It's that time of the year again - budgeting. <apply thumb to windpipe of nearest exec and make them commit to ridic numbers>

*groan* *whimper* *gag*

Budgeting in a venture-backed company is a little different than an owner-funded one. In an owner-funded company, you make some expenditure decisions based on two things: areas of the business that need investment (scale, R&D, etc.) and sales/marketing risk-expenditures in areas you think have growth potential. It's a pretty simple process. No BS. And these are generally "game day" decisions; you don't spend a lot of time looking 2, 4 or 8 quarters out. Not with payroll to make this week.

But in a venture backed company it's totally different. Most of your budgeting is based on massive growth predictions. Your investors expect you to deliver outsized performance to deliver outsized returns to their investors. And, of course, most VCs invest in disruptive companies with the potential to do just that.

So at budget time, you have to commit to these numbers with an air of confidence even though you have no idea if or how you're going to get there. And, of course, you have to build a very formal budget based on those ASSumptions. It all looks very neat on paper -- a big bottom's up model fed by appropriate input drivers and reasonable cost modeling, built up and then back down to each department.

Only its all BS.

Why exactly is it bovine excrement? Well, for starters, there is no way anybody knows if they are really going to grow annually by 25%, 50%, much less 200% in a year. Sure, one can predict modest growth with modest accuracy. But, reliably predicting venture-desired astronomogrowth requires a heady mix of hyperbole, cognitive dissonance, and a pressure-based stool sample. Goes great on a bed of basmati with a Santa Barbara red, btw.

That's all the "how big we will grow to part". But this takes for granted the "how the hell we are going to do it" part. Its true that, for a short time and for a select, fortunate group of companies, they can J-curve a single product in a single market (Google is still doing this, $10b later...), but most companies and markets are more complicated than that. And then you know, those pesky competitors keep "helping" you throw last year's plan into the compost heap. So the reality is usually way more complicated than the plan.

Let's cut to the chase -- nobody knows how they are going to pull off such huge growth in a single year. Sure, you know you are going to launch some new products, and of course you can wrap those in some expectations. And, yes, you understand that you are going to re-invest in other areas of the business, and, well, of course you can make some geustimates about what that might yield. But, the problem lies in the accuracy. See, once you keep stacking all of these "ifs" on top of each other, each replete with their own armada of assumptions, you end up with what I call the "stackable ifs" problem. Translation: you have no forking clue.

Add to that today's real-time business cycle and wildly compressed development times and you can really be in the world of make believe. Its not divulging too much to tell you that, in each of the past three years, our biggest growth drivers weren't even on the roadmap at budgeting time. Combine that with that fact that Fonality's worst annual growth year in its five year history has been 45% and you can see that huge growth and the accompanying budgetary predictions of such are rarely lifting hem in the same pew.

But that doesn't stop the ball from rolling. And, lord, the time all of this takes. Meeting after meeting wading through numbers and predictions and side conversations and re-meetings and on and on and on. It all feels very real but peeeeeple come on, its really all very very grey. And, this precipitously dive-bombing economy doesn't help. Heck if Intel can't predict their revenue how the heck can I predict ours?

Now, before you think I've gone rogue, I'll have you know: I *have* been being a very good boy and I *am* having all my perfunctory BS budgeting meetings. And, yes, I have been stroking my proverbial beard and sorting through the stackable ifs. And, the more I do it, the less confident I am in the *how* part.

However, through the exercise, I have stumbled across a number of really interesting things that DO benefit my business. I have been forced to deep dive on issues like close rate, competitive analysis, internal sales automation and lead sourcing -- all of these areas have been illuminated during these extensive personal caudal appendage perusals.

Then it struck me - maybe THAT is the point! Maybe this is not so much about actually predicting the future. This is an exercise of the present. One cannot elegantly step into the future unless their back foot rests on a solid present. This digging certainly has gotten me thinking about ways to do some things better in the here and now.

Whelp, I better get back to it. I have to present this BS, err budget, to my board tomorrow. I sure hope they don't know how to use the Google or they may stumble on this blog and my expense line may, err, suddenly be reduced by a notably babbling head count. o.O