How you budget in 2023 will look much different from this year.
The goldrush is over!
You need a savvier approach to managing expenses and revenues.
This was a crazy year for both demand and inflation. As long as you didn’t get caught unawares, you did well.
My peer group clients did excellent this year (the power of a peer group!)
Next year will be different. Are you ready?
You know what they say on Wall Street, “Past results are no guarantee of future performance.”
As I sat down this weekend to plan for my upcoming Financial Master Class, I put together five forward-thinking approaches you can use right now as you plan for 2023.
(Note: You have 1.5 more days left to get early bird tickets for the Masterclass.)
1. Keep a fluid approach to cost adjustments
You can’t just plug costs into your budget and hit cruise control.
You have to watch costs on-goingly. Be prepared to change cost assumptions monthly, or every other month, or at most every quarter.
Stay ahead of the cost wave.
Delegate responsibilities for tracking and updating costs into your estimating tools. This will allow for better purchasing and negotiating as well.
(If you are understaffed, use overseas freelancers to do this.)
2. Use value-based pricing.
You can’t just push up prices non-stop. Clients will balk, in fact they already are!
However, when you do raise prices, you should be raising value concurrently.
To do this you must understand how clients perceive your value.
Make no assumptions.
Engage clients in conversations about their needs and wants. Listen for their pain points and what they appreciate about your services.
What they wanted earlier may be different now.
Be ready to tweak your products/service so your offering is on point.
Ironically, just by engaging more with your clients, you will raise value in their eyes.
3. Ask your team to get L-E-A-N
Even if you can pass on costs adjustments, your profits will stagnate or go backwards in “real economic” terms. You need to do more.
Putt your teams on notice.
Fight for Efficiency
Inform your people that the boom is over, and they have to now fight for cost and time savings in every nook and cranny.
Make this your mantra in 2023.
Support them with accurate and exacting monthly budgets. Hold every manager accountable (includingyour mechanics) to their monthly budget.
This requires more proactivity from your team:
- How they plan for their expenses
- How they set up complex install
Ask your team to start planning a month ahead on both.
Restrict excess cash
Put your team on notice that the company needs to operate with less cash going forward.
Put a cap on the amount of cash you keep in the business accounts.
Tighten up your contract terms and your systems for collections and warranty prevention and management.
Ensure your sales team has accurate monthly sales goals and is accountable weekly.
Remove any residual complacency on your team.
4. Maintain a backlog and whitespace
Fortify pricing pressure by maintaining a backlog, yet also leave room (whitespace) for opportunistic sales.
It’s easy to say, harder to do. Here are four tips.
- Be more strategic in what you grow, don’t over extend yourself.
- Flex your capacity between your divisions, use all your people to address peak needs without over hiring.
- Use more OT to manage peak demands as well.
- Grow sales to existing clients. You hardly had time last year; this year become experts at upselling and cross selling.
5. Don’t forget to recover replacement costs.
Savvy budgeters recover all their equipment replacement costs in their pricing.
But what happens when the replacement costs goes up dramatically? You are already late if you didn’t catch this over the past couple years.
How do you make sure you can afford to replace your equipment?
YOUR CHALLENGE: Remove complacency when building next year’s plans.
Use data and convictions when setting up your strategies and operational tactics for 2023.
Make efficiency your watch word.
Engage your team and engage your clients. The more they are engaged and on board, the better chances of winning in 2023.
Regards, Jeffrey Scott!
P.S. Join us for our Financial Master Class where we will explore “budgeting and planning in inflationary and deflationary times.”
Save $250 per ticket with the early bird – it ends tomorrow!
