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How not to budget, Republican-style

This is not a political blog, but politics teaches us some profound business lessons and, besides which, we have a whip-smart author cooking up a book in the Shoestring Venture series on the subject of shoestring and bootstrap venture budgeting.

This morning, the House Republicans released their budget alternative and, in their infinite wisdom, decided to skip the numbers part. You know, dollars coming in and dollars going out? I would normally let this special Dada moment pass by without comment, but I’ve seen this faex way too many times on the small biz, entrepreneur, and solopreneur circuit.

Here is GOP-leaning Mike Viqueira on MSNBC explaining the House GOP budget:

John Boehner hold up this budget book here and said now we have a plan here is our budget. What it is is, it is a plan in the broad sense of the term. It outlines what the President wants to do in the various policies areas like energy and healthcare and entitlement reform and things of that nature and it talks about what Republicans want to do in very broad terms. It does not have, in the sense of a traditional budget, numbers with estimates, an estimate for how much they would reduce the deficit things of that nature.

One thing is very clear: the party of new ideas is manifestly not in the throes of a new idea here. But here’s the thing: this Republican “budget” looks suspiciously like hundreds of “budgets” I’ve encountered in my consulting and business journes. Chances are, if you’re a small business owner or solopreneur, you’re “budgeting” in pretty much the same ass-in-the-air way . . . sans numbers. Or sans real numbers. So before you start throwing partisan rocks, it may be a good time to think about what budgeting really is.

Budgets are about two things: first, they are genuine, numerically rigorous plans for operating an ongoing endeavor. They are realistic projections of dollars coming in and dollars going out. Second, they are operational and strategic goalposts. They signal how a company’s (or government’s) operations will use money most efficiently to produce the best results (for this reason, I’m a pound-the-pulpit believer in kaizen, or “continuous improvement,” budgeting). They are never mere exercises, but the keystone in realizing an organization’s or business’s overall goals.

There is never such a thing as a “budget plan.” Something is either a “plan” or a “budget.” The difference is this: a “budget” makes a “plan” real. Mr. Budget introduces Mr. Plan to Mr. Reality, makes them shake hands, and play nicely together. “Plans” say things like, “that way using this car to that place.” “Budgets” say things like, “take this road, turn left, watch out for heavy traffic if you hit the freeway after 4 PM, there’s a gas station selling cheap fuel at mile marker 123, last year we took the Fillmore exit, but this year taking the Coltrane exit would be better, yadda yadda yadda.” Only it does all this in dollars and cents.

Many lifetimes ago, I served for one year on the Chair’s Advisory Committee of the Stanford English department when the university began its first round of Spartan budget cuts. The department chair presented to us, his “advisors,” a new departmental budget conforming to the university’s cost-cutting goals. And the old codger had met the budget targets without drawing any blood. There was the new budget total, well within the target, and the department didn’t have to give up anything! He had even increased parts of the budget! Life was, indeed, good in this new world of budget cuts.

So I fired up my calculator and actually added the budget numbers up, troublemaker that I am. Not only did they sum much higher than the budget total, they were off by a country mile. When I pointed out this unfortunate but immovable mathematical obstacle, a tableful of building-sized intellects with PhDs from Harvard and Yale and Oxford told me that it didn’t matter. Yes, that’s right. Six of the brightest people on the planet said that the numbers above the total line didn’t actually have to add up to the sum below the total line. Yeah, it was the English department, but even in my most liberally artsy of liberal arts moments, I think I had a pretty good handle on the rigors of addition.

When the budget was submitted to the Dean, it turns out, mirabile dictu, that I was right and people infinitely smarter than me were wrong. The Dean, the old whoreson, expected the numbers above the total line to actually add up to the sum total below the line. Thanks for the sour persimmons, cousin!

That’s the problem with the Republican budget and the budgeting “plans” most businesses use. The wonderful thing about numbers is that they’re testable and verifiable (“You say that a sales staff of 12 will cost $200,000 this year? On what planet?”) and that they add up, or they don’t. The best budgets, the ones that produce real results, have the stubborn and immovable tenacity of reality itself. The “it doesn’t matter” attitude is fine for planning, wishful thinking, and political posturing, but a budget it does not make.

I’ll only take a business or a Republican seriously when I see the numbers. I don’t do wishes. You see, if wishes were horses, well, that’s a lot of manure to muck up.

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