Scenario planning might feel like an unnecessary step in your business strategy, especially if you run a small business. But it can help you prepare for future uncertainties by considering some possible situations and their consequences. If you’re keen to plan ahead for certain events how should you get started?
Step 1 – Research
Firstly, have a think about why you are scenario planning. You might want to think about some of the risks which could affect your business, which might stop you from growing your business. Consider the timeframe you’re thinking about – and whether you are more comfortable planning for the short, medium or long term.
Then identify what could affect your plans. There could be external influences like the economic climate, tax rates, environmental or legal factors that could impact your business. Also think about company-specific elements such as your sector, workforce, resources, capabilities and culture.
Finally take a look at any data about your sector and trends, and ask your employees, customers and suppliers for their input too.
Step 2 – Develop Scenarios
Once you have a good understanding of some of the threats which might impact your business it’s time to consider some particular scenarios. Try to consider a few, such as the loss of key members of the team, issues with your supply chain, an HMRC investigation or a complaint which results in a substantial financial fine. And consider a wildcard – think of how you might have planned for the Covid pandemic if you’d prepared ahead!
Consider step by step how each scenario would affect your business financially and operationally and what action you could take. For example if the person responsible for finance was signed off due to a long -term illness how would your business cope immediately and over the long term with payroll, billing, cash flow forecasting and other business critical tasks.
Step 3 – Communicate Your Plans
Once you’ve worked through what could happen, share the scenarios and plans with key stakeholders to check your logic, and ensure there’s good understanding and buy-in. Revisit your plans regularly – perhaps once a year to keep things relevant and fresh, and ready to implement if and when you need to. And don’t forget to tell your team where those plans are kept in case they are needed.
Following these steps means you should feel more confident that your business is better prepared for a range of possible situations, ensuring you can remain operational and resilient if the worst should happen.