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Good News: Your Budget Is Probably Too Pessimistic

Did you create your budget in gloomier days? Be aware there's new reason for optimism -- and for making mid-year tweaks to your budget.
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A few phantom green shoots a couple of years back aside, it’s been a long time since entrepreneurs had much in the way of positive economic news to celebrate. But while it’s still not exactly boom times, author and business expert Ram Charan may have finally located a reason to feel cheery.

What is it? Turns out many businesses’ budgets for this year are too pessimistic, he writes on the HBR Blog Network.

"There are plenty of reasons to be optimistic about the economic outlook for the next five years. The shifting energy equation, for example, sets the stage for growth. Shale gas will allow the US to be energy independent, create an export industry, and reduce energy costs. Lower costs are already making some industrial sectors more competitive," he argues, noting with near heroic levels of positive thinking that "even gridlock in Washington has not stopped the economy from progressing."

Which isn’t to say everything is 100 percent hunky dorey. Europe outside of Germany is still obviously a mess and certain industries (sorry Australian commodity producers) aren’t sharing in the cheer. But unless you’re a copper exporter located Down Under, Charan encourages you to let yourself crack a smile and take a fresh look at your 2013 projections in a more optimistic mood.

"If your budget was created for economic headwinds, then now is the time to revisit your assumptions," he writes. So what might you change in your budget halfway through the year if things are looking up? The post lays out eight possibilities to consider, including: 

Reset your goals and KPIs. You may have to make some upward revisions as the economic picture changes. Lack of ambition allows mediocre performance.

Set funds aside for growth. Even as you loosen the purse strings, keep some money on hand to invest in marketing or advertising as the market turns. You don't have to spend it ahead of time but be ready to pounce and outspend competitors segment by segment as consumption rebounds.

Rethink outsourcing. Market growth has shifted to the US, and change happens faster than ever requiring smooth coordination. It may be wise now to source domestically or to bring some functions back in-house. Being close to the market, you'll be able to move faster and also protect your intellectual property.

If you’re convinced that Charan isn’t premature in his slightly sunnier projections then check out the post for the rest of his points to reconsider.

Are you more optimistic about the business climate than you were in 2012?

Last updated: Jul 1, 2013

JESSICA STILLMAN | Columnist

Jessica Stillman is a freelance writer based in London with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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