Zero-Based Budgeting (ZBB) is a budgeting approach where all expenses must be justified for each new period, starting from zero. Unlike traditional methods that use last year’s budget as a baseline, ZBB makes sure every dollar aligns with current strategic goals.
Zero-Based Budgeting (ZBB) as strategic growth driver
The days of “growth at all costs” are no more. Investors now demand profitability alongside growth, and the CFO’s job has evolved to reflect that shift. This is where Zero-Based Budgeting (ZBB) steps in, not as a blunt instrument to cut costs, but as a precision tool to realign resources with strategic priorities. Think of it as a smarter, leaner way to operate, and one that doesn’t just trim fat but channels every dollar into driving innovation and staying competitive.
ZBB works by starting from a clean slate: every expense must be justified as if it were brand new. The goal is simple: spend smarter, not less. It’s about cutting what no longer serves the company’s vision while doubling down on initiatives that create real, long-term value. At Backblaze, for instance, this approach saved $8 million, which wasn’t just left in a rainy-day fund. That money was reinvested into growth projects, fueling its transformation into a “rule of 40” company, a gold standard for balancing growth and profitability.
“The core focus of ZBB is on creating a financial engine that powers sustainable, strategic growth.”
Start ZBB with a clear strategic vision
ZBB is primarily concerned with aligning your budget with your company’s mission. Start with a clear question: where are you heading, and what capabilities will get you there? Without this strategic compass, ZBB can feel like aimless cost-cutting, which undermines its true potential. Every expenditure should be evaluated for how it contributes to achieving your company’s goals, whether that’s entering a new market, expanding product offerings, or boosting operational efficiency.
Take Backblaze as an example. When the company decided to focus on enterprise clients, it used ZBB to evaluate every cost through the lens of that goal. Instead of cutting blindly, they channeled funds into developing the capabilities needed to thrive in the enterprise space. The result was that they turned an operational cash flow deficit of -$10 million into a positive $8 million in just one year. That’s a strategic transformation. Starting ZBB with a clear vision makes sure every dollar you spend gets you closer to your objectives.
Executive alignment as a key factor for ZBB success
ZBB doesn’t work if the C-suite isn’t all in. It’s not enough for the CFO and CEO to see the value; every executive needs to adopt a “zero-based” mindset. This means questioning every historical expense and considering its relevance to today’s strategy. Without alignment at the top, ZBB risks being written off as another tedious financial exercise instead of the game-changing tool it can be.
When leaders see ZBB as a way to fund their priorities, they get excited. The focus here is on unlocking resources for the projects that matter most. To get buy-in, make it clear how ZBB can fuel growth. Aligning leadership behind this vision often involves open dialogue (strategy sessions where every department head sees the bigger picture). When executives embrace ZBB as a tool for transformation, the results speak for themselves. It’s a shift in mindset that turns budgeting into a strategic advantage.
Use ZBB to enable strategic business model shifts
Every company evolves, or at least it should. Whether you’re pivoting to a new customer segment, scaling upmarket, or launching a new product line, ZBB is a powerful tool to guide those transitions. Instead of blindly continuing past spending habits, ZBB forces you to evaluate each dollar against your current goals. It identifies outdated expenses that no longer serve your strategy, freeing up resources for initiatives that matter.
For example, when Backblaze decided to move upmarket, ZBB highlighted legacy costs tied to outdated processes. Through reallocating those resources, the company was able to develop enterprise-grade capabilities, which was exactly what it needed to compete in its new target market. This is where ZBB shines as it shows you where to cut and where to invest.
“The key here is balance. ZBB makes sure that while you’re driving new growth, you’re still maintaining the core strengths that brought you this far.”
Measure ZBB success beyond cost savings
If you’re only looking at immediate cost savings, you’re missing the bigger picture. Sure, saving money is nice, but the real value of ZBB lies in its ability to transform your business. How do you measure that?
- Start with capital efficiency. Are you getting more out of every dollar?
- Then look at capability building. Have you gained the expertise and tools needed to succeed in new markets?
- Finally, assess how well you’re maintaining your competitive edge while expanding your reach.
At Backblaze, helped them achieve four consecutive quarters of EBITDA positivity while entering new markets. That’s a prime example of success beyond savings. ZBB drives measurable, strategic outcomes, from improving operational profitability to opening new revenue streams.
Build long-term organizational value through ZBB
The thing about ZBB is that it’s not a one-and-done deal. The most successful organizations make it a core part of how they operate. When you commit to ZBB as an ongoing process, you create a culture of continuous improvement and strategic alignment.
At its core, ZBB fosters agility. Markets shift, priorities change, and opportunities arise. With ZBB embedded in your financial planning, you’re always ready to respond. Look at Backblaze. Through maintaining ZBB discipline, they managed to achieve sustainable growth while consistently reinvesting in key initiatives. That’s the kind of long-term value ZBB delivers. But let’s be clear, this requires commitment. Leadership must communicate the purpose and benefits of ZBB clearly, and strategic priorities need regular revisiting.
Key Takeaways for CFOs
- ZBB aligns spending with growth goals: By starting from scratch each budget cycle, ZBB makes sure every dollar supports strategic priorities, driving innovation and competitive advantage. CFOs should use ZBB to fund transformative growth rather than arbitrary cost-cutting.
- ZBB fuels business model shifts: ZBB helps reallocate resources from legacy processes to key growth areas, letting companies pivot or expand into new markets. Leaders should regularly evaluate which expenditures no longer align with current business goals.
- Executive buy-in is key for ZBB success: ZBB requires full alignment across the leadership team, encouraging all executives to view it as a resource allocation strategy, not just a budgeting tool. Collaborative decision-making strengthens focus on funding high-impact initiatives.
- Success metrics extend beyond savings: The true value of ZBB lies in improved capital efficiency, capability building, and sustained competitive advantage. CFOs should track these KPIs alongside financial savings to gauge ZBB’s long-term impact and build up continued agility.
