Posts Tagged 'Finances'

February 11, 2013

Startup Series: Planwise

Every startup dreams about entering an unowned, wide-open market ... and subsequently dominating it. About a year ago, I met a couple of Aussies — Vincent and Niall — who saw a gaping hole in the world of personal finance and seized the opportunity to meet the unspoken needs of a huge demographic: People who want to be in control of their money but hate the complexity of planning and budgeting. They built Planwise — a forward-looking financial decision-making tool that shows you your future financial goals in the context of each other and your daily financial commitments.

Planwise

If you look at the way people engage with their finances on a daily basis, you might think that we don't really care about our money. Unless we're about to run out of it, we want to do something with it, or it constrains us from doing something we want to do, we don't spend much time managing our finances. Most of the online tools that dominate the finance space are enterprise-centric solutions that require sign-ups and API calls to categorize your historical spend. Those tools confirm that you spend too much each month on coffee and beer (in case you didn't already know), but Planwise takes a different approach — one that focuses on the future.

Planwise is a tool that answers potentially complex financial questions quickly and clearly. "If I make one additional principal payment on my mortgage every year, what will my outstanding balance be in five years?" "How would would my long-term savings be affected if I moved to a nicer (and more expensive) apartment?" "How much money should I set aside every month if I want to travel to Europe next summer?" You shouldn't have to dig up your old accounting textbooks or call a CPA to get a grasp on your financial future:

One of the most significant differentiators for Planwise is that you can use the tool without signing up and without any identifiable information. You just launch Planwise, add relevant numbers, and immediately see the financial impact of scenarios like paying off debt, losing your job, or changing your expenses significantly. If you find Planwise useful and you want to keep your information in the system (so you don't have to enter it again), you can create an account to save your data by just providing your email address.

Planwise has been a SoftLayer customer since around August of last year, and I've gotten to work with them quite a bit via the Catalyst program. They built a remarkable hybrid infrastructure on SoftLayer's platform where they leverage dedicated hardware, cloud instances and cutting-edge DB deployments to scale their environment up and down as their usage demands. I'd also be remiss if I didn't give them a shout-out for evangelizing Catalyst to bring some other outstanding startups onboard. You've met one of those referred companies already (Bright Funds), and you'll probably hear about a few more soon.

Go make some plans with Planwise.

-@JoshuaKrammes

June 10, 2009

Medieval Financial Techniques in the 21st Century?

Recently I had the chance to attend the annual Beyond Budgeting Round Table (BBRT) conference to help me keep up on my CPE credits. Those darn accounting licenses have to be maintained, ya know.

I was pleasantly surprised at the conference that SoftLayer was already doing the crux of what this group preaches – namely, that assembling an annual budget and trying to live by it is a colossal waste of time!

One speaker pointed out that budgeting originated back in medieval times long before the Industrial Revolution. During those days, the feudal system was the order of the day. Landowners allowed people to live on their land and raise crops. Once per year, when the harvest came in, the landowners received payment from the people living on the land in the form of a share of the crops or a share of the gold for which the crops were sold. Since the landowners were paid once per year, they had to plan how to make their annual payday last for a whole year. You guessed it – this plan was called “the budget.”

Unfortunately, most companies and organizations today use this horribly outdated financial management technique to run their business in the fast-paced information age economy of today. In most cases, this just flat doesn’t work.

For example, one of the speakers was the CFO of a very large healthcare organization. He said that back in the days when they produced an annual budget, there were 240 budget managers that spent 90 days of full-time effort to produce the annual budget. That equates to 60 man-labor years of total time to produce that budget. If you assume that each of those managers averages $50K per year in compensation, the cost of producing that budget is $3 million. What’s worse is that the CFO said it was worthless before the final version was printed because it was built on stale fundamental assumptions that were several months old.

Once these obsolete documents are produced, they become static financial contracts. They limit spending for each department, and this isn’t always a good thing. Some departments may see some fantastic market opportunities develop halfway through the year, but they can do nothing to take advantage of them because they would exceed their budget. On the other hand, some departments can be allotted too much money, so they go on wasteful spending sprees at year end to be sure and use up their budget or else lose that funding next year. People often ask for permission to exceed budget, but usually no one gives back any unused budget dollars. Even worse, management compensation is often tied to these obsolete financial contracts. Business schools are awash with case studies of bad business decisions that were made to maximize bonus compensation in relation to the budget.

From the beginning, SoftLayer realized the futility of producing an annual budget. In the rapidly developing business of web hosting, the landscape can dramatically change much more quickly than an annual cycle. So we implemented the policy of maintaining a rolling forecast that is updated to the best of our current knowledge each and every month. This practice has served us well, and is one of the “best practices” adopted by the BBRT.

Another best practice recommended by BBRT is to maintain multiple forecast scenarios that factor in macroeconomic possibilities. Then as reality develops, you have a better handle on the tactics to implement because you now know what most of these decisions should be in advance. At SL, we will be implementing the multiple scenario practice over this summer.

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