Do some worst-case scenario planning

This article first appeared August 9, 2011.

What would happen to your business if sales fell 5%?

Or 10%?

Or 15%?

Or even 30%?

What costs would you need to cut?

What parts of your business would need to change?

How quickly could you make these changes?

These are the sorts of questions that entrepreneurs should be asking themselves today. This is not a time to panic, but some smart scenario planning will ensure that you can react to changes in the economy and in your sector in a fast, considered way.

Grab your cashflow and budget and start playing around with some numbers. If sales were to decrease sharply, which costs could be scaled back quickly? It might be that the hours of casual staff could be reduced or other overheads can be quickly scaled back.

You will very quickly be able to formulate a plan, ie. “if sales fell to this point, I will change this first, cut this second and adjust this third.”

Talk through the scenario planning with mentors and key staff, so everybody knows the potential pain points.

Hopefully these scenario plans can be put in a drawer and forgotten in a few months time. But forewarned is forearmed.

Get it done – today!