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Budget Management for High-Performance Programs

Josh Bullock
Aug 4, 2021

“I get ideas about what’s essential when packing my suitcase.” -Diane von Furstenberg

As a strength and conditioning coach, just as for a fashion mogul like Diane, preparing for an extended road trip (Part 1, Part 2, and Part 3) with your team requires provision and foresight. Before boarding the bus or taking flight, as coaches, we ensure our athletes are adequately prepared for competition. In addition to preparing our athletes, we consider all possible logistical impediments to performance ahead of the team’s departure.

I have traveled abundantly for training and competition over the past four years and have spent literal weeks packing and repacking my bags. After packing for a recent road trip, I realized how conceptually similar planning for a road trip was to developing my annual operating budget as a program director.

When I pack for a long road trip, here are the things I consider:

  • The travel period - the actual process of transit. 
  • The duration of the trip - the sum of all stops and days spent on the road.
  • Training equipment needed - the training time, training space, and equipment I need to bring to ensure my athletes are developing.
  • The equipment available - the equipment that will be present at the training or competition site and, more broadly, the anticipated adaptations of the individual athletes.

Just as you plan for training and pack your bag, so do you allocate your funding. 

The image below displays an analogous representation of these considerations, converting travel terminology to budgeting terminology:

What is a Budget?

What, then, is a budget, if not simply a plan or packing list? In business, “...a budget is a translation of strategic plans into measurable quantities that express the expected resources required and anticipated returns over time” (Manager's Tool Kit: The 13 Skills Managers Need To Succeed., 2004, 219). In other words, it’s a numerical action plan, and much like our plans for a road trip or training, it’s a flexible tool for budget managers to use to achieve a strategic goal. 

There are many types of budgets in business, including (8 Budget Types for Business, 2019):

  • Master
  • Financial
  • Operational
  • Cash
  • Labor
  • Capital
  • Strategic Plan

For this article, we will cover just two: operational and capital budgets. 

Budget Formulation

Operational and capital budgets are most commonly affiliated with the strength and conditioning program, and it’s essential to understand the difference between the two before we descend into the formulation and philosophical approaches. 

Operational Budgets:

An operating budget supports the day-to-day operations of the program. This budget estimates revenue and expenditures for a certain period, commonly, one year also known as a fiscal year. Think of this like your program’s checking account. It’s important to note that these funds are typically “use it or lose it,” meaning they do not carry over the next fiscal year. Instead, any unused funds are reallocated to other programs in the athletic department.  

Capital Budgets:

A capital budget is how programs plan to purchase significant assets such as equipment or a new building. Think of this like your program’s savings account. These funds are typically capital campaign or donor dollars, and they roll over each year as you accrue sufficient funds for a major project within your program. 

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To make budget formulation as efficient and timely as possible, here are five general steps to consider. Be aware that what follows is non-specific, and your institution will likely have systems in place for the different budget types mentioned above. 

Step 1:

Calculate your expected revenue or the money that comes into your program. Luckily, in strength and conditioning, this is pretty easy to do and generally predictable. Some of the familiar sources of revenue in my programs have included:

  • College or University Annual Allocations 
  • College or University Budget Enhancements 
  • Federal Work Award 
  • NCAA or Other Grant Awards
  • Sponsorship Dollars
  • Capital Campaign or Donation Dollars
  • Retail Sales
  • Memberships

Step 2: 

Step two includes two parts. First, calculate the expected cost of the goods you sell or provide. In strength and conditioning programs, this probably means:

  • Foods and beverages 
  • Supplements
  • Equipment Sales 
  • T-Shirts (The underground currency of the program!)

Remember to include both the cost of the raw materials and the labor to assemble and distribute, if applicable. 

Second, calculate any other fixed costs that your budget will be responsible for covering. These will include things like:

  • FTE  and PTE salaries
  • Independent Contractors wages
  • Student-Employee work award earnings
  • Equipment leases or payments
  • Software and other subscriptions (technology, literature, cable, radio, etc.)
  • Insurance
  • Some utilities

Step 3:

Calculate any other expected variable costs. Some examples include innovative projects, research, design, recruiting, distribution of information, office supplies, and administrative expenses. 

Step 4:

Calculate the expected operating income. Operating income is an accounting figure that measures the amount of profit realized (if applicable) from a business's operations after deducting operating expenses (Wren, 2005). To calculate the expected operating income, simply take the difference between the expected revenue and anticipated costs.

In my experience, this requires the appropriate distribution of funding between our operational and capital budgets. First, since the goal of your program isn’t to turn a profit, your annual operating income in your operational budget needs to be balanced to zero. Every penny that comes into the program leaves the program during the fiscal year. Again, any unused money would be forfeited and wouldn’t roll over to the next fiscal year.

Alternative to your operational budget, revenue generated from a capital campaign or donor dollars will likely be allocated to a separate budget, the capital budget. Again, money in this account would “rollover” to the next fiscal year allowing you to accrue sufficient funds to make a sizable purchase, tackle a particular project, or cover unexpected expenses. 

Step 5:

Develop alternative scenarios. Alternative scenarios are the iterative rainy day process, the metaphorical rain poncho that needs to be packed. 

Ask yourself questions such as:

  • What if I lose a coach or coaches?
  • What if our facility closes for some reason?
  • What if we lose a grant or grant position?
  • How might a _________ scenario affect sponsors or donors?
  • How will a change in one area alter our desired outcome?
  • How can we incorporate financial risks into our budget?

For example, if you decide to invest in innovative projects, how might that affect your ability to provide much-needed bonuses or salary increases to your coaches? But, on the other hand, can you be successful without the completion of the project?

Build funding for alternative scenarios into a unique line item or a cushion (slack) into each line item. Then, if rainy day events fail to occur, GREAT! Simply reallocate your funding to address other program or personnel needs. 

Philosophical Approach

As there are many types of budgets, there are also many philosophical systems geared toward formulating an annual budget. Discussed here are zero-based, incremental, and Kaizen. 

Zero-Based

My preferred approach to developing and managing a high-performance operational budget is zero-based, participatory budgeting. Zero-based budgeting is constructed upon the idea that each budget is developed from the ground up as though it was prepared the first time, or “each year we start from zero” (Manager's Tool Kit: The 13 Skills Managers Need To Succeed., 2004). In my program, at the end of each fiscal year and quadrennial (four-year period), a critical review is conducted of every line item and expenditure.

This approach forces me to consider goals, strategies, and alternatives with every decision back-checked to our program’s core values and behaviors. I also value making the budget formulation process participatory, in which my entire staff is welcome but not required to participate. Participation in the budget process aligns with my values-based approach to staff development

Incremental

An alternative to zero-based budgeting is incremental budgeting. Philosophically, incremental budgeting is based on the idea that a new budget can best be developed by making only some marginal changes to the current budget. In other words, with incremental budgeting, the current budget is used as a base to which incremental assumptions are added or subtracted from the base amounts to determine new budget amounts (Corporate Finance Institute, 2021). 

Kaizen

The final philosophical approach to budget formulation that we will focus on is that of Kaizen. Kaizen is a Japanese term that roughly translates to “continuous improvement” (Manager's Tool Kit: The 13 Skills Managers Need To Succeed., 204). Unlike the philosophical approaches above, the Kaizen approach to budget formulation does not define success as adherence to the budget. Instead, Kaizen budgeting is characterized by an effort for continuous product or service improvement while reducing costs over time. Kaizen budgeting requires management to set goals based on plans for process and operational improvements rather than creating budgets based on the existing cost structure (Accounting Tools, 2021). 

A simple example of these contrasting philosophical approaches might look like this:

In each of the cases below, assume we are spending $6,000 annually for a strength and conditioning software platform with an expected increase of 5% ($300) each year. 

Using zero-based budgeting, our annual rebuild of the budget, we might follow this process:

  • Analyze historical spending over the past three years.
  • Calculate the impact and return on investment of our software selection. 
  • Question why we are paying an increased rate. 
  • Research alternatives. 
  • Formulate a decision meeting the immediate and long-term needs of the program.
  • At this point, you may want to switch to TeamBuildr 😎

Using incremental budgeting, we use the historical data and our expectations for the future to develop our budget. Therefore, the following year we would expect to pay $6,300 for our software platform. The exact process would follow for every expenditure or line item in our budget as the expected cost increases or decreases, and our revenue does the same.

Finally, using Kaizen, we might try to negotiate our price point or cut costs associated with operating the platform, such as purchasing smaller replacement tablets while at the same time improving performance outputs or logistics. I find this approach useful as a quadrennial audit. Still, I don’t love this approach annually for strength and conditioning budgeting due to the diminishing rate of budgeting cost reduction over time. 

On a relevant note, I love using Kaizen to audit my programming methodologies! This process poses an excellent question for coaches. What can I take out and get an equal or better return on the physical investment? 

I hope that the next time you are packing your metaphorical suitcase, you, like your athletes, are more prepared to meet the challenge ahead. There is no universal budget, just as there is no universal packing list. In the spirit of the always fashionable Diane von Furstenberg, when you are “packing”, get ideas about what is essential to your budget. The philosophical process you choose to deploy needs to reflect the program’s mission, vision, values, beliefs, and essential behaviors. 

Happy packing and safe travels!

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Bibliography

Accounting Tools. (2021, April 14). Kaizen Budgeting Definition. AccountingTools: Accounting CPE Courses and Books. Retrieved 6 20, 2021, from https://www.accountingtools.com/articles/what-is-kaizen-budgeting.html

Bates, M. (2008). Health Fitness Management (2nd ed.). Human Kinetics. 6/20/21

Corporate Finance Institute. (2021, 6 20). Incremental Budgeting: A Budgeting Method that Makes Only a Few Marginal Changes to the Current Budget. Incremental Budgeting. https://corporatefinanceinstitute.com/resources/knowledge/finance/incremental-budgeting/

Manager's Tool Kit: The 13 Skills Managers Need To Succeed. (Harvard Business Essentials, Compiler). (2004). Harvard Business School Press. 6/20/21

U.S. News. (2019, 1 10). U.S. News: Money. Retrieved 6 20, 2021, from https://money.usnews.com/money/personal-finance/saving-and-budgeting/articles/8-budget-types-for-businesses

Wren, D. A. (2005). A History of Management Thought (5th ed.). John Wiley & Sons, Inc. 6/20/21

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