A 5 Step Framework: How to "Win" Budget for Your Department
Tricks of the trade to earn (and stash) more resources
This post is purpose written for anyone asking for budget next year. If you follow the guidelines, I am convinced you will walk away with more resources.
I’ve sat in hundreds of budgeting conversations with department leaders, and the ones who walk away with the most dollars do their homework.
Here is a five step framework for going into conversations with your CFO or FP&A team, and it can be used by all departments across the org. Think of it as your study guide, or better yet, the answers to the test.
Whether you are the SVP of Engineering or a Product Manager, understanding how to present a business case in a format the finance team can easily absorb and react to will put you on the fast track to securing budget dollars.
(And if you are an FP&A leader, you can share this with department leaders as a resource so they come correct)
Five guidelines to earn you more resources:
I. Apply staffing ratios across your headcount asks
II. Identify where your department is relative to the company’s overall lifecycle
III. Use benchmarks to determine what a best in class department looks like
IV. Forecast your team’s travel by person and activity
V. Ask for placeholders when it comes to tools and consultants
I. Apply staffing ratios across your headcount asks
There should be a clear throughline across all your headcount asks.
For most departments there’s a “core” role that the rest of the group is staffed around. In Sales, it’s the account executive - all the other resources are aligned through some ratio to the individual quota carrier. In product it tends to be the product manager, with designers and researchers (and even engineering bodies) falling into line.
Questions to ask yourself
If you’re in product, what’s the ratio between PM’s, Designers, and Researchers? Are you staffing by product line? Do you need to tie it all back to engineering headcount?
If you’re in Sales, what’s the appropriate ratio of Account Executives to System Engineers? How many Account Executives to a Business Development Representative? Does this ask change at all by Segment (SMB vs Enterprise?)
If you’re in Engineering, how many developers are staffed to the front end vs the backend?
If you’re in sales ops, how many people are responsible for reporting on behalf of each sales engine and sales geo?
Understanding this “pod” relationship will help you ask for the appropriate amount of headcount, and demonstrate rigor and logic behind your thinking.
II. Identify where your department is relative to the company’s overall lifecycle
Companies hire for different roles at different stages in their revenue lifecycles. When you are sub $10M in ARR, you over index for people who can build the product. Otherwise, you’d have nothing to sell. And as you scale through, say, $20M, you increasingly layer on Sales and Marketing resources to distribute said product.
Now, this doesn’t mean that Product and Engineering fail to grow - they just don’t grow as fast as the Go-to-Market engine. Below is a hypothetical slicing of the pie across different revenue ranges.
The inflection point where GTM resources are hired at a faster rate, and may even overtake the R&D side of the house in terms of total headcount, usually coincides with the timing of a Series B or C fundraise. This is when companies pour fuel on the S&M fire.
You’ll observe how at most startups initial sales are done by the founder and a couple of engineers, timidly pounding the phones, and selling to their other founder friends in tech. But eventually you’ll need pros to run targeted sales campaigns.
Regardless of how big a company gets, Customer Support usually reaches its “terminal velocity” at about 8-10% of the org. The same range applies to G&A, give or take a couple of percentage points. However, be aware that CS and G&A may temporarily get out of whack during periods of “building” when the company is trying to get the foundational core support functions in place. So don’t fret.
Questions to ask yourself:
Has your company found “Product Market Fit” yet?
Has the CEO or CFO talked about where you will be prioritizing “investments” in the company?
Are there any parts of the org that look out of whack, and are bound to change?
Be real about where your company is in it’s lifecycle. The org can only have big arms and skinny legs for so long.
