Planning for the unknown in business
1st May 2020
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 and how the economy is going to react in the short, medium or long term?
If we take a moment to think about this, in reality this situation is not that uncommon. In fact, I would argue that dealing with known unknowns is normal in the world of business.
When we start a new business do we know that it will be a success? When we launch a new product or service do we know there will be a great take-up? When we open a new office or factory are we sure 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 what we know 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 planned 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 you can use this time to think deeply about your business 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.
In this period there are some known knowns and many known unknowns. However, those businesses that have a plan, make sure their teams are on board with this plan and execute their plan with the passion, energy and enthusiasm of a new start-up, are best placed to overcome the many challenges that lie ahead.
I have broken down the next 18 months into stages:
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 what your income looks 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:
○ Pessimistic
○ Realistic
○ 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.
Stage 2 – July to December
There are lots of known unknowns in this stage and therefore it may prove to be the most challenging to deal with.
My checklist for stage two is as follows:
Continue to monitor your cash flow extremely closely – make sure everyone in your leadership team understands your cash flow perfectly – no exceptions.
If there is a need for additional cash, know where it is coming from or plan to cut your costs well in advance (possibly a combination of the two).
Do your best to communicate brilliantly with your team – they are as worried and uncertain as you are, perhaps more so.
Become closer to your customers than ever before – they will need your help and you will need theirs.
Pursue your refreshed vision with the passion, energy and enthusiasm of a new start-up.
Take a heightened interest in your profit and loss report – this is not the time to be transacting unprofitable business that will eventually impact on your CASH position.
Preserve cash – this will be a bumpy journey for many – the only way your business will survive is if it has CASH.
Be ready and prepared for some unexpected business interruptions e.g. a second wave or local outbreak.
Make time to laugh and smile together.
Stage 3 – January 2021 to December 2021
Let’s hope that we have a vaccine available by the early part of next year and normal life can return. Having navigated the previous nine months you should now be in a position to look forward with more certainty and benefit from the increased confidence that will come from having worked through the initial stages of the COVID-19 crisis with your team.
My checklist for stage three is as follows:
Review your cash position – can you start to release some of your reserves to support the growth of your business?
Revisit your business plan – can you take a more optimistic view and revise your forecast in an upward direction?
Reflect on the performance of each individual in your team. Who has stood up and supported you? Who has let you down? Who can help you to turn your future plans into reality? Reward those who have made a difference.
Segment your customers following the experience of the past nine months – which relationships are you going to nurture and who are you going to let go?
Consider stepping up your business development activities – decide if your business is ready to exit survival mode and re-enter success mode.
Make sure that your energy and enthusiasm for the next 12 months is burning brightly.
Maintain that heightened interest in your profit and loss report.
Continue to be ready for unexpected business interruptions.
Take some time to recharge your batteries – it will have been a tough few months and there are more challenges ahead.
Let’s not beat about the bush; the next few months are going to be extremely challenging for the majority of business owners and leaders. However, many businesses will come through these incredibly difficult times and emerge stronger than before and go on to achieve new heights.
If you need any assistance planning for the unknown please call or email and I will be ready to offer my help and support.
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