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Scenario Planning Meeting

It’s been a heck of a time, right? Pandemic. Tick. Government scandals. Tick. Looting. Double tick! From the huge corporates to the tiniest start-ups, we’ve all suffered. So, with that in mind, it’s important that small business owners do scenario planning to make reality-based assessments and prepare for the worst-case scenario. Because you just never know when you might need it.

“While it’s very unlikely that business owners would have predicted or budgeted for a virus pandemic – there were certainly warnings signs leading up to the countrywide lockdown – prudent businesses would have had a worst-case scenario (or very quickly developed one) within their planning. These usually entail disaster situations,” says Alex ApplebyRetail Capital Head of Treasury.

Without further ado, here’s how you can prepare for a worst-case scenario for your biz.

Know this: scenario planning is important

Scenario planning will touch on all ends of the spectrum from the most favourable to the most reasonably difficult. In essence, it helps business owners understand how various events or situations will affect their ability to do business. This requires the various areas of a business to be prepared – operations, finance, support, and everyone else involved – so that they can plan their responses accordingly.  

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You’re basically saving for a rainy day

“We instinctively understand the need to ‘save for a rainy day’. Now, we may not want to endure a rainy day, and perhaps we don’t think it will rain any time soon, but saving for its potential arrival means that we know certain things will be taken care of. This is how businesses should approach having a plan in place for various scenarios,” says Alex.

And that means you too, small business owners…

Depending on the size and complexity of a business, scenario planning can become a complicated and time-intensive exercise, which may put small business owners off. “Small businesses owners are generally on the ground running the business. Their focus is on sales, customer relationships and operations, while at the same time overseeing finance and their employees, etc. They cannot imagine freeing up the time to complete the exercise, or find the money to pay a consultant to do so,” says Alex. But even in cases where micro-enterprises are being run by small teams with little time and few resources, they would do well to perform at least a rudimentary scenario-planning exercise.

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SMEs should begin with the big picture

Start with the pandemic. We are now in a third wave – what are the implications of the vaccination drive taking longer than expected? Will delays or low adoption rates lead to the possibility of a fourth wave? If it picks up and runs ahead of schedule, how is that likely to affect the shape of the pandemic and business conditions?

“The big picture also includes things like global geopolitics and the oil price, the fourth industrial revolution, how technology is likely to change business, local politics and governance, and how various outcomes are likely to affect the economy,” says Alex. Once an SME has considered the main drivers of the big picture, the next step would be to decide which of them have the most impact on the business. 

“If you are in tourism, for example, these may include the pandemic’s impact on borders and tourists resuming international travel, local tourists and their tastes and buying power, the weather, and perhaps legislation specific to the industry. If you’re in hospitality, perhaps it is trading restrictions, food prices and consumer demand – more than a year into the pandemic we are all developing more insight to enable businesses to plan for the current wave of infections and the period beyond this when transmissions subside. Try to stick to the two main drivers most likely to impact your business,” he says.

Lastly, exercise resilience

Once the main drivers have been defined, draw up various scenarios that could reasonably play out, then consider how the business would react, and importantly, what needs to be in place to enable the business to make those calls. If a business requires a funding partner to help it scale during favourable scenarios, then building those relationships now, rather than reacting in the moment, makes the most strategic sense. 

“Carefully consider the implications of the different scenarios and start planning your strategy and goals, [while being] cognisant of these scenarios. It’s important not to feel as though every possible scenario and outcome should be analysed. Not only is this impossible, but it would become counterproductive,” says Alex.

Photo by Ketut Subiyanto from Pexels

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