Blog 86: As budgets are limited, how best do we manage it?
- Idea2Product2Business Team
- Aug 8, 2024
- 2 min read
Budget management is a significant challenge for product managers. Budgets and resources are limited. We need to efficiently use it for various items such as salaries, marketing and sales, infrastructure charges, tools (refer to blogs 79 to 85), new product development etc.
Thus, budget management refers to the planning and control of resources allocated to develop, produce, market, and support a product from idea to completion and beyond. Several start-ups and established firms have run into troubles due to improper budget management. Managing budgets is a tight rope that we as product managers need to tread. It is surely more complex than we think. We must be wary about uncertainty and scope creep.
As a first step, we need to fully understand our product vision (refer blog 32: why we need to articulate a good product vision?) and our product strategy (refer blog 31: product strategy connects business objectives with the product). The second step is to create a high-level product roadmap (refer blog 73: what is a product roadmap?). These two steps will help us carefully plan the budget, track the budget, optimise our resources, communicate the budget status, and then eventually improve our entire budget management process.
The book ‘The Alchemy of Growth’, says companies must simultaneously budget for three horizons. These three horizons are critical to growth.
Horizon 1: Current bread-and-butter of the firm.
· Business as Usual and serve current customers.
· Maintain current products for existing customers that generate significant profits.
· Prioritise customer satisfaction, cross-selling, upselling (refer blog 76), and churn reduction, nurturing long-term relationships.
Horizon 2: Fast-developing entrepreneurial ventures.
· Sustain innovation and attract competitor’s customers.
· Build on existing products and upgrade technology.
· Reduce switching costs with strategies like free trials, bonuses, and aggressive marketing.
Horizon 3: Ideas that will generate future profits.
· Engage with prospective customers: Allocate funds to customer orientation, product comparison, branding, and a streamlined buying process.
· Enter new market segments: Explore innovative approaches to address similar problems in new markets.
· Allocate some budget towards taking calculated risks by developing new products.
· Disruptive innovation - Invest in bold, forward-looking ideas for long-term growth.
An effective budget management process can increase the probability of delivering successful products that provide value and meet business objectives.
Jump to blog 100 to refer to the overall product management mind map.
Source:
I wish you the best for your journey. 😊