Financial Modeling – How to Budget for 2022


Please meet, Michelle Lesh, Chief Commercial Officer at Alfen, and former Chief Commercial Officer at GE – Grid Solutions. She’s been in the sales game a long time. So when we decided to write something about annual budgeting, we decided to get an expert. 

Pay attention, you are going to learn something.



From determining where to allocate finances to creating an effective financial strategy, budgeting is a challenge. When you build a budget for your business, you are effectively playing a large-scale game of economic chess. You need to understand the current state of your business, observe the market, and make a financial strategy that will both grow your company and make you money! Not to mention the business politics that can often get involved as some departments get a smaller allowance than they expected.

Luckily, we’re here to help! In this guide, we’ll give you the strategies and tactics you can use when creating your 2022 budget. Let’s get started!

The Budget Dichotomy: Long-Term Game Plan vs Immediate Reality

Before we dive into the specific strategies for building a financial plan, we need to understand the two-faced nature of budgeting. When a budget is created, there are two opposing forces at play. 

On one hand, there is the Long-Term Financial Gameplan (also known as the Top-Down Approach). This is the vision that company directors have for the business’ budget. They strategize by looking at the big picture – trying to figure out how to make this year’s budget fit into the organization’s long-term goals. 

On the other hand, you have the Immediate Reality (also known as the Bottom-Up Approach). This is the market reality that the front-line workers like salespeople and marketers face on a daily basis. Although these individual departments don’t have a clear view of the big picture like the corporate directors, their input on the current state of the business can be invaluable.

As a result of this dichotomy, budgeting is about more than simply making financial goals. It’s about finding a delicate balance between long-term strategy and short-run efficacy. If you can establish an equilibrium between these two forces, your business will benefit both in the coming year and also for many years to come!

Divide and Conquer

When it comes to budgeting, there aren’t many hard and fast rules that you must obey. Every company has its unique strategies, procedures, and priorities when budgeting for the new year. After all, a small business with five employees will create its budgets much differently than an immense, publicly traded corporation with offices around the globe.

With that said, there is one rule that you should follow if you don’t want to panic while budgeting: don’t leave it to the last minute! Like most things in business, budgeting often takes longer than expected. Unless you hit the financial strategy jackpot on your first try, your budget will likely need to be approved, revised, rejected, recreated, and reapproved multiple times before you finally have a definitive plan. In other words, it’s always better to start budgeting earlier than later – so get started now! 

In the next section, we’ll be demonstrating two month-by-month strategies that you can look at as inspiration for how to create your next budget. The first approach is the Top-Down Approach – the financial plan is founded on the company’s long-term goals, and the various departments are aligned to make them happen. The second approach is a Bottom-Up Approach – individual departments are considered earlier in the budgeting process, and the strategy is less rigid.

Month-by-Month Strategy: Top-Down Approach

July – August: Long Term Game Plan
Create your macro strategy. In a perfect world, where will your brand be in the next 5-10 years? What will its finances look like? Will it acquire any new significant assets? Figure out what financial moves you need to take to achieve your objectives. The rest of your budget strategy will be based on this plan.

September: Create Market-Based Strategies
Now, it’s time to look at the state of the current market and adjust your strategy. For example, perhaps the market demand for your product has temporarily decreased. It might be time to consider putting a greater emphasis on sales and marketing to put those numbers up and keep your financial goals on track!

October: Allocate and Debate the Financials
With your long-term goals set, start looking at your individual departments. Determine the portions of the budget that each team will get. Naturally, this phase will result in some discontent among departments – negotiate with departments and explain the reasons behind the budget allocation. Listen carefully to your departments. They’ll likely bring up some perspectives that you might not have considered in the previous steps. This is where powerful leadership and communication skills are a must-have.

November: 90% Done – Ironing Out the Wrinkles
With all of your company’s departments happy (or at least relatively content), it’s time to iron out any final wrinkles that appear in your budget. Look closely at your financial strategy and eliminate any small discrepancies between your goals and tactics. Are your products ready? Are consumers willing to buy? Identify and overcome these budding obstacles before they have the chance to turn into serious problems. 

December: Link Reality to Theoretical Macro Strategy
As the new year approaches, make minute adjustments to the macro strategy you created in July. There’s a good chance that the market underwent some unexpected changes since your initial planning phase. Validate reality and make your financial targets more precise.

January: Finalize and Adjust Based on Reality
Finalize your year’s targets based on your end-of-year performance. Ensure that your plans and strategies are realistic and achievable. You should not be making any new decisions at this point – just tailoring your approach.

Month-by-Month Strategy: Bottom-Up Approach

July: Create Your Macro Goals
This strategy starts similarly to the Top-Down one. Begin by setting your macro long-term financial goals. In the Top-Down approach, we used July to create our macro plan and sculpt the budget around it. This time, we’re just setting goals – our financial strategy remains dynamic throughout the process.

August: Set Bottom-Up (Departmental) Strategy
Here’s where the Bottom-Up strategy shines! As early as August, start bringing your company departments into the mix and involving them in the budgeting process. Use this month to determine each department’s financial strategy and discuss things like vacation time.

September: Lock In Top Strategy
Once you have your departments’ strategies locked in, craft your Top (macro) strategy so that it complements your Bottom strategies and helps you achieve the goals you set in July.

October: Debate and Determine Other Financials
With your Top and Bottom strategies secure, hammer out any other financials that aren’t locked down yet. As would be expected, this part of creating a budget will come with its fair share of disagreements and debates, but there should be less friction than with the Top-Down strategy.

November/December: Finalize Strategy and Make Adjustments
Use the last two months of the year to analyze the market and make small adjustments to your budget and financial strategy. No massive changes – just optimizing.

Making Your Budget Functional

Creating a budget for your business isn’t just about thinking of strategies and putting numbers on paper. The few months when you craft your financial policy can often result in some of the most emotionally tense moments in your organization. 

Scarcity is at the core of business and economics – there is never enough for everyone to be satisfied. The same is true when building your budget. For every department that’s happy with the financial strategy, there will be another that feels it’s not getting a fair piece of the pie. The question is, how can you ensure that creating a budget doesn’t result in a mutiny for your departments? In other words, how can you keep your people productive and satisfied while they feel left out? 

The answer: through powerful leadership skills. The reason why departments get disgruntled over budget allocation usually isn’t because they’re in desperate need of funding – it’s because they start feeling undervalued by their leaders. Luckily, there’s a solution! Show your people that you care. If you’re a top-end manager, don’t only check in with your departments when you need something from them. Be proactive in your leadership and support your people!

If you want to learn more about creating functional, effective, and reliable financial strategies for your business, click here to connect with the author of this post, Michelle Lesh!

About The Author – A Message From Michelle Lesh 

How can you help support this process?  Think about how you coach your team, how to understand their challenges so you can move forward together. When people ask me for advice, this is what I suggest for people still finding their path forward to understanding and navigating the budget battle. 

Our job as leaders is to provide context and enable our teams to connect dots between the macro and the front line. And once the dots are connected, we have to find the right balance of asking for more, pushing, and stretching while simultaneously supporting the organization to achieve the goals.

 There is one major pitfall I encourage people to conscious about. Sometimes, those front-line sales and sales leaders, often default to salesperson mode, blinders on, and may struggle to see the big picture, only what I need for my customer right now. Or what I need for my team right now.

I encourage people to practice stepping back, practice having empathy for your internal organization and its challenges just like you do for customers. Every department is feeling it too. If disconnects remain, try to understand “the why”. And it is encouraged to ask your leadership in a private 1:1 moment to help you understand. Share your confusion, and see if they can help part the clouds and improve visibility. Even if you do not agree with them, it still sends a strong message about your commitment to the organization. This doesn’t mean stop pushing or asking, just understand your customer (internal).

Advice for upper management, sales is not a cost center, it’s a revenue stream. Realizing any manual activity that prevents your sales reps from actually contacting or speaking to prospects and customers has a 3x factor of the time spent on the activity. First the lost time itself, then the impact of what they could have been doing talking to a customer, and third, the compounding interest on those customer facing activities. 

In short, listen  to your sales leaders, and sales reps. Make sure they have a seat at the table. Help connect the dots between their market reality, the strategy, and what’s possible! And finally, if it’s not clear, ask them to explain “the why”. 


For more 2022 planning, check out our 2022 Sales Management Planning Guide on-demand webinar here. You’ll learn all about what to do when it comes to your goal setting, headcount, sales stack, coaching stack, sales training, budget, and navigating the conversation with C-Suite.

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