Tumultuous 2020 is drawing to a close and 2021 is looming large from a planning and budgeting perspective. The bad news is that Covid is still here and needs to be taken into account; the good news is that by now you understand the impacts of Covid on your business very well, and you are in a much better position to detail your budget for 2021 than you were during 2020.
Here are 5 tips designed to help you think through your budget for 2021
- Approach: You are now better positioned to plan the year ahead and so the focus should not necessarily be on cutting the budget but rather on how to use your budget in a smart way that fits the Covid environment.
- Smart information monitoring: Being on top of the Covid situation requires rapid and sensitive information flows and you should consider investing in areas that may enable you to adapt to and control the situation, e.g.
- If you are selling remotely, you should ensure that you have the right processes and tools in place to track remote sales operations effectively and efficiently.
- If you are bringing people back into the office, you may want to consider investing in office based Covid testing.
- Deferred plans: Some major plans have understandably been put on hold because of the pandemic, but it is very important to continue to develop your operations and to plan for reinitiating them or for reasonable alternatives, e.g. many startups that raised money in 2020 had had plans to relocate their CEO to the US to spearhead their US expansion; also, travel for marketing and sales is unlikely to return at least till mid-year 2021.
- It is important to consider the impact of such a delays on your budget and how you are going to continue developing your operations.
- You may want to consider how to supply the need by reallocating funds from the delayed relocation and/or travel budget to remote hires of suitable people in the US or other relevant alternatives.
In addition, travel is unlikely to ramp up at least in H1 2021. Reallocating travel budget to alternative mechanisms of marketing and sales is another important consideration.
- Working from home: As working from home has become a reality during the pandemic, there are 2 key considerations to take into account:
- Talent acquisition pool just got a lot larger. A whole new range of potential candidates has opened up as businesses can now successfully recruit people beyond the central Tel Aviv area. It’s now much more acceptable for an employee to work remotely and come to the office only once or twice a week.
- Take good care of your employees who are working remotely. According to Calcalist, 42% of employees in Israeli startups are working from home only and 45% are working partially from home and the office. 59% of employees feel that organizational culture has been impacted in some way by working from home and 20% feel that it has been impacted in a significant way. It is important to dedicate resources to ensuring that they feel part of the team and that they feel that they are progressing and growing with the company. Here are some areas to consider:
- Onboarding is moving online and even becoming a fully remote process. It’s important that appropriate resources are dedicated to this and alternatives for new employees to form social bonds with their colleagues need to be considered.
- Employee benefits and welfare is an important part of looking after your employees. To ensure this is not an after-thought, plan now for remote virtual team activities, employee gifts, and effective ways to encourage employee engagement.
- Training and development of new and existing employees needs to be given careful consideration in the WFH environment, so they develop the skills they need to contribute effectively and continue their professional growth.
- Home office resources – part of employees being fully productive working from home is ensuring that they have the appropriate resources such as computer, stable wifi, and a comfortable workspace.
- Office requirements – with a meaning percentage of employees working from home on any given day, you may want to re-evaluate your office space requirements.
- Budget modelling: although you are much better prepared for the impacts of Covid in 2021, there is still significant potential for volatility. Dealing with volatility can be difficult and we suggest bearing the following in mind:
- Model at least 3 scenarios e.g. status quo, medium and extreme scenarios
- Be cautious about forecasting growth e.g. don’t front-end your growth in H1 2021
- Consider alternative sources of funding e.g. venture debt, grants, etc.
- Keep a close eye on US$/NIS exchange rate volatility.