“When you set a budget, you’re taking control of your future.”

“When you set a budget, you’re taking control of your future.”

This quote really struck me when I saw it on one of the social media channels. It’s the kind of thing I’m talking to my clients about all the time. The thing people find difficult to grasp is that setting a budget is not really not about the financials at all.

Note: When I’m talking about a budget here I’m referring to looking at the next twelve months or the next financial year and planning what we expect to happen. 

Setting a budget: 


What revenue do we expect to generate and what costs do we expect to incur? And the net effect of that is what profits do we expect to make? 

This exercise forces you to ask some fundamental questions about the direction you’re heading:

  • Where are we going to? 
  • What sort of journey do we want to be on?
  • What scale of growth do we want to achieve? 
  • Where do we want that growth to be? Is it in top line revenue? Is it in gross profit? Is it in EBITDA net profit? Is it in terms of the number of clients? Is it in terms of geographies? 
  • What will our headcount be? 

And so on and so on and so on…

This level of questioning forces you to be consider your direction of travel over the next twelve months.

And this in turn – ideally – fits within a wider plan. What I would refer to as a growth plan.

The growth plan

The growth plan is typically a three-to-five-year time frame, which is far less specific in terms of numbers, but very prescriptive in terms of direction of travel. And again, referring to the list above, it’s a very similar sort of questioning but at a slightly more macro level. I often I refer to this as the pole star.

The pole star

I’ve written about the importance of a pole star – sometimes referred to as the ‘steel wire’ – that you follow. Once you have a pole star, every subsequent decision you make should ask: 

Are we heading towards that goal or is it something that’s distracting us or holding us back or taking us on a different direction? 

Determining this steel wire will allow you to make decisions far more quickly because they either are helping on the journey towards the goal or they’re not. 

A plan within a plan

So, within the growth plan time frame of three-to-five year, you would set a twelve-month budget. A budget that reflects the direction of the next 12 months, but also the broad direction that is set by the longer-term growth plan.

The specifics are then set within the budget. And what’s great about the budget is you’re being very deliberate about what you’re doing. You’re forced to think about things like:

  • What clients do we have now? 
  • Are we making the right kind of money from those clients?  
  • Are those clients profitable?
  • Is there growth potential in those clients? 
  • Are they a great partner? Are we working in a way that feels like a partnership, where there’s potential for growth?
  • Are there other bits of the organisation where we could sell other services? 
  • Do they recommend us and advocate for us? 
  • Do they refer business to us? 

There’s kind of questions about the current nature of the relationship with the client, but also what potential do they have? What more could you be selling them?

It’s not simply just a question of ‘what do we think we’ll make from them next year?’ It’s ‘where will we be generating that revenue?’ And then on the cost side of that, there’s the discussion around ‘what is it going to cost to deliver those services?’ 

We typically plan revenue first, but if we make some assumptions (and budgeting is all about assumptions) we would model what costs would be associated with that.

  • What would change if we were entering new markets? What would be the costs associated with that?
  • If we’re taking on new clients, providing new services, simply just delivering more revenue, what’s the capacity we need to deliver that?
  • How can we design that effectively so that we continue to deliver the service experience to our clients, but also that we make a profit doing it?

It begs a wider question, which is:

Do we know if we’re doing it profitably? Are we tracking the right things? 

The whole idea of setting a budget is about really being deliberate. Being in control of your business.

Designing a budget (and ensuring profitability) might mean peeling back a layer and asking:

  • Are we doing timesheets effectively? 
  • Do we do timesheets at all? 
  • Are we tracking our people’s time? 
  • Are we estimating well?
  • Do we stick to the scope of work or do we overservice? Or worse, do we over deliver all of the usual things that we would think about? 
  • Are we utilising our people in our individuals effectively and at the levels we expected? 
  • Have we set any expectation around utilisation? 

There’s masses and masses of assumptions that go to the back of setting a budget and which force us to think more clearly about our business before setting off on the journey. 

Not so simple… 

Setting a budget and achieving a plan is never something as simple as going, ‘well, here’s our target, let’s see if we can get there’.

It’s considerably less arbitrary and more deliberate than that. 

That’s why I love it. Because, the moment you start doing this exercise with any level of diligence, you start to take control of the business. 


Typically, budgeting starts about three months out from the start of the new financial year, but you can budget anytime. The point worth making here is this is not forecasting Forecasting is shorter term.

We might set a budget. Things might change. We might get new information.

A budget is a guess, so you can re forecast during a budget period, but the budget is set at the start of the year and doesn’t change. It’s our initial understanding of the direction of travel. 

If you’re in the middle of the year and you haven’t got a budget and you haven’t thought about it, then do an 18-month plan.

An 18 month plan is more useful than a six-month one, you can go through the rigour of the exercise in the way that I’ve discussed above and really get specific about what you’re thinking about, what your expectations are. You can then roll that down into your teams and what their expectations are as well. 

If anyone wants to explore this further, or has questions about how to set a budget then I’m very happy to find some time. 



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