We believe that your business budget is one of your most valuable allies. It might sound surprising, but the process of budgeting should not be daunting or intimidating. In this episode of "I Hate Numbers," we'll explore the advantages of implementing a budget for arts and creatives.

Your Budget as a Valuable Ally

Budgets, for example, play a pivotal role in your business. They help allocate resources, monitor progress, motivate your team, and facilitate communication across departments and stakeholders.

Transforming Your Business Journey

Budgets, in fact, transform your business journey into tangible numbers, creating a robust performance system.

Budgeting for Creativity

Lessons from different sectors, such as the arts, likewise, can be adapted and applied to your business context.

The Universal Language of Finance

Additionally, finance is a universal language that offers valuable lessons for businesses, regardless of their sector.

A Traditional Approach

A traditional approach involves setting your destination point. Once we've got our destination, your budget becomes your roadmap, outlining the journey and activity plan needed to reach that destination.

Building a Financial Model

Budgeting is a financial model that simulates and represents something, a bigger landscape. To build a successful financial model, you need to understand your business model.

Understanding Your Business Model

Your business model defines your value proposition, core values, target audience, and transformation goals. That sounds odd, but your business model is not the same as a financial model.

Cost Structure

Your business model influences your cost structure, including the nature of expenses involved in delivering products or services.

The Art of Revenue Streams

Another aspect of your business model is revenue streams. So, each revenue source has its value and risks, but we need to factor them in.

Simplifying Data Management

Two tools can support you: a digital accounting system and a planning platform like Numbers Knowhow.

Conclusion

In conclusion, budgets are powerful tools. Granted, they might have their limitations, but they help control costs, provide accountability, offer direction, and motivate teams. They are not financial straitjackets but rather flexible frameworks that enable adaptability and focus.

We hope you found this post insightful. So, we'd love to hear your feedback. Do you follow a similar approach when creating your budgets? Reflect on your organization's model, and until next week's episode, keep budgeting wisely.

Your business budget is one of your best friends in your business. That might sound quite shocking and you might be thinking the very idea of budgeting, the very idea of producing a budget is something that makes your eyes water. You want to go lie down in a darkened room. That shouldn't be the case.

In this week's podcast on I Hate Numbers, I'm going to talk you through the benefits of producing a budget and actually implementing it. Some of the key thoughts and considerations that we should look at when we put a budget together. And I'm going to be looking at the world of the arts and creatives as an illustration as to how that budget process can best work.

I'll be sharing some tips also how to improve things as well.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another episode of I Hate Numbers. This is the podcast that's got a mission and that mission is to help your business, make more money, be more productive, increase your financial awareness, reduce the amount of time you're spending on needless tasks, and have the business that you aspire to.

That's got to be a pretty good start point if I say so myself. Let's crack on with the podcast. I said initially that budgets are a valuable friend, a valuable ally in your business organisation, and that's absolutely correct. They tell you where your money should be allocated, your resources, they help you in terms of controlling and monitoring your progress.

They can be motivating devices, especially if we're involving our team in helping set their targets. It's a good way to communicate what's going on in your organisation, what's going on in your business to all the different people, all the different departments, all the different stakeholders. And also it translates your business roadmap, your business journey into numbers. And numbers of the things that we can capture number of things that we can review.

And lastly, a budget is a very powerful performance system. Granted, it might have its limitations, but that's for another podcast. Now I'm a big believer in terms of budgeting. And what it can do for us, and I'm going to look inside a theatre as an illustration where we can all take lessons from that as to how we might go on preparing a budget for a creative organisation like a theatre.

If you're a private business, if you're a commercial business thinking this is of no value to me, then rethink that thought. There is a lot that we can learn from different sectors, from different organisations, we can take those lessons, we can adapt them and we can apply them to our own circumstances.

I've been fortunate in over 30 years of business, of actually working within the commercial sector, within the social enterprise sector, the art sector, working internationally and domestically. And what I find is finance is a common language that runs throughout all these different entities. And therefore there's lots of valuable lessons to learn. Even if it's not your sector, lessons are still there to be learned. Now a traditional approach that I like in budgeting is to obviously think in terms of your destination point. Where is it that you're going to want to end up in 12 months time,

perhaps, two years, three years? Your budget typically done on a 12-month cycle is your footprint going towards that end point, that end destination. Once we've got our destination, we can work backwards to figure out the activity plan, the journey plan. Just as though you're planning a route to your favourite holiday destination and you're figuring out the route to take, what you've got to pack, the pit stops that you're going to make, the currency that you need to take with you.

It's the same approach when you put a budget together for your organisation. Destination then reflects itself in a journey plan and activity plan. And then we can actually put that together with some numbers as well. Now, to add to that, a budget is a model. Now, I don't mean like models as in model aircrafts, but it's a model that simulates and represents something, a bigger landscape.

And one key element in building a successful financial model, which is essentially what a budget represents, is to make sure you understand Your business model. That sounds odd, doesn't it? A business model is not the same as a financial model. And I'm going to give you some insight into what a business model represents.

So in our fictional theatre company, let's call it the I Hate Numbers Theatre Company. What we're going to think about firstly is what's the value proposition? What is it we're trying to achieve as a theatre? What's the why that we're delivering to our end audience? What's our core value? What are we trying to give to the different audiences and different stakeholders we interact with?

Not just the people who turn up to actually watch a show, those who participate in a workshop perhaps. What is the transformation? What is the thing that we're trying to deliver to those end segments? That's going to reflect itself, obviously, in how we price things, how we deliver things, and the quality of the offer as well.

A couple of other things I want to throw into the mix on the business model. And the business model, by the way, helps us put together a successful financial model. What are the different segments? So, in our theatre, what are the different audiences? Can we describe them as individuals, based on demographics, spending power?

Are we going to use diversity and ethnicity? If one of our stated propositions is to have a diverse audience base, then obviously we've got to be able to segment and categorise our audiences accordingly. Those people who might turn up for workshops, outreach work, those who come in to sit to watch a performance will vary.

Now the segmentation is not for segmentation's sake, but just imagine yourself if you're at a networking event for example, that audience is going to be made up of people with different characteristics, different behaviors, different ways of interacting, and you'll have the same message perhaps to share with them, but you might be delivering it in a different way

depending on who the audience is, depending who that person in the room is. And that's the same with customer segmentation. Segmentation is a powerful way, not only does it shape how we communicate, but it also shapes the pricing, it shapes how we deliver value to that end consumer group. For theatre, that consumer that customer segment is typically referred to as an audience and we've got those audience demographics. And there's lots of organisations that provide great insight into looking at the composition of those audiences whether they're broken down by age, whether they're broken down by spending power, whether they’re broken down in geographical - whatever suits your segmentation the best is what you need to think in terms of. And also means we can track because budgeting is as much about monitoring what we said we're going to do.

So therefore, if we've got this idea of the segments we're delivering value to, experiences to, then it makes it easier to actually track them on our systems, not just our accounting systems, but also any management systems we have as well. Now, the business model would also generate thought process in terms of perhaps our cost structure.

What's the nature of the cost that we have in terms of delivering the work? Perhaps delivering a performance, supporting that performance, promoting that performance, doing the monitoring doing the review. We need to consider if we've got performances broken down in category. And I'm a big fan of categorisation here. Then it's easier to assign the related costs to those individual projects in those individual delivery components.

Now folks, that's just given us a small flavor of some of the things that we need to do. Just as a heads up, in next week's I Hate Numbers podcast, I'm going to be expanding the theme into what's called a business model canvas. That's a bit of a spoiler alert for next week. And we're going to expand that and apply that and see how we can use that to build a really strong robust budget, a strong financial model where we might be looking at individual components of our business.

I think the last thing I want to comment on in terms of the business model proposition and the budget connection is about revenue streams. Where does the money, where does the cash flow, where does the revenues come from for our organisation? So typically for a theatre, money coming in would come from things like grants, from donations,

from performance income, merchandising, it would come in from sponsorships. All of those have different values, all of those have different risks to them, but we need to factor in them. And we can assign revenue streams to customer segments. Notice what we're doing here, a bit of mapping. And if you're listening to this thinking, well maybe that's quite a lot.

That's quite a lot of data to track, to evaluate. Well, you've got two things that are going to support you here. Number one. your ecosystem, your digital accounting system. I'm a big fan of digital accounting where we can take the heavy lifting out of data entry, recording and capturing data. Without data, by the way, there is no information.

So a tool, a system like Xero, my personal recommendation for a number of reasons is a real powerful ecosystem that can plug into lots of different channels. We can collate and collect data from websites, from our ticketing systems, from our social media outlets, and we can connect those with the financial data.

The other thing, I'm going to give it a little bit of a plunk here, is a platform whereby we can actually do our planning, see what the outputs are. Compare that to what we're actually spending in terms of our accounting system. And a platform like Numbers Knowhow is a fantastic tool that you can tap into where you can do your planning.

But more of that on a different podcast. But check out the show notes folks and I'll give you a link in case you want to have a look and see. Now in conclusion, budgets for me, in some people's eyes, may have their restrictions, may have their limitations. But they're powerful. They help you control and monitor the cost that you're expending.

They give you some idea of where accountability lies. They give you an idea of what that future direction is, and they're not financial straitjackets. Yes, they have a parameter, they've got a framework, you know, but we overspend, we underspend, we move things to different directions, opportunities come out, but it gives us focus.

It helps us get motivation within our team and putting it together, coming up with those financial numbers that go into our budget, our financial model is essential that we have a good idea of how we do things now, our business model and how we plan to do things going forward. So folks, I hope you found this useful.

I'd love to hear your feedback. What do you think? Does any of what I've said resonate with you? Do you adopt a similar approach when you put your budgets together? And until next week, have a reflection and have a think about what's the model that your organisation has. We hope you enjoyed this episode and appreciate you taking the time to listen to the show.

We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.