With the current Covid restrictions putting many businesses at risk, planning for and analysis of different scenarios has never been so crucial for all businesses to ensure their future success – performing ‘what if’ scenarios can help business owners to better understand each financial decision or investment.
Failing to plan for different scenarios can leave the door wide open to greater risk and missed opportunities. In today’s uncertain climate, creating ‘what if’ scenarios could be vital to your business’s survival.
‘What if’ scenarios can improve the overall performance of your business by allowing you to plan for challenges and possibilities and meet your company’s growth objectives.
They can help to remove some of the uncertainty from your finances while providing the flexibility to take advantage of opportunities – if you are looking for a finance provider, they are more likely to fund your project if you can demonstrate that you have considered various key scenarios and their potential impacts.
By using ‘what if’ planning you can run scenarios utilising both real time and historical data. By using appropriate software you can identify potential future risks in minutes rather than waiting months, such as budget shortfalls and inefficient processes, and make quicker decisions without the need for endless meetings and discussions.
With cloud technology you can forecast forward with relative ease and plan for outcomes which directly impact the financial health of your business such as:-
- ‘What will happen to my results if I take on an additional member of staff?’
- ‘How will winning this new major contract with a customer impact my business?’
- ‘I have a price increase from my suppliers – how will this impact on my profitability?’
‘What if’ scenarios can include the following:
Stress Testing
A stress test is a plan put in place to establish a business’s response to a financial disaster. This is vitally important now that we are heading for a potential second lockdown.
Stress testing will help your business to minimise any problems and take advantage of opportunities – you can use scenario planning as a stress test against your business’s strategy.
Managing Staff
Taking on new staff is an ongoing expense. Your business will change over time and sales may fluctuate however, you will still have to pay staff.
If your business is struggling to stay afloat at the moment, a scenario plan will help you determine whether you are over staffed or under staffed – it can help you to ascertain whether you need to recruit additional staff to increase your ROI.
Growing Your Business
By creating various scenarios, you can build a clearer picture for the future health of your business – this will help you to discover opportunities for growth.
Scenario planning for positive changes is just as important as planning for a disaster.
‘What if’ scenario planning is the most reliable indication of what can be achieved to give you the confidence to make informed business decisions and can be the key to future success.
For further help or advice on scenario planning, please contact Lee Sugden or Mark Tooby on 0161 761 5231 or email theteam@horsfield-smith.co.uk.
