Business Planning Through Extreme Uncertainties

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With most certainty the pandemic has slapped our economic realities (amongst other things) with rampant uncertainties. Although modern economics is based on uncertainties, yet the degree of uncertainty this pandemic has exposed us to, is of epic proportions. Uncertainties are a cyclical phenomenon taking our economy downwards as well as upwards. While we have come to almost a grinding halt, we may be also looking towards a recovery never seen before. As businesses just ended a very difficult financial year (20-21), is the worst really behind us yet? What has this new FY (21-22) in store for us?

2020 was a very promising year. This year almost marked a new era in most organisation’s long term business planning. ‘Vision 2020’ was as much as a cliché, as it became uninspiring. But one cannot deny that 2020 was truly a milestone year. Probably the most pertinent teaching was that of planning with uncertainties.

As business leaders we are expected to give shape to an organisation’s vision through the transaction of product and services within varying market conditions. We are expected to ride the upswings and beat the downs. But how does one forecast during extreme uncertainties?

I recommend a three dimensional approach, where we start with basic assumptions which we believe will hold good during the time frame of the plan. Second, we establish our baseline numbers - given our assumption holding true what will be our minimum threshold revenue. Next, plan all your expenses and activities linked to this minimum threshold. Now work on a second scenario. Make additional assumptions and be very bullish in your approach. Uncertainty does not always mean downwards, you could also be looking at a dramatic upswing. Prepare a plan for this upswing. Allocate resources and strategies to manage a sudden growth of demand. Plan your production / supply and your operations. Also plan the capital requirement to meet the demand growth. This probably will be the most important element of this plan – the capital. Based on how much capital you will have or will be able to raise – you should adjust your appetite. In spite of dramatic opportunities most plans will fail to capitalise due to unpreparedness and the lack of capital.           

Then there is the third scenario. If your assumptions of a static business environment hold true then it can throw open an opportunity. What are the possibilities of gaining market share in a static environment? Either by expanding geographies, pricing or introducing a new product line or reaching new customer base or doing it better than competition.

In this three-dimensional approach – you have first fixed your base line which is almost sacrosanct. Then you look at two scenarios – one with an upswing and the other creating opportunity in a static environment. Surely there is a fourth scenario, wherein the market dips below your anticipated base line. But given your threshold planning, come what may you will have to hold on to that line to make ends meet. So, if the market dips below anticipation, you will need to realign to ensure that baseline is met – so in other words, you negate the fourth scenario.

There is with most certainty a recovery ahead of us. Once we reach that bend it is going to be an unprecedented joyride. The question really is when; not sure if anyone can answer that at the moment. But what we can do is remain invested through these difficult times and prepare.

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