Boundary conditions represent the range of financial limits that a board agrees upon with a CEO in the process of setting a budget.

Third quarter is a great time to begin prepping for the budget creation for the following year. The first step is the creation of Boundary Conditions.

Example Boundary Conditions

• Boundary conditions for children of various ages:
• • 8 year old - please go outside the gate without permission
  • 16 year old - please be home before 11pm
• Boundary conditions for a venture backed startup:
• • Target Revenue Growth: YE 📝ARR growth of 120%, 100%, 80% in each of the following three years.
  • Target Runway: Manage cash burn at Target Revenue Growth to make cash last 24 months.
  • Implications:
  • • 📝EBITDA no greater than $X
    • Operating Margin no greater than Y%

Contexts

• 🏷️#dictionary
• 🏷️#the-book
• 🏷️#weekly-accounting-lexicon
• 🏷️#weeklyaccounting