Getting ready for 2023 – planning in the face of uncertainty
Thinking about planning for 2023?
Don’t assume that your past successes are going to bring you new successes next year!
Many leaders are looking at last year, seeing a significant increase in revenue and going into the new year expecting more of the same growth.
We expect next year to be very dynamic.
This is one of the most challenging environments for planning that I’ve ever experienced. You can make a plan for the new year, but you can expect that by January 2nd things will have changed.
Leaders are going to have to be agile.
This is the process we’re recommending to our clients.
Start with your assumptions – both internal and external
Begin with your assumptions for the new year. Consider both internal assumptions and external assumptions. Identify 3 or 4 of each.
Here are a few questions to get you thinking.
- Do you expect sales volume to increase, decrease, or remain about the same?
- What about pricing?
- What do you expect in terms of staffing and employee attrition?
- What is your competition doing that you aren’t?
- What new lines of products or services should you consider adding?
- What changes are occurring in your industry that could affect your business?
- Are there any new or pending laws that will impact sales or customers?
- Are there any leading indicators that depict opportunities or threats for your business next year?
- If so, what are they and how much risk can be tolerated?
These assumptions will help you think through the logic of your business plan.
Make 3 plans: low case, real case, high case
We are recommending that our clients create 3 plans based on 3 different scenarios: a low case plan, a real case plan, and a high case plan.
Creating 3 plans will help set expectations for your stakeholders: your board, your lenders, your employees, your customers.
Low case plan
This plan assumes the worst. It’s your “break glass in case of emergency” plan.
What will you do if you must lower prices or experience a drop in sales? If outside conditions negatively affect your business? How will you bring down costs?
Make the tough decisions now instead of during a crisis.
Real case plan
This is what you reasonably expect.
Perhaps you can slightly increase your price and hold your volume.
A good real case plan should be about 80% probability of actually happening.
High case plan
This is the optimistic plan.
All your positive assumptions prove true, none of the negative come to pass, and you’re able to capture all your opportunities. You can both increase price and volume.
This is the plan you present to your sales team to inspire them – it’s something to strive towards.
Maintain the balance between structure and flexibility
Family business owners and leaders tend to be positive and optimistic. It’s important to balance that optimism by looking at risks to get to reality.
Because the truth is that you’re not going to get all the opportunities you aspire to have. And all the bad stuff you can think of is not going to happen to you. Realistically, it will likely be a mixture of both.
We believe that next year is going to be very, very dynamic. It’s an election year which always has an effect, we have high inflation that is slowing down.
We’ve also enjoyed a decade of continued growth and a strong economy. We don’t know how long that will last and business owners and leaders need to be prepared for a slowdown.
Being prepared for 3 different scenarios – low, real, and high – helps you maintain a balance between structure and flexibility.
Your plans will set direction, but your management needs to execute every day.
You don’t want the plan to hinder you from taking advantage of opportunities – or blindside you because you’re not considering risk.
If you’d like some assistance with planning for 2023, book a free consultation call with one of our advisors. We’d love to help.
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Thursday, November 3, 2022
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Talent Trends 2023
How to attract, retain, and motivate your company's most important asset
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