We're about to head into budget season, the point in the year where everyone starts projecting what they're going to do next year.
As you go about setting your own budgets, consider a few words of caution: Don't be a hero.
What I mean by this is that we all share an intrinsic desire to set high goals for ourselves in business. It's our nature as entrepreneurs and business people to have high expectations of what we can accomplish. But if you get carried away in setting your budget too high and tell everyone how great you're going to do, you might be setting yourself up for a lot of unnecessary stress and even failure down the road. Instead of a hero, you'll look like a bum.
Think about what happens with public companies and their relationship with Wall Street analysts. The analysts set targets and projections based on research and conversations with the company itself. Smart companies engage with these analysts as a way to help ensure that the projections seem fair and attainable. We're talking about a 70-80 percent chance they will hit those numbers, versus something far more risky, like a 50/50 chance.
Why? Because any time a public company's performance falls short of the analysts' expectations, their stock price takes a beating--and people lose their jobs.
Just because you don't run a public company doesn't mean you can't apply this same lesson to your own budgeting process.
Early in my career, I learned this lesson the hard way. Whenever I set my budgets, I wanted to be a hero in front of my peers and bosses, so I put our projections way out there, to show how much we were going to kill it. The budget meetings were awesome, with everyone excited about putting up big numbers and having a record year.
But then we came up just short--like 1 percent below our plan. The good news was we had accomplished great things by growing the company. But no one wanted to talk about that, especially my bosses. All they focused on was that we had missed our plan. I was a bum.
In this case, I had disappointed my executive team, sucked the energy out of the business and caused people to miss bonuses. But this lesson is even more powerful when it comes to making your goals for your financial partners. If you miss a projection with a bank, you face the very real threat that they could call your loan--which forces you to pay back the money you owe them while trying to find another lender at a time when you're missing your numbers. That's bad news all the way around.
On the other hand, I work with an executive who is a master at setting achievable budgets, who induces just the right amount of doubt on critical programs and revenue generation. As the year develops, many of those risky programs that were doomed to depart start turning into revenue and good customers -- making his budget. What's funny is, he pulls basically this same move every budget season, yet he's developed a reputation as someone that always delivers.
The lesson learned is that if you set more realistic goals--those that you are at least 70 to 80 percent certain you can hit--you vastly increase the chances you will be seen as a hero at the end of the year. Better to be a hero at bonus time than at budget time.
There will always be pressure from those who say you're sandbagging or not being aggressive enough, because you seem to be setting your goals too low. Do your best to tune those voices out. If you can overdeliver on what you promise, you'll completely change the conversation at the end of the year from a negative into a positive. Most smart senior leaders want people to meet or exceed budget on a regular basis.
This also changes the momentum inside the business. People feel the energy of winning, as opposed to thinking they somehow lost. And the smiles at bonus time will tell you that you made the right decision.
So, if you want to build growth in 2019, set highly achievable goals, then go out and crush them.