How can you plan for the future when you don’t know what it holds? Come to think of it: what do you not know about your business?
December is usually a busy month for business planning with my clients as we spend time looking at the next year in more detail. That tends to be true even when their year end isn’t December 31st – the change of calendar year is a good time for reflecting on progress and looking ahead to the future.
However 2020 has already been littered with new forecasts, re-forecasts, new opportunities and dashed hopes. We’ve pretty much exhausted all the options for revising the financial detail!
Instead, I’ve set aside time to think about, and crucially, document the things that we don’t know about the future.
We don’t know whether there will be more coronavirus disruption in the New Year, or the impact that a vaccine will have on the economy – can it stave off the predicted recession? We still don’t know what Brexit will throw at us, but we’re used to that by now!
But what about other risks?
What if one or several of your customers moved their business elsewhere? What if one went bust? How reliant are you on a particular customer? What’s the spread of business (and importantly profit) between customers? How much do they owe you?
Where* do you think the risks could be? (* you’re bound to be wrong here, but considering the risks is still valuable). What action can you take to get better information, or reassure yourself?
How about your suppliers? How quickly could you replace one if they hit problems? How close are your relationships with key suppliers? And while we’re on the subject do you have adequate back up if a staff member handed in their notice?
Do you have deposits or prepayments with suppliers that you depend? And what about directors loans? This is getting generic now, because every business is different but hopefully you see where I’m going.
While this isn’t a cheery, “season of goodwill” sort of message the point is that a relatively small amount of time working out what you perceive the risks that your business faces are will let you start to plan around them. You will bear them in mind when you make decisions, perhaps even subconsciously. And most importantly when the worries are on paper, not stuck in your head, you can sleep better at night.
So what did I find out about the businesses I work with?
Firstly, I find it’s always enlightening to look at all my clients together (in private of course). They are a diverse bunch: small and not so small businesses in different sectors.
However looking at the challenges in one can spark off ideas about the challenges in others and that’s one of the benefits of having an almost outside perspective on the business.
The risks that I identified initially were:
- Unsurprisingly Brexit is still a big unknown (no prizes for guessing that)
- Continued Covid disruption (don’t even mention the L word) will either be a bonus or a hindrance depending on sector
- Reliance on key staff is a threat everywhere, which is true of any small business. That’ll result in more efforts to document and share information in the New Year; improving contingency plans especially where business owners are concerned
- A bit of work needs done thinking about the reliance on certain key customers and what can be done to reduce the impact if they were to disappear
- And in one business we need to monitor the levels of cash paid upfront to suppliers – cash that would be lost if that supplier was to cease trading
So plenty of work to be done in the New Year thinking about future proofing business, even while we don’t know what the future holds.
If you would like to take a look at where the risks may be in your business give me a shout; I’m always keen to help. You can find out more about how I help my clients here.