Here, SCR Growth Hub business advisor John Hassall of JRH Business Consultancy Ltd, gives some guidance on planning for the unknown in these uncertain economic times.
I have been reminded during my many discussions with business owners and leaders over the past week of the phrase that the ex-United States Secretary of Defence, Donald Rumsfeld, used when he famously responded to a question about the Iraq conflict by saying: “There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know”.
This phrase epitomises what most business owners and leaders are going through right now; how do we plan for the future when no one knows what’s going to happen next? Especially when we don’t know how the economy is going to react in the short, medium or long term.
Although the current economic situation is unprecedented, in reality dealing with known unknowns is normal in the world of business.
When we start a new business, we have no idea if it will be a success. When we launch a new product or service we do not know if there will be great demand. When we open a new office or factory, we can never be quite sure if we can expand quickly enough to justify the investment.
The reality is that we never really know. What we do know is that if we make a plan based on the facts in front of us and we commit wholeheartedly to that plan, our chances of success are greatly increased. Of course, there will be challenges along the way, naturally, not everything we plan will come to fruition and we may even have to change direction a few times.
But here’s the thing – that first vision, that commitment, that plan was the fuel that sustained us on the journey and in my experience, that usually leads to a good outcome.
This terrible crisis we are all experiencing offers us one crumb of comfort – the chance to start again. Amidst all of the heartbreak and tragedy business owners and directors can use this time to think deeply about your company and the changes you are going to make in it. The world is inevitably going to be a very different one from the one we exited on the 23rd March 2020.
Whether we like it or not, this crisis is a watershed for change and those business owners and leaders who embrace this time are in my view the most likely to succeed in the new world.
So where do we start?
I don’t believe anyone has a blueprint for guaranteed success, but what I do know is that every business needs a plan. Your business needs a plan for the next two months, the following six months and then for a minimum of 12 months after that.
Those businesses that have a plan, once lockdown is over, need to make sure their teams are on board and execute their strategy with the passion, energy and enthusiasm of a new start-up. This will make them best placed to overcome the many challenges that lie ahead.
Business owners need to be thinking about planning for the future and that needs to start with some fundamental early steps.
Stage 1 – May and June
In many ways this is the easiest stage as there are many known knowns. By now you probably have a very good idea of what your income will look like over this period. You know what government support you will receive, and you know what your amended overheads are looking like.
There are also some known unknowns. When will your business be allowed to return to work? What will returning to work look like? How will your team react to the changes that may be imposed upon them?
My checklist for stage one is as follows:
- Review your rolling 13 week cash flow forecast on a weekly basis – in many instances daily.
- If there is going to be a requirement for additional cash, know when this is likely to happen and take action to fill this gap right now e.g. apply for a Coronavirus Business Interruption Loan.
- Stay close to your team – call every team member on a weekly basis (furloughed and working) to ask how they are getting along.
- Find positive reasons to stay in touch with your customers – can you help them to solve some of their problems?
- Create a simple business plan for the next 18 months (1st July 2020 to the 31st December 2021)
○ What do you want your business to look like – is it the same as before or different?
○ What do you want the structure of your business to look like?
○ When and how will you bring your team back to work to turn this plan into reality – phased, all at once, possible redundancies?
- Now map this simple business plan into a profit and loss forecast for the same period – run three scenarios:
○ Mildly optimistic
- Does your plan work on the pessimistic assumption? Can you scale-up if either the realistic or mildly optimistic assumptions start to come to fruition?
- If you decide to pursue the realistic or mildly optimistic strategy, do you have the cash reserves to see it through if the pessimistic scenario becomes your reality?
- Take time to refine your thinking – don’t rush.
- Write down your timetable for implementation.
After completing this first phase of planning there are two further stages, which I will discuss in my next blog, but for now, I hope this has been useful and that this helps to give you a structure for your planning as your business emerges from the impact of Covid-19.