It’s impossible to know for certain what the future holds. However, the area in which successful companies excel is responding to change. Along with being agile and able to pivot on a dime, these businesses have the ability to make decisions and act on them with confidence, and that means mastering the art of scenario planning.
A way to secure control despite uncertain circumstances, scenario planning involves identifying assumptions about the future and creating a plan for how your business will respond. By constantly analyzing your business and reviewing existing assumptions, you can meet the challenges of a post-pandemic economy and steer your business in a better direction. As the country moves out of the crisis period and toward recovery, companies need to abandon earlier forecasting methods based on old information on customer demand. Instead, business leaders should craft new scenario plans that include a wide range of variables from inventory to sales, expenses to capital availability. By identifying and evaluating all your business drivers, you can create the strongest scenario model for your organization. The end result is improved forecasting when it comes to revenue, profitability, and cash flow. Read on to learn about the importance of evaluating business assumptions and discover the top variables affecting scenario planning.
Evaluating Business Assumptions
In today’s economic climate, sticking to your preconceptions can have disastrous results. To that end, savvy businesses are constantly reevaluating their assumptions based on changing circumstances. If you want your business to succeed, you need to be willing to test beliefs and make course corrections as needed. Here are some assumptions to examine if you want to give your company the best shot at success:
Companies often launch with the mistaken belief that their product is fulfilling a significant need in the marketplace. However, CB Insights says that nearly half of all startups fail because they’re trying to solve problems that don’t actually exist. Before founding a new company, do your homework to determine whether the product or service you want to provide actually has an audience waiting to purchase it.
Roles and Responsibilities
When it comes to business assumptions, it’s not enough to evaluate your project. You also need to consider the roles and responsibilities of your staff. In fact, companies often suffer financial losses as a result of poor project planning. For best results, evaluate the scope of your project as well as who is doing what and consider using a project management software to keep key tasks from falling through the cracks.
It’s not enough to have a great product. You also need to know how you’ll deliver your goods or services to your target audience. Do your research to determine not just how you’re interacting with your customers but also how you’re delivering value to them. In some cases, you may realize you need to target different groups or communicate with them in new ways.
Steps for Successful Scenario Planning
The key to successful scenario planning is looking at all possible variables. Here are some steps to follow if you want to keep up with a changing marketplace and make the best decisions for your business.
Consider Business Factors
If you want to improve your scenario forecasting, start by brainstorming business factors that can impact your bottom line. These include customer desires and expectations, supply chain issues, cost variables, and capital availability. For best results, consider a wide range of factors from the common to the less expected.
Evaluate External Forces
Of course, your business’ long-term success or failure can depend on external factors as well. For example, it’s no secret that the COVID pandemic affected businesses in numerous ways, limiting their ability to secure supplies and impacting available workforce. As a business owner, you may also want to consider forces like cultural differences, currency variations, environmental factors, and even geopolitical issues.
Narrow Down Scenarios
Even the most responsible business owners can’t create accurate forecasts for every possible scenario. After brainstorming multiple possible scenarios, narrow down your list of outcomes to a handful that seem most likely to occur. The goal is to choose scenarios that will give you the most actionable insights into your organization moving forward.
How Planning Maestro Can Help You Achieve Your Goals Through Scenario Planning
Changing economic conditions combined with post-pandemic anxieties have created an environment in which accurate scenario planning is more important than ever. To that end, business budgeting software needs to be sophisticated enough to keep up with the task and user-friendly enough that employees can utilize it day to day. Not only does the latest budgeting software allow for improved forecasting, but they also offer data-driven insights, more detailed reporting, and overall better performance. If you want to improve your financial planning and analysis, consider utilizing Centage’s Planning Maestro.
Centage Corporation’s Planning Maestro is a cloud planning & analytics platform that delivers year-round financial intelligence. With Planning Maestro, Centage offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. For more information on how to modernize your office of finance with intelligent planning, view our product demonstration video, or call 800-366-5111.