As business owners and managers trying to operate in these extraordinary and uncharted times, my advice is to hope for the best and plan for the worst.
Because we don’t know when things will turn around and there’s so much uncertainty, it’s easy to say it’s all too hard to do meaningful business planning. I beg to disagree!
Now is just the time to do some straight-forward scenario planning, along with risk assessments and identifying critical strategic and operational priorities.
In this blog we’re sharing a series of questions and suggested actions to help guide you through that process.
What is your objective?
There should be one objective in undertaking planning now, and that is to put you in the best position to have some degree of certainty, stability and predictability about:
- anticipated demand from your clients
- supply and delivery of your products and services
- involvement and safety of your people and teams
- liquidity to continue to operate effectively
- being opportunity- and growth-ready for a bounce back.
Questions to identify key issues in your business
We’ve come up with some questions for you to consider in relation to your own business – large or small, corporate or a private enterprise – to help you plan for a range of scenarios.
We’ve started with the key assumption that the physical/economic shutdown will last for at least six months. We are of the firm view it would be foolish to plan for an earlier reprieve than this, although if there is one then hopefully that is a bonus for at least some of us.
- Is the demand for your products and/or services impacted (how – positively or negatively)?
- Is that impact temporary/based on the extent of the shutdown, or is it likely to be more far-reaching due to the economic and social impacts that may remain post the depths of the health crisis?
- How are your customers/clients being impacted, and therefore how might that impact you and what you offer and/or their ability to make purchasing decisions on your offering?
- What does your income look like under these scenarios (weekly / monthly / over the next six months)?
- Do you have ‘easy’ access to your raw materials and other supplies critical for the delivery of your product or services? Do you anticipate this access continuing, or will it become restricted?
- Do you have ready alternatives?
- Is your team safe from COVID-19 in the current work environment?
- Have they all the relevant tools and platforms to be effective and productive?
- How are they coping with the new ‘remote working arrangements’? What additional support could be offered?
- If demand for your product or service slows and capacity grows, or vice versa, have you explored alternative resourcing arrangements and potential team restructuring or temporary changes?
Liquidity and commitments
- What are your current financial and related obligations (daily / weekly / monthly) in relation to:
- employees (salaries and wages, accrued entitlements, training, professional development)
- finance repayments (principal, interest, balloon payments, prepayments on future purchases, guarantees and retentions)
- other regular subscriptions/payments?
- How do the above, and your assessment of short-term demand, impact cash flow?
- What changes could be made to your commitments to ease the burden?
- Beyond six months, if things were to resume some sense of normality (will it ever be the same?), what is the demand outlook for your products and services?
- What do you think will be the likely ‘early stage’ triggers of a turnaround?
- Will there be pent-up demand that will bounce back strongly, or does this crisis mean a change in the way you provide your services and your associated business model?
- What will your business need to have when/if things bounce back to maximise the opportunity (i.e. be ahead of the curve), that it doesn’t have in place now?
Summary of the planning process
Using the questions above to help you think about and gather the information needed for an informed plan, we suggest the planning process should be as follows:
Step 1 – Review: Objectively review the lay of the land as a result of all that is going on.
Step 2 – Anticipated forecast: Build a new cash flow forecast for your business based on the possible scenarios.
Step 3 – Take 5 immediate actions (these will impact your forecast from Step 2):
- Identify cost reductions (reduce outflows)
- Identify opportunities to delay or reschedule commitments (rearrange outgoing commitments)
- Identify additional sources of capital (access funds)
- Identify initiatives to sustain demand (retain inflows)
- Identify government and other support which is beneficial (access support).
Step 4 – Business plan: Develop a 3–6 month practical and actionable plan.
Step 5 – Implementation: Tightly manage, refine, review, monitor and progress!
Why we’re following our own advice
Doing business planning in a time like this might sound all very textbook and theoretical, however I assure you JPAbusiness is undertaking this planning and we’d strongly recommend it for our clients.
We are, in fact, assisting a number of past clients right now, by helping undertake scenario planning to develop three cases that might play out for their business over the next three to six months (i.e. a pessimistic, base and optimistic case) and we are developing practical actions, measures and tips, along with fall-back remedies.
Not only do these plans give greater stability and certainty to ourselves and our clients, but they also provide the same to employees and, importantly, can provide a ‘bankable’ business case for a financier in a time of a business’s greatest need – survival!
How we can help you
JPAbusiness is offering a range of business restructure and advisory services to assist you in the current difficult climate.
We can guide you and your team through the scenario planning process as a sounding board and facilitator, or alternatively we can offer an all-inclusive service which starts with a complimentary Business Health Check on a free, no-obligation basis, and then delivers a six-month, practical and useable business plan with scenarios, supporting financial and operational analysis, and projections and key implementation actions.
If you think you may need some guidance and support with this process, contact the team on 02 9893 1803 or 02 6360 0360 for a confidential, no-obligation consultation or quotation.
James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.