")
<\/figure>\n\n\n\nUse machine learning for forecasting<\/h2>\n\n\n\n
Adapt<\/h2>\n\n\n\n
![\"\"\/](\"https:\/\/lh6.googleusercontent.com\/6Ev9DDTX2COEVooZES5kp38goekBxgv5Rs-Ggn0eKNeutD-qDbsMl0dHLfG4R1H-QW3ARdtzPbvjLbrupe4IvkknIQnbN0TVWzRRJ4NIe9pqFZQF46Rf69aAC1PIbyCqbie9dBw9\")
Conclusion<\/h2>\n\n\n\n
![\"\"](\"https:\/\/i0.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2020\/04\/Alyse_Falk-2.png?resize=207%2C231&ssl=1\")
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