It’s official. We’ve approached the most exciting time of year. The start of the 2022 financial year is just around the corner, which means…it’s budgeting time. Can I get a “hell, yeah!”? To celebrate, here are 7 tips for crafting a well-balanced, accurate budget that ensures the sustainability of your media business.
I can’t express how much I love the budgeting process. I know it’s not everyone’s favourite activity but done well it can do amazing things for your business and your future planning, which is why I’m always surprised when I speak with media businesses who don’t have a solid budgeting routine.
Budgeting can crystalise half-formed ideas, it can point you in the right direction (away from products that suck time and money), and set a blueprint for you to follow for the year ahead.
But it can be daunting. If you’re nervous about budgeting, think of it as a review process that gives you a yearly plan of activities (with numbers attached).
Here are my top tips for setting a realistic budget to build a profitable, sustainable print or digital media brand.
1. Do a SWOT analysis
Yep – that’s right – the dreaded ‘strengths, weaknesses, opportunities, threats’ review. I know it’s been done to death, but if you do a thorough, objective SWOT you can better assess how well you’re positioned to achieve your revenue targets.
A SWOT helps to identify what you do well and where you need to improve. In relation to your budget, it tells you what you should build on and leverage (your strengths) and the areas where you may need to consider more investment or upskilling (weaknesses).
The SWOT should cover all areas of your publishing business:
A no-holding-back team brainstorm full of hard truths can be the best way to complete the SWOT analysis.
2. Take a holistic approach to budgeting revenue
The budgeting process is a great opportunity to take stock of your business revenue to date. A successful budget starts with a review of your existing performance, the revenue you think you can achieve in the future, and the micro/macro factors that might impact this.
Now, 2020 was a bit of an anomaly. COVID-19’s impact on the way we do business was significant. Australia’s economy is bouncing back, but we’re not out of the weeds yet so it makes sense that you view your previous and forecast revenue performance through the prism of the coronavirus.
- How much revenue have you achieved this financial year (so far)? What were the key drivers?
- How much revenue did you achieve the previous financial year? What were the key drivers?
- Was the niche that you serve negatively or positively impacted by COVID-19? What does their recovery trajectory look like?
- Are there government grants/policies/funding that support your niche?
If COVID-19 has had a big impact on how your niche operates or behaves, think about how you might create brands or products that better serve this:
- Are there sections of your niche that are financially better off than others, or engaging with you more? How can you leverage this?
- What else can you offer to your audience and/or clients that provides the same or greater value?
- Are your advertising clients marketing their products and services differently? How can you help them achieve their goals?
- Are there greater options to increase your reader revenue?
It’s also important to take stock of how much you generated through different revenue streams and think about how this has changed over time.
- Do you need to invest or build further revenue diversification into your budget to reduce your risk of being overly reliant on one revenue source?
- If you have a declining revenue source, what do you need to do to either increase or offset this?
3. Be balanced when budgeting expenses
Understanding how much your business costs to run is extremely powerful. The budgeting process should capture all the expenses that you incur, split into fixed and variable costs.
Fixed costs are those that remain the same for your business despite how much you produce. These can include office expenses, full-time staff wages, etc.
Variable costs are those that change based on the amount you produce. For magazines, the most significant variable costs include printing and postage costs, and freelancer/contract/casual staff resourcing. Marketing can also be a significant variable expense.
To properly budget variable costs, you’ll need to source quotes from your suppliers, which means folding more future planning into your budgeting process. If we continue with our magazine budget example, this means detailing:
- The number of pages each magazine edition will be (or source a range of quote options)
- The date each magazine edition will be published (to determine when the expenses will fall)
- Any changes in paper stock
- An estimation of magazine distribution.
I always like to have an eye on further savings when considering business expenses, but it’s important to understand when a saving might negatively impact your brand (e.g. reducing your paper stock). Similarly, it’s important to understand when an expense can positively impact your revenue (marketing).
It’s a fine balance. Be careful of expense bloat, but don’t skimp on what gets you results.
4. Understand the performance of each of your media brands
If you have multiple media brands, it is useful to attribute relevant variable expenses to each brand to assess the financial contribution of each media brand. That way you can tell which brands are your top performers, and which brands need some improvement.
Your aim should be to achieve a positive contribution for each media brand. If you have a media brand that is underperforming or carries some risk, it may warrant a closer look at the brand’s strategy, including a review of the production and resourcing expenses attributed.
5. Plan new products properly before inputting them into the budget
If your SWOT analysis and initial budget planning has identified new product ideas or revenue streams for you to pursue, plan out the financial implications of launching the product in a separate spreadsheet before including the detail in your full budget.
This allows you to have a clear understanding of the costs involved in the launch and determine the contribution you can expect it to make over the coming financial year. You may want to look further into the future, and forecast the likely return the new launch will provide you over the next two to three years.
Don’t forget to include how much staff time it will take to launch your product. Ask:
- Can you launch the product with your existing resources, or do you need to hire?
- Will your other products be impacted if existing staff time is used?
6. Build in flexibility
Last year was challenging for many. A good portion of Australian publishers experienced a sudden and unpredictable dip in expected revenue and had to make some hard decisions around pausing publications or rescheduling lucrative conferences and exhibitions.
Most publishers demonstrated how agile they can be by quickly pivoting their business model or method of delivery to continue to meet their audience’s needs.
But if COVID-19 taught us anything, it’s the importance of building financial security into our businesses. So if you compile your budget and find that you aren’t budgeting to achieve a profit in the next financial year, you need to take a step back and ask why.
And you better have a really good reason to go into the red (or a flush bank account). If not, it’s back to the drawing board. Review your plans and find a place where you can deliver value to your audience and clients while maintaining a sustainable business.
7. Take notes and review your budget regularly
When compiling your budget, it’s good to take notes on why certain revenue targets have been set or why particular expenses have been budgeted. Your notes could cover:
- Media brand strategy
- External factors likely to affect your business
- Any large differences in revenue predicted compared to previous financial years – increases or decreases
- Any strategies not directly related to revenue generation that may impact your success.
These notes provide a record of the careful thinking that went into planning your budget, and you’ll be better placed to review and track your success over the course of your budget period.
Because, guess what? Budgets aren’t a set and forget process. It’s important to review your budget regularly – monthly or quarterly – and track your actual performance against your budget. This allows you to make any necessary adjustments to your expenses if you aren’t achieving your budgeted revenue targets.
Budgeting for success
Now, tell me that budgeting doesn’t sound fun!? Building an accurate budget is very fulfilling. It takes time to craft but it sets you up for success.
If you have any budgeting questions, I’m here to help. I have templates, step-by-step strategies, and can offer an objective second opinion if you are struggling with accurately forecasting your revenue targets. Or – if you just want to inject some excitement into your budgeting process – I’ll bring the enthusiasm.
Send me a line: firstname.lastname@example.org