Chapter 02

Planning a Budget & Making a Case For It


In the previous chapter, we talked about how to analyze business requirements and establish what your organization actually needs any new technology to do.

Next up, a stage in the process that almost nobody enjoys: planning a budget and, worse, making a case for that budget.

But that doesn’t have to involve pain.

In this chapter, we cover:

  • The purpose of a procurement budget
  • How to plan a procurement budget
  • What to expect when you’re making a case for your budget
  • Common budget pitfalls.

The purpose of budget planning is to connect expenditures to business objectives

Managers often assume that planning a budget is about being able to state:

“This is how much we’re spending on each activity over the next XX months.”

But that’s not the goal at all.

The primary goal is to connect every dollar you hope to spend to a specific business objective, and then explain how that expenditure is going to get you there.

Essentially, your budget should be a single document that states:

“Here’s how much money we need to spend to achieve our business objectives.”

How to connect budget items to your business objectives

To connect a budget item to a business objective, your business requirements can serve as a bridge.

Budget Requirements Business Objective

This is often easier than trying to move directly to the end game, for at least two reasons.


1. Most business objectives involve complex problems

Few technology purchases offer wholesale solutions to a business problem.

For instance, if your business objective is to increase sales, a CRM can help. However, if your organization only has one salesperson, a CRM probably won’t increase sales – but hiring more salespeople will.

It’s difficult to argue in a budget: “Spending this much will totally achieve our business objective.”

2. Business requirements are discrete and defined

Instead, business requirements should be more narrowly defined. If they’re individual, discrete items you’ve already worked to analyze, you’ll be able to say: “This is a requirement that will have X impact on Y business objective.”

And those business requirements will lend themselves to being attached to specific budget items.

So when it’s time to make the case for your budget (more on that in a minute), you can state clearly: “X dollars will meet Y requirement, which in turn will have Z impact on our business objective.”

How to plan a budget

At this point, it’s time to look at the steps involved in planning a budget.

As our

Budget  Requirements ➡ Business Objective

model suggests, budget planning involves answering two questions:

  1. How much is a business objective worth?
  2. Is that a good enough reason to spend the amount necessary to meet that requirement?

One effective way to answer those questions is to make a table framework something like this:


Using this framework, you can identify:

  • The dollar value of the business objective
  • The percentage that meeting a specific requirement will contribute to achieving that objective
  • How much should be assigned to that requirement in the budget.

Here’s an example of how this framework can be used.

Let’s say an enterprise wants to grow its business by acquiring new customers, so it sets a business objective of closing 20% more sales.

Let’s also say you’re the marketing manager responsible for managing your department’s technology.

You know the sales team has a pain point related to the time involved in managing the sales process with spreadsheets.

You think a CRM will help them avoid that pain point, because you think better data processing will free up half of that time for your sales team and let them close 50% more sales.

Finally, let’s say your business closes sales of $100,000 in a year.

From here on, it’s just basic arithmetic:

  • Dollar value of the business objective: 20% x $100,000 = $20,000
  • 50% of $20,000 = $10,000
  • Therefore, the budget available for a CRM is $10,000.

table 2

It’s good to keep in mind that the technology solution you’re seeking could also meet other business requirements, which could contribute to achieving the same business objective.

This approach has several advantages:

  • It starts with the end objective, rather than starting with a possible solution and trying to shoehorn it into your organization.
  • It doesn’t mention technology at all. It simply states: “We have X dollars to solve Y problem.” So when the time comes to look at vendors and the solutions they are proposing, you can quickly rule out any solutions that exceed your budget.
  • You create your budget based on what your technology delivers, rather than what it costs.
  • You have a budget cap. For instance, if your new CRM costs less than $10,000, that’s great. If not, you’ll have a difficult time achieving a positive ROI.

person using tablet computer

Making the case for your budget

Unless you’re fortunate enough to have free rein with your budget, you’ll need to make a convincing case for your budgetary requests to purchase new technology.

For many, this is where dreams come to an end.

However, with foresight and some good planning, it’s not as challenging as you might think to get (and keep) your stakeholders on board.

Here’s what you need to know.


Technology isn’t the end goal

The end goal isn’t to acquire new technology. It’s to achieve business objectives. When you’re making the case for your budget, it’s important to keep the conversation focused on reaching that outcome.

Then the question is: “Will this technology deliver the returns you’re promising?”

This is another point at which an external consultant can be useful.

Having your budgetary projections validated by a third party who knows the technology, has seen it implemented before, and is constantly monitoring best practices can give convincing weight to your budgetary requests. At the same time, that external consultant can help you correct any questionable projections before you include them in your budget.

At Enginess, we have helped organizations such as IESO, the Law Society of Upper Canada, Law Foundation, and YWCA Toronto build and audit business cases for technology procurement. In each case, we offered unique insights into the gaps in their respective digital ecosystems, and our independent expertise added value throughout the procurement process.


A budget submission is a business case

Your budget isn’t just figures – it tells a story about the problems your organization is facing, the solution you’re proposing, the costs of implementing that solution, and how those costs will deliver meaningful returns.

And you need to tell that story as persuasively as possible.


Don’t focus on the missed opportunity

A mistake often made by business managers when they are making a case for their budget is focusing on the opportunity cost. For example: “If we spend $100 on that, we can’t spend $100 on this other thing.

But that’s not how corporate budgets work. While there are hard limits (eventually) on what is available to spend, it’s rare to hit those. You’re more likely to come up against soft limits – for instance, when people in your organization don’t buy into your plan, or you fail to secure an adequate budget.

Rather than opportunity costs, you should focus on urgency: make a case for why your organization needs to invest in the technology you’re proposing right now.


This is another point at which an external consultant can provide support. They’re closer to the technology marketplace, and they can help you understand how other organizations have succeeded with technology implementations, as well as the cost of not acting.

calculator and finance documents

Common budget planning pitfalls

You should be aware of a few common pitfalls when planning your budget. Here are three you should try to avoid.


Underestimating the total cost of ownership

You need to make provisions for the time, effort, and training necessary to deploy and leverage any new technology solution – even those that claim to have “out of the box functionality.”

And yet, these implementation costs are regularly overlooked. Cost overruns in new technology deployment projects are so common, it’s almost become a cliché.

But that’s avoidable. The problem is that we humans are optimistic by nature.

We’re prone to what’s called the Planning Fallacy. According to Roger Buehler, a professor of psychology at Wilfrid Laurier University:

“The planning fallacy is a tendency to underestimate the time it will take to complete a project while knowing that similar projects have typically taken longer in the past. So it’s a combination of optimistic prediction about a particular case in the face of more general knowledge that would suggest otherwise.”

Regardless of any previous experience, we simply assume “everything will be okay!” This can be a good approach in many situations, but planning and managing complex technology deployments isn’t one of them.

Fortunately, this simple problem can be met with a simple solution.

It’s called reference-class forecasting and, in this situation, it involves comparing the outcomes of projects similar to the one you’re currently working on to your own track record of delivering projects on time, and then adjusting your budget projections accordingly.

For instance, if your budget allocates $10,000 for the implementation of a new CRM, and most other CRM implementations have cost overruns of 20%, and the last five projects you managed were 20% over budget, you should probably allocate an additional 20% so that your total is $12,000.

Failing to account for a “bed-in” period

New technology tools take time to bed-in, as team members get accustomed to new ways of working. There is internal hesitation to overcome, training to put in place, and time needed for people to learn.

What’s more, while people are learning to work with new systems, productivity will fall. Basically, everything is going to take longer.

It’s important for project champions to anticipate and prepare for this by giving internal teams the resources they need to get back to full productive capacity as quickly as possible. Dense self-help networks, video tutorials, and dedicated classroom hours are some of the options to consider.

Following a herd mentality

A common temptation facing managers is to simply pursue the “best in breed” solution, which amounts to looking at only a handful of other organizations in Gartner’s Magic Quadrant.

While this can be a great starting point, and while it’s good for organizations to turn to tried-and-true providers for ideas about costs and technical requirements, there’s no use trying to get buy-in for technology that’s far too sophisticated for your organization.

For instance, think back to our marketing manager looking at a CRM. Although it’s widely advertised, a solution such as Salesforce may be overkill for a small organization with basic marketing needs. Alternatives like Pipedrive, StreakCRM, or Base CRM would all function just as effectively for a fraction of the cost.

Working with an external consultant who can help introduce you to lesser-known technology providers is a simple and effective way to avoid following the herd.

Chapter summary

  • Focus budget planning on connecting expenditures to business objectives. Use business requirements to bridge this gap.
  • Plan your budget by comparing apples to apples: assign a dollar value to achieving your organization’s business objective, and then work out your budget request in relation to that amount. Determine the percentage your requirement would contribute to achieving the business objective, and use that to find the most you can spend on new technology and still maintain an ROI.
  • Focus budget discussions not on the costs of new technology, but on the value of what that new technology can deliver.
  • Tell a story when you’re making a case for your budget: create a scenario focused on the problem facing your organization, your proposed solution, and how the cost of that solution will contribute to achieving your organization’s business objective.
  • Avoid common pitfalls when planning your budget. These include underestimating the total cost of ownership, failing to account for a “bed-in” period, and following a herd mentality. Bringing in an external consultant can be an effective way to avoid these problems.

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