Budgeting for a rebrand? Explore your organization’s OpEx/CapEx policies

Budgeting for a rebrand? Explore your organization’s OpEx/CapEx policies

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Thursday, May 5, 2022 | Eniana Vrenozaj, Eli Greenspan

If you’ve recently made the decision to rebrand, you know you’ll need to answer two fundamental questions: How much will this project cost? And how long will it take to roll out?

But there’s a third question you’ll need to consider in order to build a realistic implementation plan: How will your organization pay for your rebrand?

Some organizations piece together a rebranding budget using operational (i.e., OpEx) dollars from multiple departments. Others capitalize some or all their expenses as a way to spread out the financial impact to their bottom line (i.e., CapEx).

There’s no right or wrong way to budget for a rebrand — as long as your financial projections are accurate and comprehensive. Whether you use CapEx resources, OpEx dollars, or a combination of the two, be sure you understand how each funding source works. Then, carefully navigate the policies and procedures specific to each category.

Here are 3 questions to explore at your organization to develop a plan that meets your needs.

What is our organization’s philosophy about using CapEx dollars to pay for our rebrand?

As a marketing leader, you likely manage a robust operating budget for your division. As such, you’re familiar with your organization’s annual budgeting process and understand the rules for spending the dollars available to you.

But those governing principles might be entirely different for capital expenses. So, if you want to put your rebrand down the right path from day one, it’s important to know your organization’s official capitalization policies early in the implementation process You’ll need a firm grasp on what expenditures qualify as a capital expense and which fall within the operational realm.

Capital budgets must comply with GAAP

There’s no one-size-fits-all approach to creating your CapEx vs. OpEx spending plan. It comes down to what’s best for your organization. Plan to have a conversation with your CFO about your organization’s approach to capital spending.

Your CFO will be able to shed light on the ins and outs of your governing philosophy. Some organizations can justify their entire rebranding as a capital expense, while others adopt a different approach. Some opt to pay for the entire rebrand out of operational dollars.

The most important thing to remember is that your organization is beholden to generally accepted accounting principles (GAAP) when making decisions about your rebranding budget. Again, your CFO and other accounting team members will guide your organization’s approach.

Capital budgets can carry over year-to-year

One key advantage of capitalizing as many rebranding expenses as possible is that those dollars will likely remain available to you across fiscal years. By contrast, operating budgets are generally “use it or lose it” within a certain fiscal year; any unspent dollars disappear when your fiscal year concludes.

Capitalizing large expenditures — such as the cost of converting your signage and website — provides much-needed flexibility when implementing your rebrand. If circumstances prevent you from spending your budget in the fiscal year you planned, those dollars remain intact for you to utilize later.

Are there CapEx approval or spending policies that will impact our rebrand implementation timeline?

Operational budgets are often simpler and more straightforward to manage than capital budgets. Obtaining approval for a capital budget can be a significant hurdle to clear. In fact, some organizations make decisions by committee and only approve capital requests once or twice a year.  In addition to the competition you might face from other capital projects seeking approval, if you miss your window to submit your budget request, it could significantly derail your implementation timeline.

To that end, make sure you know when your organization makes capital funding decisions and keep the specific criteria they require in mind when submitting your request.

Once your budget is approved, you’ll also need to know what process to follow to access the funds available to you. For example, you might be required to submit an RFP to multiple vendors for any large-scale purchases. Or there may be specific purchase orders or tracking mechanisms to use. Take some time early on to understand these details so you can avoid holding up the conversion of high-profile branded assets.

Which branded assets will we classify as CapEx vs. OpEx?

Taking a complete inventory of the branded assets you’ll need to convert — and developing a plan for when and how to transition each one — is one of the most important elements of rolling out your rebrand. As you develop your strategies, make note of how you’ll classify each expense along the way.

Branded assets that typically fall within CapEx

At a minimum, most organizations capitalize the cost of rebranding their signage. Because the value of the investment is depreciated over a period of years based on each sign’s estimated useful life, it makes sense to allocate this significant cost as CapEx.

Some organizations look at the price of each sign individually and only capitalize those that surpass a minimum threshold (e.g. $2,500 or $5,000). Others bundle the entire cost of signage together and capitalize the entire expenditure. Some even include related fees such as design work or site surveys.

You might also consider making the case to capitalize the cost of rebranding your fleet vehicles – especially large-scale assets like helicopters and planes – and your investment to rebuild or redesign your website to reflect your new brand.

Again, the decision about how to treat each scenario depends on your organization’s policies and philosophy.

Whether you use CapEx resources, OpEx dollars, or a combination of the two, be sure you understand how each funding source works.

Branded assets that typically fall within OpEx

You will typically use operational dollars to replace branded assets such as marketing materials, sales collateral, business cards, fact sheets, and packaging. In fact, a smart way to reduce the financial impact of your rebrand is to update lower-profile branded assets when they are due to be replaced operationally.

Just remember: you must use operational dollars in the year for which they’re budgeted. So, if you’re planning to use OpEx funds to cover significant portions of your rebranding expenses, don’t let the end of a fiscal year pass you by without spending those dollars. Consider ordering items you’ll need in bulk (vinyl for signs, ID badge stock, etc.) if there’s a chance you won’t spend your entire budget before the fiscal year is over.

Building a sensible rebranding budget starts with understanding your organization’s CapEx/OpEx policies

Rebranding can be a powerful way to propel your organization forward and increase your company’s market value. Even so, a project of this magnitude comes with a substantial price tag. Therefore, make it a priority to understand every option available to you to reduce the financial impact on the balance sheet.

Take time to talk with your CFO about your organization’s philosophy around capital budgets. Factor in any unique requirements related to obtaining approval and spending CapEx funds. And carefully consider which branded assets might qualify for CapEx vs. OpEx allocation. Creating a savvy rebranding implementation budget is within your reach.

 

 

 

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