Thursday, April 05, 2001

Budgeting Made Easy

Entrepreneurial budgeting is simple: Give every program a $1 budget.

You may think I'm joking, but I'm not.

As a entrepreneur, you need every project to pay off quickly. You can't afford to take a flyer on a long-term investment, where the term may exceed your company's life expectancy.

Painful experience has taught me that "Investment" is simply a code word for, "Bend over and pull down your shorts."

I'm not saying that you can build a billion-dollar business without spending money--you can't. What I am saying, however, is that you need to make sure that any money that you do spend results in a pretty darn quick payback.

A classic example is 3M's approach to innovation. 3M allows its researchers a certain lattitude to pursue untried, unplanned, unbudgeted ideas. It's not easy, but if you can beg, borrow, or steal the resources, 3M will look the other way. In fact, this approach has resulted in some of 3M's greatest products, like Scotchguard and the Post-It Note.

Constraints breed creativity. If your team knows that it can't undertake a project unless it a) costs nothing, or b) has a payback period of one month, you people will get very creative.

You want every one of your employees to act like the cost of their projects is coming out of their own pockets--that will give those programs the best chance of success.

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