Business planning in the midst of Covid uncertainty

Xero’s David Bell offers some valuable insight into how business owners can effectively plan for the future during the current Covid crisis.

Let me start by pointing out the obvious. Even the most experienced business leaders couldn’t have perfectly prepared for COVID-19. What we’ve experienced so far in 2020 has been nothing short of devastating for most. But we also know that many businesses went into this pandemic without any plan.

Only 22 percent of sole traders had a business plan written down before the pandemic. And that figure only rises to 43 percent of SMEs with less than five employees. 

As we navigate the economic recovery in the wake of the COVID-19, it’s crucial that business owners set aside time to plan for the future of their business. Think of it as setting up a road map for recovery and writing down specific directions on how to get to the end destination.

Okay, so how do I get started?

The starting point can seem daunting but it’s actually quite simple. The question I always get people to ask themselves is, what do you want to be when you grow up? I believe that you can think the same way about your business. It may sound somewhat flippant, however we could always answer easily as kids and the question can break down barriers to understanding your business. If you can figure out where you want to be, you can work back from there. And if you don’t know, there’s plenty of questions you can ask yourself to get clear on your vision.

If you already have a business plan, you should be evaluating the current situation of the business and taking a deep dive into where things are sitting now. Be sure that your business is not the same as it was a few months ago.

What does a business plan look like?

A business plan should be an evolving, living document. It should be dynamic, and you should be reviewing it at least every six months to make sure you’re on track with where you need to be. It should also be measurable. Understanding how you are executing against the plan is critical.

The easiest way to start it is to ask yourself a series of questions where you simply choose one option over the other. Do you want to be this or that? This gets you thinking about where you want the business to go and starts to create a pathway for you to build your plan.

Ask yourself a series of questions to establish what’s important to you. Think of businesses you know, what do you like about them? Understanding what you don’t like is just as important. What do you need to do to get there? Where might you get that capability or capacity from?

Follow that same process for the following areas and this will help form the business roadmap.

• Value proposition – Why would people want your product/service? What is unique about it that makes people want it? Why is yours better than your competitor’s? Articulate the unique value your business provides in a few simple sentences that get straight to the point.
• The problem being solved – Why do people care about what you offer? Why do they either want or need it? What’s different about this solution that hasn’t been done before?
• Target market and competition – identify who your customers are and what other choices they have. How is your business going to serve them better? Include market research.
• Sales and Marketing – How will people find out about your business? Where would the target audience most likely look if they were interested in your business?
• Budget and sales – Forecasts of sales and outgoings. What will the margin be on each sale, is it enough and how many sales are needed to make a profit?
• Milestones – For each milestone, list why it’s important, note what needs to be done to make it happen and give it a due date.
• The team – Who is part of your business and why? Write out a couple lines for each person that includes their goals and responsibilities. Do this for vacant roles too.
• Funding – Identify how much your business needs or already has and what it’s being used for. When will repayments be made and when is it expected to be paid back?

I would recommend going through this process with your accountant or advisor, because there’s a lot to think about. Make sure you have a good one!

A useful tool to help you do this, is Business Sorter. It works by presenting you with a range of cards and you have to choose the ones that are most important to you. It helps you clarify your priorities when you’re not sure where you want to go and what you need to do to get there.

The second part of a business plan is ultimately all the detailed work you absolutely need to do, but never want to. This includes things like risk assessment and having a robust contingency plan for when things go wrong.

We’ve all just learnt the biggest lesson in this. If you can’t go to work, if you can’t get your team together and you need to work remotely, how will you ensure you can keep operating? It takes some time to think through, but you’ll thank yourself the next time something that’s out of your control disrupts your business.

Building a business plan will also help businesses know what their cash needs are and help them implement a system to track cashflow closely. It also allows owners to pinpoint pressure points and make the necessary changes to readjust, make changes, and get back on track.

While this is harder to put into place in the midst of the unknown, it presents an opportunity to re-evaluate what customers need from businesses and how they might adapt to providing a product or service.

That’s a lot to consider – what are some common mistakes to avoid?

A few common planning errors are likely to include things like not budgeting enough money, expecting sales to ramp up fast as we start to get back to normal, relying heavily on one or two customers (or suppliers), and not allowing for unexpected delays or costs.

Now’s the time to take stock of how COVID-19 impacted your business and start putting plans in place to rebuild out of this economic shock.

It’s going to take a while for things to return to “normal”. For example, we’re unlikely to see the borders open for all international travel for a significant amount of time – do you need to pivot the focus of your business to diversify and survive?

As leaders start building a business plan, it’s also important to keep on top what government assistance programmes they might be eligible for. Things like the wage subsidy extension, business debt hibernation, new loans for small businesses, and commercial lease support and mortgage holidays may be helpful.

Planning has never been more important in the midst of all this chaos. It will help leaders realign themselves with their business goals and lay the groundwork for coming up with fresh ideas and milestones. Creating a business plan will also help them avoid as many future disruptions as possible and give them a guideline to follow throughout these uncertain times.

David Bell (pictured) is Xero’s Director of Business Growth.