2026 Forecast Planning: Board vs Budget vs Bonus Explained

[00:00:00] Luke Austin: so each of these scenarios serve a really. Specific function within the organization and to have specific groups of people that they're going to be serving against that expectation. And so scenario planning, this is how we approach it when we build out profit systems. When we build out forecast for our customers, we're really looking at board budget.

[00:00:19] Bonus is the sort of three tiers oscillating in between most likely to happen, and what we'd like to happen over the coming time period.

[00:00:25]

[00:01:03] Richard Gaffin: Hey folks. Welcome to the E-Commerce Playbook Podcast.

[00:01:04] I'm your host, Richard Gaffen, director of Digital Product Strategy here at Common Thread Collective, and I'm joined today as I believe I was last week by our war reporter, our VP of E-commerce growth here at Com Thread Collective, Mr. Luke Austin. Luke, how are you doing today, ma'am?

[00:01:20] Luke Austin: I am. I'm doing well. We are. Deep, deep in the throes of Black Friday, cyber Monday Prep. Got a lot of early bird sales and offers live. And you can start to feel the tension is palpable. The buildup heading into the BFCM period, especially as these initial November sales. There's, there's so much in the back of all of our minds about.

[00:01:44] What is VFCM gonna be like this year that these initial November sales end of October, we get into November, is sort of like an indication of, okay, how did this comp to last year's VIP or early access sale. So the tension and the expectation is palpable in the air as it is for all of us, but that is the time of year.

[00:02:02] Richard Gaffin: Exactly, and that's one thing we talked about a little bit with Taylor last week that we're going to revisit today, which is the idea that despite the fact that right now everybody's sort of in this crazy executional phase with Black Friday is right around the corner, we got a couple weeks left before before the day itself.

[00:02:18] Actually now is also the time that you need to be thinking about 2026 as well, which is this crazy. Kind of place your brain needs to be in two very, very different places at once. One, thinking about the most intense short-term planning, and then thinking about actually the most intense long-term planning and the most crucial long-term planning of the year.

[00:02:34] So, you know, November, no fun. Daylight savings time is gone. It's getting dark early and it's tough out there. But what we have for you today a breakdown of something that we talked a little bit about with Taylor last week, which is this idea of building not one, but three. Forecasts for your business for the next year.

[00:02:53] One for the board, one for your budget, and one for the bonus. Right? And the idea there is like, it's a mix from the board being the most conservative estimate of what might happen over the next week, or sorry, over the next year rather. And then bonus being sort of an aggressive, slightly more open, basically a way to push your team towards something bigger than what you might expect otherwise. So, what we're gonna talk about today is Luke is going to kind of show us a couple examples and break down how we think about the factors that play into the different levers that you can pull to affect the board budget and bonus budgets that you build out.

[00:03:25] So I'll turn it over to you, Luke, maybe quickly give us a little bit of an overview of what each of these budgets are and then, or rather use these forecasts are, and then we can go right into your examples. Mm-hmm.

[00:03:55] Luke Austin: business trajectory. And each of those should serve a unique purpose, right?

[00:04:00] Having a, having two scenarios or three or four scenarios of a forecast that sort of live in the same sphere of expectation. That's just sort of like to gauge how how the business is pacing it gets isn't really, isn't really helpful. And so the framework that we. Operate against, as it as it relates to scenario forecasting, giving those different perspectives is that we are going to deliver a forecast scenario to the board.

[00:04:22] We're gonna deliver forecast scenario that aligns with what the budget of the business is gonna be over the coming time period, and then, and then the bonus the one that's tied to the goals and the expectations of the organization and driving them, driving them further. The names, I, I think there's it, it's helpful but just to add some more context.

[00:04:39] So. The board is going to be likely the most conservative view of the business of all, of all three of these forecast scenarios. It, it will be it's going to represent the most likely outcome of the business over the coming time period. And so we talk about this language a lot too likely to happen and what we would like to happen, and so.

[00:04:58] Board sits on the likely to happen end of the spectrum. And if there is an important in place, then it's may maybe for your bank, right? Or your capital provider. So board slash bank is kind of gonna be that most likely to happen scenario that sets the expectation for the business. Then as you move up from there, the budget is what you as the CEO, the operator, the core decision maker and the leadership team are likely going to hold as.

[00:05:24] The core expectation for how you resource and make investment decisions maybe purchase inventory, et cetera at, at, at least as a sort of main operating forecast for the business and making those sorts of decisions against. And then the, and then the bonus. Is going to be the the scenario where we, you push for something more, right?

[00:05:45] This is the most, the, the closest to what you would like to happen in the coming time period. And this is what you're gonna align on with your key leaders, with your team around setting goals, bonus expectations around, and really pushing the organization further than the capacity of both the board and then the budget forecast scenarios.

[00:06:02] And so each of these scenarios serve a really. Specific function within the organization and to have specific groups of people that they're going to be serving against that expectation. And so scenario planning, this is how we approach it when we build out profit systems. When we build out forecast for our customers, we're really looking at board budget.

[00:06:22] Bonus is the sort of three tiers oscillating in between most likely to happen, and what we'd like to happen over the coming time period.

[00:06:28] Richard Gaffin: All right. So as, as we kind of alluded to or I alluded to earlier, there are yeah, again, various levers that you can pull to develop these forecasts in a way that makes sense. The thing that makes sense for the board, the thing that makes sense as a bonus. Again, the idea is not to, for the bonus.

[00:06:44] Forecast to be pie in the sky. It also needs to be grounded in reality in some way. So let's jump into then your examples of, of exactly how we build these out and kind of what the different factors are that go into it.

[00:06:56] Luke Austin: Yeah, so there are a lot of pieces that go into our. Forecasting process, but we're gonna talk through two main inputs in. The in the planning process that we use to be able to build out these additional scenarios. One is what we call percent over model performance in our spending power model. And then the second is the impact of additional net new marketing calendar events in our event effect model.

[00:07:22] So percentage over model and then the event effect model are two of the core things that we're going to chat through because these play into. A large part of the expectation as it relates to building board, board budget and bonus forecast. And I'll caveat quickly of, there are a lot of other things that we could dive into in relation, in relation to the profit system that we build out and all the other inputs.

[00:07:44] We can talk about improving the cost profile of our delivery, right? If we move to a different fulfillment. Pro uh, provider and that uh, giving us efficiencies in our cost of delivery and modeling that out in these different scenarios based on the terms that we get to, we could talk about impact on a OV by us launching a new product line, and if our a OV for both our new or our returning customer cohorts improves or degrade as a relation to these launches.

[00:08:07] So we can talk about a lot of these inputs, but we're gonna focus on percentage of remodel and a VIN effect model as they have some of the, the, the biggest impact on how you operationalize against these three different. Forecast scenarios, board budget and bonus. So percentage over model to start, start with there as a quick refresher spending power model is an ensemble model that we build that looks at the degradation of your new customer acquisition efficiency.

[00:08:29] And so it helps us to understand what is the optimal level of budget that you should spend based on your defined business objective for that set time period, whether that be maximizing contribution margin on month one, maximizing revenue at breakeven contribution margin. Or pushing against a contribution margin outcome in defined LTV time period.

[00:08:47] And so we're able to see every level of every incremental level of $5,000, $10,000 in incremental spend, what the additional revenue outcome is and what the impact is to the contribution margin outcome over a defined time period to back us into what is the optimal budget allocation for that, that time period.

[00:09:06] So percentage over model. What it does is it alters the degradation efficiency curve for any one of these time periods. So when we have 0% over model, that is going to be the best reflection of based on the ensemble model, which is a model looking at at over 30 different individual models that we then ensemble into the spending power model.

[00:09:27] Looking at historical degradation of efficiency, categorical and competitive impacts. Seasonality and, and a bunch of other factors. So 0% over model is going to reflect most closely to what is likely to happen for the business if you continue on your current trajectory. Right? So this is going to be, this is your current degradation of efficiency based on the his, based on the history of the brand, if that continues into the future, 0% over model is going to be.

[00:09:51] Most aligned with that performance. And then as you go under or over model performance, so we can go negative percentage over model or we can go positive percentage over model that is gonna alter your degradation curve of efficiency. And so if you increase to 10% over model in a, in a specific month, what that's going to do is it's going to allow you to spend more than if you were at zero percentage over model while maintaining the same efficiency.

[00:10:17] Right? So 10% over model is gonna allow you. To you're gonna be modeling that. You're gonna be able to spend more while holding the same level of efficiency in that time period. And this could be due to a number of factors, but just to state some of the most obvious ones that we're all focused on.

[00:10:32] Okay. We are planning to increase our creative output substantially three months from now, right? And starting in March, we're, we're making conceited efforts in our creative output. And so we are gonna double our creative volume. And so we're looking we expect that to have a positive impact on our efficiency as, as you should.

[00:10:49] If you're making an investment in that area, you should be able to expect it to have some, some impact. We are. We found some ways that we are buying media that is less than optimal within our ad accounts. Through audits and conversations and bringing in folks on our team and we were making broad structural change.

[00:11:06] Media buy-in that we expect to have improvements on the acquisition efficiency and on down the line, right? Of these are the things that we expect to have a positive impact on the way that we are buying media. To continue to improve it, now we have to do is you have to make an assumption on how that's going to impact the, the, the business out.

[00:11:24] This case, how we bottle up all of those hypotheses and expectations on the actions that we're gonna take and what impact they're gonna have in the business. We synthesize that down to percentage over model. We are expecting all of those actions to be able to contribute to a positive percentage over model, to some extent for the business, which is gonna allow us to spend allow us to alter the, the curve of efficiency degradation so that we don't just keep spending at the same level of efficiency degradation.

[00:11:52] As you can see, we're sharing our screen for those looking while we're, while, while we're chatting, but what we have is, is in the spin power model, a curve where we can see the degradation of efficiency. And when you alter the percentage over model, that curve becomes less steep, right? So if you, if you're increasing your percentage, percentage over model, that curve is gonna become less steep, which allows you to spend more volume at the same.

[00:12:14] Efficiency. So percentage of remodel is the indication. It is the way that we are quantifying the expectation that we have of the actions that we are gonna take in the future, that we expect to have a positive impact on our new customer acquisition efficiency.

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[00:13:12] Richard Gaffin: So then talk to me about how the. So you mentioned sort of bringing the idea of like all of the actions that are gonna be taken to create an effect that is over and or, or rather a result that is greater than kind of the, the 0% result that's all being distilled into this idea of, let's say being 10% over model.

[00:13:32] So how do you. Is there any sort of like level of precision to saying like, Hey, these X amount of actions result in a 10% increase, or is that just sort of like a vibes thing of like, we're gonna do all these things, we kind of feel like it's gonna make this increase? Or

[00:13:47] Luke Austin: Yeah.

[00:13:48] Richard Gaffin: more precisely nail down what that's gonna look like?

[00:13:50] Luke Austin: Yeah. So, art and science may be equal parts. Right in, in this, in the forecasting process, we're, we're working on ways to better quantify the impact of some of the things you mentioned where it's like, okay, if you increase creative volume X amount. That contributing to the percentage of model expectations.

[00:14:06] So we're working on, on on building this out further as we, as we are always with, with our tools, but the specific percentage of model number that we land on in terms of the expectation is what, what we'll do is we'll look at historical months. And so we'll look at how, what has our percentage of remodel been for historical time periods when we, when we've, made movements like this in our, in our media buying, in our creative volume, et cetera. And the example we have up here is we're looking at an individual brand, and we're seeing over the course of 2025. What their spend, actual spend, actual new customer revenue, actual contribution margin from first time customers was every single month.

[00:14:46] And then we're looking at percentage over model for, for each of these months as well. And what you can see is this progression is actually is actually really strong when we look at starting in March, April through the year. Which is sort of, July 18% over model August 26% over model September 24% over model October 38% over model November 35% over model.

[00:15:09] And it's sort of stacking these positive percentage over model improvements over time which is a really good sign that we are improving against the model expectation over that time period. And, and we should expect that to continue into the future unless something materially changes around the business.

[00:15:25] Inventory positions, core, core products. But the first start in us looking at, okay, we're gonna set an expectation for percentage of our model is if I'm looking at what I think is possible to happen for the business if we keep this energy going, is looking at these recent months and seeing that we've been able to.

[00:15:44] And to beat the model outcome by 30, 35% in some of these recent months against the, against the original model expectation is that I, I'm gonna be expecting that in the future from my team to be able to contribute against, right, so into December, into January and February. That's the sort of expectation I'm going to have.

[00:16:02] Is continuing the positive trajectory of 35% maybe becomes 40%, and I can use that into the future to forecast out the percentage over model that though is going, is going to represent most closely likely my bonus scenario, right? Or some version of that, which is looking at how I've been able to, how the business has improved over model.

[00:16:23] And I'm going to continue that trajectory and actually improve the trajectory that's going to, that's going to fall in the category more of where my bonus and goal expectation is going to land. 'cause I'm looking at the historicals and I, I'm gonna impose an expectation of that continuing improvement into the future.

[00:16:39] In terms of the budget what I'm, what I'm going to look at more is yes, the historical, the historical outcomes over the course of this year, but I'll probably look at an average for the total year to kind of back into that. Right? So these recent months we've been at 30, 35% over model, but earlier on in the year we've.

[00:16:57] 20% over model, 10% over model. April we were minus 11% over model. So there's been fluctuation for sure. And so if you were to average these out, you'd get closer to 15 to 20% over model, somewhere in that range as sort of the average for the year. And that's, that's closer to what I'm going to use as the budget expectation for the, for the business.

[00:17:17] Right. Is looking at. We've made some improvements over model, but it's oscillated in different time periods there's been fluctuation. And so the average of the course of this, this year or longer timeframe is what I'm going to is how I'm going to build the starting point for my budget. Expectation sorry for my, for my budget expectation.

[00:17:34] Yeah. And then, and then moving down the line to the board expectation Border Bank is likely going to be some adjustment down from there. Likely more in line with what I saw in some of these slower months, or at least sort of like a 25, 20 fifth percentile outcome of the year. So rather than just a straight line average looking at the, looking at how these months have been distributed and seen as like in some months we were only able to get 10% over model.

[00:18:02] Right. And like that there's gonna be fluctuation like that. And so in terms of the. Board expectation, a percentage over model of somewhere in the neighborhood of 10%. There's gonna be improvement year over year. Absolutely. But it's not gonna be the 35, 40% of my bonus and likely not gonna be the 15 20% of.

[00:18:19] The budget as well. And so just right there, like that's, that's sort of a, a window into some of the things that we'll look at in building these different scenarios. And all of this, there's impacts on the marketing calendar and changes there that we'll chat through in a second here. So there's a lot of other factors, but just right there, we're able to back into, okay, going into the going into the next year for these three scenarios, my percentage over model.

[00:18:43] For my board scenario is gonna be somewhere in the neighborhood of 10 percentage over model for the course of the year. My budget is gonna be between 15 and 20%, and then my bonus is going to be somewhere in the neighborhood of 35% over model against this core baseline model. And that right there serves sort of the, the foundation of the my expectations for the efficiency of our media span and new customer revenue output over the course of next year in those three different tranches.

[00:19:09] Richard Gaffin: Yeah. Okay. So if those are sort of maybe generalized numbers, then let's talk more specifically, and actually maybe this is a good segue then into talking about the event effect model. You had mentioned the marketing calendar, so this gets in a little more. I'm imagining into the idea of like, how, how is this executed or how do we get more precise about this?

[00:19:25] So, yeah. Talk to me about how the various factors in the event affect model play into this.

[00:19:31] Luke Austin: Yeah, so the event effect model, what we do with the event effect model is we. Integrate and we pull in historical marketing moments for the last two years plus from. The brand's marketing calendar, and then we tag each of those events based on the type of event that they are. So you have product launch events, you have promotion events, you have VIP drops, you have clearance events, you have Memorial Day, you have seasonal events and and on down the line, and you have your Black Friday and Cyber Monday as well.

[00:20:01] And so what we'll do is pull in the marketing calendar, tag each of the events by the type of event that they are, and then. The event effect model goes and looks at all the events that we have in these different samples, right? So all the promotion events, and in this case, this brand that we're looking at, they have 55 historic.

[00:20:17] Promotion events that we've tagged. So 55 promotion events. They have 65 site-wide sale events, tagged 41 clearance events tags, 52 product launch events tagged. And so these, this is the number of historical events of that, those, each of these specific types and the history of the business that then get tagged.

[00:20:34] And we look at each of those each of those events and assess the impact on two specific metrics. First is the impact on your A MER efficiency for that individual day. So the new customer model looked at like the month as a whole and what you can expect in terms of your new customer acquisition efficiency.

[00:20:53] The event effect model looks at on individual days when you're running a product launch or when you're running the promotion or when you're doing a clearance event on those individual days. What is the impact on your A MER for that individual day, which is going to allow you to spend more or less than than a normal time period.

[00:21:11] And so for most marketing events. Typically you're gonna see a positive impact on a MER as an example on promotional days for this brand, there's 55 historical events. We're expecting, on average, a 17% improvement in a MER efficiency relative to a baseline, sort of evergreen day surrounding that. And so that gives us an expectation of 17% increase in A MER is going to allow you to spend.

[00:21:39] More than you typically would on another day at the same efficiency level, right? It gets at the same idea, but it allows you to do that in, in individual day. So that's the first metric impact on a MER. The second metric is the impact on our returning customer revenue relative to a normal day as well.

[00:21:59] And, and the, the. Easiest way to think about this is in, is in line with like how you think about repeat rate. So on a normal day, how much of, what percentage of your revenue is coming from returning customers? Right? And so like if on a normal day you're getting 60% of your, your revenue from returning customers and 40% from new customers, when you launch a promotion or product launch, there is some.

[00:22:22] Increase typically on the percentage of the revenue that you can expect from your returning customers relative to a normal day. So if you have 50 50 new and returning customer revenue on a normal day of the month. When you launch, launch a product launch promotion, typically what you'll see is okay on these, on these for these specific events, 70% of our revenue comes from returning customers because you have an email blast and SMS blast and you have it on the site and, and your repeat rate increases.

[00:22:47] And so that's the second metric we'll look at is the increase of returning customer revenue relative to new customer revenue on those, on those individual days. And what this allows us to do. Is to be able to input our planned marketing calendar for the coming year and then for each of those days to then see how much additional spend volume we can push through based on the impact in a ER and then what the sort of follow through returning customer revenue is based on the impact of those events to start building through the expectation of what would happen if.

[00:23:25] One, we add in more marketing calendar events, and then two, we improve the efficacy of those planned marketing calendar events through an increase in the expectation. Similar to the percentage over model, but what we can do is we model the events and then what we can what we'll do is add in additional marketing calendar events and increase the performance of the existing marketer ca marketing calendar events as a way, as a way to leverage each of these things into the board budget and bonus expectations around our marketing calendar.

[00:23:57] Richard Gaffin: Okay, so this, again, the idea is like, like we were saying before a little bit obviously like a 10%, 20%, 30% over model result is gonna have to be the, has to be caused by certain specific actions. What we're seeing here is a list of actions taken in the past and kind of precise measurements of the improvement in acquisition at. Among other things, right?

[00:24:17] Luke Austin: Yes.

[00:24:17] Richard Gaffin: it, kind of like, to summarize it sort of in, in basic terms would be something like well, let's see here. This example, let's say a VIP drop results in a 366% improvement in a MR, which is huge, right?

[00:24:31] Luke Austin: Mm-hmm.

[00:24:33] Richard Gaffin: the the logic then the most at its most simple would be, let's just do a third one instead of two of them. year. And let's see what that, what do impact, do we think having an additional day like that in our marketing calendar is going to look like and then kind of rinse and repeat with all the sort of other different events here and then potentially creating new ones and all that type of thing as well.

[00:24:53] But the idea

[00:24:53] Luke Austin: Yes.

[00:24:54] Richard Gaffin: here's a very simple menu of items that you can pick from and say, Hey, let's plug this in an extra time or two and see how that affects. Our performance overall and pushes us towards beating the model in that way. Is

[00:25:07] Luke Austin: Yes, that that's exactly right. Yeah. So building up from board budget into bonus. So with board, where we'd start is integrate the marketing calendar and then for 2026 for the rest of the year in 2026 plan. The major marketing moments that are gonna be most in line with what we did this year, right?

[00:25:24] There's, there's likely a subset of your main marketing events. You do Father's Day you do Veteran's Day, black Friday, Saturday, Monday, and then maybe one earlier on in the year, right? Like you have your major events and you do two product launches. One, one in the spring, one in the fall, or something like that, right?

[00:25:38] And so you build the marketing calendar to be similar and most in line with what the activities are that you engaged in this year and your key pillar moments. And then for those, for those moments. The other thing that we built in, similar to the percentage over model is the ability to have an expectation for if these moments will underperform or outperform the baseline expectation.

[00:26:01] Similar like we do on percentage over model. We do this on an individual basis where on a 0.25 standard deviation increment to the upside and downside, we're able to make an expectation for each of these events to under or outperform. And as we move up, so if we are, we're gonna say that these these moments are gonna outperform the baseline expectation.

[00:26:19] What that's going to mean is the impact, the A MER is gonna be even more positive, right? And the retention expectation is gonna be higher, whereas as underperform is gonna go the other way. So, for the budget forecast, our marketing calendar, pretty close alignment with what we did this year, our core pillar moments.

[00:26:34] And we are going to have a, a normal sort of baseline expectation for the impact of these moments. We're, we're gonna set the. We're not gonna have 'em underperform, we're not gonna have 'em outperform. We're just gonna have like the baseline consistent model. That's, that's the starting point for how we think about budget.

[00:26:50] Sorry, the board and then in budget, what we're gonna do is. We're gonna start to layer on some of the new things that we are planning for this year because we do need to plan resourcing against those inventory, purchasing, et cetera. So we're gonna layer in that new marketing calendar sale that we are planning in the summer that we didn't do last year.

[00:27:08] We're gonna add in the new collection drop that we're doing in February that we didn't do last year, and we're gonna set a baseline expectation around what those are going to be. And that's going to serve as closer reflection of what our budget forecast is gonna be. And then as we move up to bonus and goal, then what we're gonna layer on is.

[00:27:28] Some of the bigger swing moments, some of the things that we're not sure how they may impact, if they're new marketing calendar moments that we never tried before, they're to their total sort of deviation from anything we've done historically. It's really hard for us to assess what the impact is going to be.

[00:27:42] We're gonna add those in to, to make them work. And then in addition to that. What we're going to do is set an expectation for these moments to outperform the baseline expectation as well. So we're going to add in the additional moments, and then we are gonna set an expectation for the existing mar marketing moments to outperform, whether it be slightly outperform or or substantially outperform sort of the baseline expectation in the model.

[00:28:06] Now, why would we do that? Why we do that is every time you run a sale or every time you do a product launch, you learn things about. This segmentation that you're using in your email list, you learn about the cadence of your email and SMS that doing the VIP early launch, SMS at 4:00 PM PST, and then the email at 6:00 PM local following that is actually a way better way to do it than to do it the inverse way, right?

[00:28:28] So every time you run one of these things, you should be, and the team should be learning ways that they can improve the outcome. So if you run the same Black Friday, Saturday, Monday. Promo this year, as you did last year. You should expect there to be an outperformance because there's things you learned and can improve upon.

[00:28:43] And so that's what's going to lead into the bonus scenario of this, is we're gonna add in additional marketing moments and we're gonna set an expectation for them to outperform against the baseline. So the event effect model. How it plays into this. Is budget most closely aligned with last year's marketing calendar?

[00:28:59] No expectation of over performance budget is going to be adding in the additional key marketing moments and product launches because you need to be able to plan for those from a resourcing and purchasing side of things. And then bonus is going to be the additional marketing moments plus an expectation of, of over performance for those individual days that's going to lead to a higher outcome that the team can push against.

[00:29:21] Richard Gaffin: Okay, so, so then to clarify, because I just wanna make sure that we have this straight, is that it sounds like the, 'cause you had mentioned on, on the, on the bonus plan, including these sort of major swing marketing moments, but it does sound to me that like. Obviously like the, the ones included in budget are the ones that have to be budgeted for that have some cost associated.

[00:29:43] So is it like the, the additional marketing efforts in the bonus are things that don't have a cost associated with them or don't scale with volume or, or rather the cost don't scale with volume or, or how does that, how would the big swing work without incorporating the budget piece, I guess? Or does it still incorporate that?

[00:29:59] Luke Austin: Yeah, they, yeah, there's so the ways it might go is, let's say you have. Let's you have excess inventory in a subset of SKUs, right, in a subset of SKUs or in a certain collection. Or you just need to move things at cost for the, for the sake of producing cash flow or, or potentially even below cost.

[00:30:20] That's inventory that you have sitting in the warehouse right now. That you, you're not planning to go buy new inventory against and your existing team can go execute the ad campaigns against and design the ads for et cetera. So there's not additional resource you needed, but you've never done an end of season sort of inventory clearance sale prior, and you really don't know how it's going to play out.

[00:30:41] And so that could be an example of one where budgeting for the impact of that as it relates to your p and l. Isn't isn't really necessary related to your cash flow statement like that, that's definitely consideration there. But as it relates to the p and l outcome, no idea how this is going to perform.

[00:30:56] It's a subset of ones skew that you're trying to move at the costs. It's an offer you've never done before. There. The resourcing considerations inventory is already bought, isn't there? So that could live in sort of the bonus like bigger, bigger swing net new thing. Let's see. Let's see how it comes to fruition.

[00:31:12] To your point, as much as possible, the additional marketing moments that we're planning, if we're really going to index against them at the level necessary, including those in the budget, is gonna be most helpful for sure.

[00:31:22] Um, and then the bonus scenario is gonna be okay, each of those planned marketing moments, but outperforming the baseline expectation of how we actually execute a promotion or a product launch or VIP drop.

[00:31:33] Richard Gaffin: Gotcha. So then to kind of like re resummarize this, basically the board or rather the board forecast is kind of like. Like we said, sort of the, what's gonna happen if we improve slightly year over year and don't really do anything differently. budget forecast is that plus marketing moments equals X amount percentage over model, and then the bonus is roughly speaking board plus marketing moments.

[00:31:57] Plus we crush the marketing moments,

[00:32:00] Luke Austin: Yes.

[00:32:01] Yes,

[00:32:02] that's right.

[00:32:02] Richard Gaffin: that there's like additional actions being incorporated into the bonus. It's. If we're able to actually push more budget than we thought we were gonna be able to, if we're approaching these sales with the learnings from the previous year sales, there's definitely potential for us to do better than we thought we might do otherwise.

[00:32:18] And so that's kind of what the bonus budget is or, but the bonus forecast is rather,

[00:32:22] Luke Austin: Yep, that's exactly right. And the only thing I'd add is there there's a lot of conversations that go on in the planning process around. Hey, we've never done an international Women's Day sale, or we've never done a pre-fall collection drop or whatever the thing might be. And it might be the marketing leadership team, or it, it could be anyone, but someone's trying to make a case for why this thing is gonna be net positive for the, for the business, right?

[00:32:47] And there's potential questions around what the specific impact, yes, we know it'll help, but how much additional revenue is it worth us doing another sale? And the impact on. Our list or the brand or whatever it may be. So there's all these conversations that go into, okay, these net new moments that we're going to play out.

[00:33:01] And so that's, those are ones that could show up in the, in the bonus and goal expectation, right? Which is like, here's the new things we want to be able to push for this. Here's the impact to the business. But we're creating those sort of get buy-in at the leadership. Level, the key decision maker to show, okay, we're going to index the resource in this way, but it's going to lead to this outcome.

[00:33:23] And that'd be a helpful way to do it. So that'd be the only way, other way that like these additional marketing actions may show up in the bonus and goal section, if it's like we are needing to still make the case and get buy-in at this level to be able to engage in these additional actions.

[00:33:36] Richard Gaffin: Gotcha. right, cool. Anything else you wanna hit on this? Anything else that you feel like we need to kind of pull outta the subject?

[00:33:45] Luke Austin: No, I think, I think we hit, I think what I would, what I would summarize is, and a lot of this conversation goes into like we've created the sort of framework and inputs into the system. And there's, and we have models that sit behind these that is a lot of science that goes into these models. But then as it goes through this planning process, there's an equal amount of art and science that sort of converges here.

[00:34:07] And what I would say is most helpful is. All forecasts are gonna be wrong. We all know that we expect these board budget bonus forecast scenarios to be wrong. To some extent. We you should expect them to be higher than what your current forecast is. That's what, that's what we see across our data set, but the core.

[00:34:26] The core benefit of engaging in this process and being able to use the inputs like percentage over model of, in effect model is you can quantify how much you are off by in either direction. And so it's not, it's not enough to know, okay, we are off a budget forecast by by 5%, and that's it. The, the question for everyone is, okay, why, what, what led to that?

[00:34:48] Was it our new customer acquisition efficiency? 7% of remodel instead of the 10% that we have forecasted. Okay. That's really helpful. What specific months was it behind? Now you actually have actions that you can go take, or was it these marketing moments that we had planned, we expected to outperform by by two levels against the baseline expectation.

[00:35:07] And they didn't, they actually underperformed because this year we sent them to a collection page on the website instead of a, instead of a homepage with a sort of site wide banner, what, whatever the levers may be, but being able to quantify the actual outcome of each of these marketing. Actions and your forecast is the critical piece to then be able to solve and improve upon that in the future, rather than just a, an expectation of, okay, here's the forecast, here's what we're going, what we're going to do, but not being able to decompose that into the individual inputs that then you can go and actually affect and be able to track against and give you and your team clarity on when you're, when you're off pace, when you're off plan, why specifically are you off?

[00:35:48] Richard Gaffin: That makes sense. Well, as, as we always say, or as Taylor especially likes to say, all models are wrong, but some models are useful. And that's that's what we're building around here. In fact, three models that are all all useful in different ways for specific people. So, I'll, I'll make my plug as I always do at the end here.

[00:36:02] Comment thread code.com, hit the hire us button if you'd like to talk more about having us build this out for you. Just, you know where to find us. Go ahead and get in touch. We'd love to talk to you more about it, but I think that's gonna do it for us. So, for Luke Austin, I'm Richard Gaffin. Take care, everybody, and we'll talk to you again next week.

[00:36:19] See ya.

[00:36:20]