Chapter 7: Building Realistic Budgets

 - Connecting Strategy to Financial Reality

Video: How to Build a Realistic Budget in Case Presentations – Scale, One-Time vs Ongoing, and Credibility

Learning Objectives

By the end of this chapter, you should be able to:

• understand the purpose of implementation budgets

• estimate project costs using reasonable assumptions

• distinguish between one-time and ongoing costs

• scale budgets appropriately for different organisations

• justify financial assumptions using benchmarks

• present budgets clearly and professionally

• use budgets to strengthen strategic recommendations

Why This Matters

One of the quickest ways to undermine an excellent recommendation is to ignore the cost. Many teams spend hours developing innovative strategies, designing implementation plans, and creating polished presentations. Then, when judges ask, "How much will this cost?", they have no answer. Others include a budget, but it bears little relationship to the size of the organisation or the recommendation itself.

An implementation budget is far more than a list of expenses. It demonstrates that your team has considered the practical realities of execution. It shows that your recommendation is not only strategically attractive but financially feasible. Every recommendation requires resources. Your job is to demonstrate that those resources have been thoughtfully considered.

Budgeting Is About Credibility

Executives rarely ask whether an idea is good. They ask whether it is worth the investment. A realistic budget answers questions such as:

• How much capital is required?

• What operating costs will increase?

• What savings will offset those costs?

• When will expenditures occur?

• Can the organisation realistically afford this initiative?

Budgets transform ideas into investment decisions.

Every Recommendation Needs a Budget

Whether your recommendation involves:

• launching a new product

• implementing new technology

• entering a new market

• opening additional locations

• acquiring another company

• expanding production capacity

someone must pay for it. Even recommendations involving policy or organisational change usually require investment in:

• training

• communications

• technology

• project management

• consulting

• recruitment

• monitoring and evaluation

Ignoring these costs reduces credibility.

Start with the Scope

Before estimating costs, define exactly what the recommendation includes. Ask yourself:

• What activities are required?

• What resources will be needed?

• How long will implementation take?

• Who will be responsible?

• What must happen first?

A clear implementation plan naturally leads to a realistic budget.

Separate One - Time and Ongoing Costs

One of the easiest ways to improve a budget is to separate costs into two categories.

One-Time Costs

These are investments required to launch the initiative. Examples include:

• software development

• equipment purchases

• consulting fees

• employee training

• facility renovations

• implementation support

These costs occur once.

Ongoing Costs

These continue throughout the life of the recommendation. Examples include:

• salaries

• maintenance

• subscriptions

• marketing

• customer support

• utilities

• software licensing

Separating these categories helps executives understand both the initial investment and the long-term financial commitment.

Scale Matters

One of the biggest budgeting mistakes in case competitions is poor scaling. A $100 million recommendation may be entirely reasonable for a multinational airline. The same recommendation would bankrupt a regional manufacturer. Likewise, proposing a $50,000 investment for a Fortune 500 company may be too small to have any meaningful strategic impact. Always ask: Is this investment material enough to matter? And is it realistic for this organisation? The best budgets are proportional to the organisation's size, financial capacity, and strategic objectives.

Using Industry Benchmarks

Cases rarely provide detailed cost information. That is where benchmarks become valuable. Examples include:

• IT spending as a percentage of revenue

• Marketing expenditure as a percentage of sales

• Average employee salaries

• Warehouse construction costs

• Manufacturing costs per unit

• Customer acquisition costs

• Industry implementation timelines

Benchmarks provide logical starting points when exact information is unavailable. Remember to explain your assumptions during the presentation. Transparency builds trust.

Building the Budget

A practical implementation budget often includes:

Category	One-Time	Annual
Technology	✓	✓
Equipment	✓
Training	✓
Marketing		✓
Salaries		✓
Maintenance		✓
Consulting	✓
Contingency	✓	✓

This structure allows judges to understand where the money will be spent quickly. Keep the presentation simple. Budgets should support the recommendation, not overwhelm it.

Linking Costs to Benefits

A budget should never stand alone. Every major expenditure should answer one question: What value does this investment create? For example: An online booking platform may require a $10 million investment. Rather than presenting only the cost, explain:

• increased customer convenience

• reduced staffing costs

• higher booking conversion rates

• improved customer retention

• long-term operating efficiencies

Budgets become far more persuasive when costs are paired with expected benefits.

Presenting Budgets Visually

Executives rarely want detailed spreadsheets. Instead, use:

• summary tables

• stacked bar charts

• implementation timelines

• cost breakdown diagrams

• waterfall charts

Keep visuals clean. Avoid excessive decimal places; round large numbers where appropriate. The audience should understand the financial story within seconds.

Financial Storytelling

Every budget tells a story. Consider two presentations.

• Presentation A: "This initiative costs $12.5 million."
• Presentation B: "This initiative requires a one-time investment of $8 million in technology and implementation, followed by annual operating costs of $4.5 million. These investments are expected to reduce operating expenses by approximately $7 million annually, resulting in a positive financial contribution within three years."

Which presentation sounds more credible? The numbers may be identical. The story is very different.

Discover Your MAD Skills Principle

Budgets don't justify recommendations. They demonstrate that your recommendation is executable.

Anyone can propose ambitious ideas. Winning teams prove they have considered the financial realities of implementation.

Coach's Lens

One of the comments I hear most often from judges is: "Their recommendation sounded interesting, but I had no idea what it would actually cost." Don't make judges ask that question. A simple, well-structured budget often creates more confidence than pages of detailed financial calculations.

Remember the purpose of the budget is not to impress people with arithmetic. It is to reassure them that implementation has been carefully planned.

Deciphering Cases

Financial feasibility is one of the hidden puzzles within every business case. A recommendation may be strategically attractive but financially impossible, or it may be financially affordable but too small to create meaningful impact. Strong competitors continually ask:

• Can this organisation afford the recommendation?

• Is the investment proportional to the opportunity?

• Does the expected return justify the expenditure?

These questions separate realistic recommendations from optimistic ideas.

Common Mistakes

Avoid these common budgeting errors:

• forgetting to include implementation costs

• ignoring ongoing operating expenses

• failing to separate one-time and recurring costs

• proposing investments that are unrealistic for the organisation

• presenting unsupported assumptions

• focusing only on costs without discussing benefits

• overwhelming judges with unnecessary detail

MAD Skills Drill

Choose a recommendation from a previous case competition. Develop a one-page implementation budget. Include:

• one-time costs

• ongoing annual costs

• major assumptions

• expected financial benefits

• implementation timeline

Now ask yourself: Would a CEO approve this investment based solely on the information provided? If not, identify what information is missing.

Chapter Summary

A well-designed budget transforms a recommendation from an interesting idea into a credible business proposal. By estimating costs realistically, scaling investments appropriately, and connecting expenditures to expected benefits, competitors demonstrate the executive thinking judges expect to see. Budgets are not accounting exercises. They are strategic communication tools that help decision-makers understand the financial implications of action.

Key Takeaways

✓ Every recommendation requires a realistic implementation budget.

✓ Separate one-time investments from ongoing operating costs.

✓ Scale budgets to the size and financial capacity of the organisation.

✓ Use industry benchmarks to support assumptions.

✓ Connect every major cost to an expected benefit.

✓ Present budgets simply, clearly, and visually.

✓ A budget should increase confidence in your recommendation, not distract from it.

Looking Ahead

Once we understand the cost of a recommendation, the next question becomes: Will the investment create sufficient value? In the next chapter, we will explore investment evaluation, introducing ROI, NPV, IRR, and sensitivity analysis the financial tools executives use to compare alternatives and make informed investment decisions.