Accept Change. How can I adapt my Business Plan to be Stronger
There is no reason not to plan. Now is the time to go back to basics and identify the challenges and brighter horizons for your business.
With the immediate panic behind us – and some very long hours worked – clients are now asking how we should adjust our business plan to account for this global crisis.
Genuinely, my response is, keep the business plan as it is.
Keep the objectives for the year as they are. We need to find new ways of achieving them.
Bin Scenario Planning
Businesses have been considering a multitude of future scenarios. When it comes to this, proceed with caution.
Just to give you a quick definition, scenario planning represents different possible outlooks for the business future. Businesses form an idea of possible future scenarios and how each would affect the strategic objectives.
In all honesty, scenario planning can be time-consuming, chaotic, and a potentially stressful exercise. Look at it this way, would you have predicted where we are today at the end of 2019? None of your proposed scenarios could ever be played out.
There is one scenario to concentrate on right now. It represents a variation of:
- There is a global pandemic
- The UK is in lockdown
- Most businesses are shut
- You and your team now work from home
- Schools are closed. You look after your children full-time with no support
- Your Revenue has been slashed in March, April and May
- Your future Revenue forecasts are hugely reduced
- There will be a global recession
- You will need to get leaner
- Some of your customers will not survive
That should be enough to get your head around for now.
Let’s Go Back To Your Objectives. No…Let’s Go Back Even Further
Your Business Plan has to always start with Your Mission and Your Vision. I have provided a link to two previous blog posts on each.
Your Mission Statement is your “Who”, “What”, and “Why”. It could be up to a page long and defines your purpose and core principles.
It is a very broad brush and never targeted at specific customers or percentage margins.
The vision statement enables you to detail which direction you want your business to head in.
A well thought out vision statement will save you time and the possibility of making the wrong decision when opportunities suddenly arise. They will arise.
Hopefully taking some time to review the above can bring new context to this crisis.
Ask yourself, has either fundamentally changed over the last six weeks? Is your business still relevant, all things known? This is where the winners will be. Those businesses who are relevant within their marketplace and for their audience.
Now that you have revisited your Mission, your Vision, we have kept our Business Plan for the Year including our Objectives, we just need to rethink how we can achieve them?
Now, Let’s Forecast
This is the aspect that you need to consider and change. Your original forecasts for Spring, Summer, and possibly Autumn, need amending.
The place for you to start is with sales. Business planning, forecasting and budgeting MUST ALWAYS start with Sales.
It has always stunned me when I see ‘sales’ is covered in just one line on the default P&L (profit and loss). Businesses like to separate “Printing and Stationery” costs from “Postage and Courier”, but it is naive to think that sales can be covered in one single line.
I recommend you split your monthly sales across a few lines. If you are a small business, like me, then you might be able to have a separate row for each customer. If you are bigger, then I would split it out by Service Type, Market Segment, Customer Type, or Geographical Location (whichever is most helpful to you).
Ask yourself, which revenue segmentation would improve your decision making? Why not hard-code it into your Accounting software? I bet your accountant hasn’t recommended that!
The next step is to obtain an accurate set of accounts that can detail monthly Revenue within each segment for the last six to 12 months.
Now, it is time to forecast for the next six months.
- What and Where are the shortfalls?
- Has Revenue been equally cut across every segment? Probably not.
- Has the number of clients been reduced across every segment? Probably not.
- Has the number of projects been reduced across every segment? Probably not.
- Which segments still appear to be intact?
- Where are you going to make up the shortfalls?
- What is the average revenue per client or per project?
- How many clients do you need?
- Which services are people still buying?
- Which industries are still buying?
- How are you going to achieve sales in these areas?
- Who do you need to help you?
- What specifically do you need them to do?
That is all Business Strategy is. Break it down. Slow it down. Keep it real simple.
- What do you need?
- How can you get it?
- Who could help?
And the Business Plan, Mission, and Vision all stay intact.
Let’s Bring To A Close
You will know the decisions you may need to make providing, you map out your sales forecast. You adjust your costs accordingly and compare future performance against this forecast. I would suggest you do this monthly.
If you keep on missing your forecasts, then you will need to continue making bigger decisions, but you will already know what those decisions relate to.
Having a commonsense business plan is about setting expectations for yourself and your business.
Know what you should be doing, what you think you should be doing and where you should be starting. It provides the basis to build on and longevity for your business. Having a plan can help save the day.
The role of the Virtual Finance Director does not need to be a full-time overhead to provide confidence and commitment to your business. I share and help simplify financial performance, planning and strategic positioning for business owners and investors who just want their world to be uncomplicated and thrive.