Learn how the process of planning can help you prepare your business for unexpected changes.
Well, that was a different world. COVID-19 changed everything, and you need to adjust your business plan accordingly.
A Business Plan Is an Informed Prediction
"In preparing for battle I have always found that plans are useless, but planning is indispensable."
– Dwight D. Eisenhower
I love that quote. What Eisenhower meant was that committing to a specific plan was foolish, because it doesn't allow any wiggle room when circumstances change — as they always do. However, the process of planning gives you valuable intelligence about what to expect so you can react appropriately.
Think of a business plan like a compass. It starts you off in the right direction. Then, when winds blow you off course, it helps you get your bearings.
COVID-19, of course, was a hurricane-strength wind. Fortunately, a well-constructed business plan can help you weather the storm.
First, Find Magnetic North
If you entered 2020 with a complete business plan, you have both your high-level, five-year goals and your more detailed, immediate targets. In adjusting your plan, you should start with the latter, since they will influence the former.
Here's what you'll need to do:
- If possible, keep expenses proportionate to adjusted revenue. In making this calculation, a lot will depend on the degree to which the pandemic has affected your business. If you're a contractor who has seen business decline by, say, 20%, you might be able to make a proportionate adjustment in expenses. Look for fixed costs that you can unfreeze, such as reducing your fleet of company vehicles or getting new quotes on various types of insurance coverage.
- Draft both a pessimistic and an optimistic projection. No one wants to deal with the worst-case scenario, but at least those who have planned for it can navigate it as painlessly as possible. If the pandemic has hit your business especially hard, explore potential exit strategies ranging from M&A to liquidation. And even a best-case scenario can be challenging for those who haven't prepared. If you're suddenly back at 100% demand, will all of your workers and suppliers be readily available to meet your needs?
- Consider planning as a rolling-forward, four-quarters process. Don't just revise your 2020 plan once and forget about it. This year is likely to be very fluid, so correct and groom your plan every quarter and push it out one more quarter from there. That way when 2021 draws near, you're not starting from scratch. Each of your new revenue forecasts will probably be wrong, too — that's OK. Again, the idea is not to create an indelible roadmap, but to establish reference points to guide you through the crisis and its aftermath.
Who Knows What the 'New Normal' Will Be?
You're going to hear a lot about the "new normal" for the rest of 2020. The truth is, however, that no one really knows what it will look like. By updating your business plan on a quarterly basis, you'll be ready for the new normal no matter what form it takes.