In today’s entry of The Daily Drucker, Peter Drucker explains the need for two budgets and the difference between them.
The first budget is the operating budget. That budget is addressed by asking “What is the minimum amount we need to spend to keep operations going?”.
The second budget is what he calls the future budget. This budget is addressed by asking “What is the maximum funding these new activities require to produce optimal results?”.
According to Drucker, the operating budget should be adjusted downward when times are poor, while the future budget should be maintained in good times or in bad – unless things are so bad that spending the funds threatens the survival of the company.
Have you ever thought of your marketing budget in these terms? Do you know what you have to budget to keep your business or practice running “as is”? Many of us have this sort of operating budget.
Do you have a budget for the future? Are you prepared to spend it, even when times slow down? I find that many business owners understand intellectually the importance of marketing when things are slow, but when it comes time to write the check, marketing expenditures are easily postponed.
When I first read this idea about the future budget, it reminded me of the phrase “pay yourself first” that we use when talking about saving – the idea of investing now for the future.
What do you think? Do you think you can use this “future budget” in your business?
