I hear lots of noise about planning in times of uncertainty…

My first question is:  

When were things ever certain?  

The moment we convince ourselves that our business, our industry, our life are static and certain, we’re toast.   Static plans designed for a dynamic world are bound to crash and burn.  And, while current times seem especially dynamic, the truth is: the world is dynamic.  Always has been.

The real challenge isn’t planning for uncertainty, it’s planning for reality.

One gift of the pandemic is that it has disabused us of the notion of certainty.  Uncertainty is now explicit…in our plans, in our business, heck in pretty much all parts of life. 

You may be hearing:  

“We can’t fill that position…there may be no job in six months.”

“We can’t budget…we don’t know what next year will be like.” 

“We can’t launch new products…we don’t know if people will buy them.”

Here’s the truth:  

WE’VE NEVER BEEN CERTAIN OF THE FUTURE.

Seriously.  Never.  But we went around making job offers, approving budgets and launching products anyway.  I guess we were ignorant about the inherent uncertainty.  And, our ignorance was bliss.

So, how DO you plan for reality?

1. Start with Strategy. 

   Boil it down to its purest form.  How can you deliver what your customers value in a way that is financially sustainable for your business?  Write it down and make sure your teams are aligned.

2. Rightsize the Timeframe.

   Plan for a time period where you can see the horizon.  Depending on the situation, you may be looking quarterly, monthly, weekly – or even according to certain milestones – COVID opening phases, for example – that don’t match a calendar.  

3. Craft an Operating Plan.

   Translate your strategy into specific actions over your rightsized timeframe. The plan should be simple, consider current events and include all departments/operating units. 

4. 1. • Set Priorities: the smaller the planning horizon, the smaller the number of priorities…and no matter what, there should be no more than five
      • Agree on realistic goals for each priority
      • Identify the key levers for each priority and agree who is accountable for each lever 
      • Align department action plans with the priorities, goals and timelines
      • Develop an ‘actionable budget’ for each time horizon that reflects the priorities and supports day-to-day spending decisions

4. Put the Plan in a Larger Context.

   Planning for shortened time horizons doesn’t mean ignoring long-term implications.  Whatever your planning horizon, zoom out and consider longer-term scenarios if things continue, get better, or get worse.

   • • Isolate the two or three factors that most influence which scenario is likely to unfold
     • Determine what – if anything – you can do to increase the likelihood that things improve – or at least continue as-is
     • Identify “no regrets” actions you can take to make the business stronger regardless of which scenario unfolds
     • Consider proactive measures that will reduce risk
     • Develop a ‘directional budget’ that covers the next 12 months and includes the impacts of the possible scenarios; the directional budget provides visibility to longer-term financial opportunities and challenges to consider while planning and executing the actionable budget

5. Monitor, Monitor, Monitor…and Adjust.

   With shortened time horizons, plans need frequent review.  And because businesses may be struggling, these reviews should be robust.  Identify the most important metrics – cash balances, unit sales, inventory, etc. – and monitor them relentlessly.  Be prepared to act quickly based on both positive and negative variances.
   

6. Remember that Cash is King…or Queen.

   Cash management is different from typical financial management, and in times of uncertainty, cash becomes more important. Do you have it, how do you generate it, and how can you protect it?   Cash is especially important if accounts receivable stretch past 90 days, you carry inventory or if margins are slim.  Ideally, create cash reserves to cover: operations (6+ months), facility repairs and maintenance (6-12 months), capital projects (1-3 years) and growth opportunities.  It takes time and discipline to build up reserves, but it will pay huge dividends in the long run – both financially and emotionally.

Uncertainty isn’t new.  Startups and small businesses navigate uncertainty day-in, day-out.  Think about how much more flexible, adaptable and successful we’d be by permanently adjusting strategic and financial planning to better reflect reality – our inherently uncertain reality.  Companies that don’t consistently learn and adapt eventually disappear.  Don’t be intimidated by uncertainty, embrace it. 

Contact enlight to discuss how small changes can make your business more successful regardless of which future scenario unfolds.