Budgeting Challenges for 2023

Part 1 of Setting Your Ecommerce Budget for 2023

This is part of a 5 part series on setting your ecommerce budget for 2023. For an easier to read all-in-one PDF of the entire series, download our Setting Your Ecommerce Budget for 2023 guide.

We may all be tired of hearing this after several years of pandemic and post-pandemic uncertainty, but 2023 is yet another year where your traditional budgeting approach may not work. According to Harvard Business Review, four out of five turnaround and restructuring experts expect a recession, and three out of four expect there to be major shakeups in their industry as a result.

Reading the business and financial press lately could make you think we’re living in a Charles Dickens novel - “It was the best of times, it was the worst of times … it was the spring of hope, it was the winter of despair.” Some experts think 2023 could be a year of economic recovery and growth, others see a recession but also point to how companies properly prepared and budgeted for a recession can end up having record-breaking years despite the recession. This makes it absolutely critical to get your budgeting process right in 2023.

HBR recommends for 2023 that departments and business units budget and track not just against revenue and costs, but also cash-flow and assets. Given that many companies treat their larger ecommerce projects as depreciable assets it’s important to know your CFO’s stance on this and make sure they realize which items in your budget represent capital investments that build asset value versus operating expenses, as CFO’s may view those capital investments in a more positive light.

Another recommendation is to focus on cash generating efforts - as interest rates continue to rise, companies that were dependent on debt to finance their major initiatives will begin to struggle. Along with prioritizing projects which are more likely to create an increase in revenue in the near-term, working with your CFO to show what systems can be moved to the cloud or what work can be outsourced you can convert some of your fixed costs into variable costs, giving you and your CFO another way to react to changes in interest rates and revenue levels.

Finally, realize that using this year’s numbers or last year’s numbers may not serve you as well as brainstorming from scratch - creating an all-new revenue projection for 2023, as 2021 and 2022 both were greatly influenced by the pandemic, supply chain challenges and other items that hopefully won’t repeat in 2023. As you begin to brainstorm and work through the figures for your 2023 budget, consider building three scenarios to account for the uncertainty in 2023 - a baseline scenario followed by a moderate downturn in demand and a severe downturn in demand. In each scenario forecast not only the change in ecommerce sales but also what you could do to change your planned spending to react to changes in the economy throughout the year.

Before we dive into the process of setting your ecommerce budget, though, we’re going to take a look at some benchmarking data to help you understand what other companies are doing. Stay tuned for the next post in this series - Benchmarking Data for Ecommerce Budgeting for 2023.