(cross-posted from http://www.sqlandy.com/archive/pass-update-44-budget/)
I had a question recently about how budgets work at PASS, and I think that’s something worth sharing, so I’m going to write an overview of that process today. Note that I’m not the Finance guy, so the “official” word gets published elsewhere, and for that reason I’m not quoting numbers, just talking about process from my perspective as a participant in that process.
First, we start with funding, how do we raise money to pay the bills? A big, big chunk of our revenue comes from the annual PASS Summit, and you can think of this as not just a community event but an “annual fund raiser”. Some of that is from paid attendees and some from sponsors. We also generate some funds from selling Summit DVD’s as well as sponsorships for things like 24 Hours of PASS. PASS does not take any portion of sponsorship funds from SQLSaturday events or Chapter meetings. [Note: That isn’t to suggest that we might, just to explain that we don’t.]
Also, we should have the budget for 2011 published shortly and I’ll post a note when you can review the full document.
Early each year we start estimating (aka guessing) what our revenue will be for the next year. So in Jan/Feb and up through May we’re looking at how much money we will have for the fiscal year that begins July first, with the added challenge that we won’t know how we did until mid to late December after we’ve finalized all the items related to the Summit. If we guess too low we hurt the organization by spending less in often critical areas, and if we guess too high, then that leads to painful discussions about what areas to cut. This is something that most businesses go through and certainly isn’t unique to PASS.
Then we switch to spending. It starts with the President assigning ‘portfolios’ to Board members, which you can think of a being about the same as a large department in most companies. Directors then submit a budget request to the VP of Finance outlining how much and the major areas where it will be spent. At this point it’s a wish list, but scoped based on anticipated changes up or down in revenue as well as the previous year budget. The VP of Finance (currently Bill Graziano) and our accountant then combine all that into a monster spreadsheet for the first round of review.
Next we typically look at that first cut and start talking about where we can make adjustments. Most requests are reasonable to start with, but sometimes there just isn’t enough to do everything, so we each review our list and find places to reduce our request. This has been for one of the best experiences on the Board for me, everyone working together and jointly trying to find ways to get to a budget that will let us accomplish our most important goals.
Then, finally, we vote to approve the budget. At that point we’re able to authorize spend against that budget as long as it generally fits within the plan. If it’s a minor change we’ll send a note to Bill asking for his ok. An example was the project to populate the SQLSaturday wiki. I requested to re-align some of the funds allocated for the project and as it was inline with the goals of the portfolio it was approved. A deeper change might be sent out to the Board for discussion. Once the budget is approved, getting ‘more money’ requires a budget exception, which in turn requires Board discussion and vote. That process is, by design, painful. It takes time to have the discussion, we have to find that ‘more money’, and in general we don’t like mid course changes. They do happen though, and perhaps once a year we’ll have one.
So, where does the money go? We maintain an office and staff, to do things like plan and handle Summit logistics, do SQLSaturday coaching, maintain an auditable set of financial records, and a whole lot more. A lot of it goes to costs at the Summit. I won’t go into numbers here, but the costs are significant. To give you a taste of the costs, at the upcoming SQLRally it costs $12,000 per day for the space, and anything we spend on food and beverage reduces that cost, hopefully to zero. We have to use the hotel for food and beverage, and a boxed lunch costs, wait for it, $35 per box! Our team does a lot to control, reduce, and negotiate these costs, but if you need a big venue, you’re largely stuck playing their game. We devote some money to all the other stuff; SQLSaturday sponsorships, IT projects, etc, etc, etc.
Board members are not paid. When we travel on behalf of PASS (usually just 3-4 meetings a year) we get per diem and reimbursed for airfare, PASS pays for the hotel directly. We do get “free” admission to the Summit. Individual Board members don’t have any personal discretionary spending authority or budget, if we buy drinks or appetizers or coffee when we sit to talk informally with members it’s all out of pocket.
Each year we grant free admission (a “comp”) to the Summit to our speakers and a small number of volunteers. Comps are built into the budget because they have a real cost. It’s not “free” to just let someone extra attend – they get a bag, require registration services, eat meals, drink water, and in general cost real money. It’s somewhat less than the cost of a full registration, but it is substantial. We’d love to do more comps, but ultimately it comes back to the budget. Faced with sponsoring a couple more events or buying SWAG or any of the other places where spending would help, we try to do the things that help most members.
All in all, it’s the standard process that any business goes through, making estimates and judgments and tradeoffs to try to do the most good. Hope that helps some. When Bill publishes the budget I encourage you to read it carefully, though I’ll tell you it’s not exciting reading! He’ll also be publishing an annual statement about our finances and you should read that as well. I think the thing I’d tell you is to look at it portfolio by portfolio and if you have suggestions, send them in.