After the events of 2020, every business leader is focused on being better prepared for the unexpected. One effective way to do this is to conduct a scenario analysis, a useful planning tool in which businesses create an action plan for the “what-ifs” they may encounter.
Effective scenario analysis can help your organization evaluate the efficiency of current systems while also helping to mitigate against risk and minimize negative impact. Not sure where to begin? Follow this advice from the members of Business Journals Leadership Trust.
1. Study how you responded to difficult scenarios in the past year.
A good first step in conducting a scenario analysis is to evaluate the scenarios you faced over the past year and how you responded. Take the Covid-19 element out of the discussion and evaluate based on the factors it influenced, such as where you could work, how you could do the work and the change in demand for your product or service. What would you do differently, and what are the options for next time? – Laura Doehle, Elevation Business Consulting
2. Start with a SWOT analysis.
A simple SWOT analysis can be a good starting point. Be honest about your weaknesses and threats. Do you have a client concentration problem? Are you over-reliant on one supply partner? Have you failed to differentiate your brand or services? Imagine these weaknesses leading to unpleasant outcomes and then create mitigation — or better yet, plan to prevent the outcome. – Karen Albritton, Thinc Strategy, Inc.
3. Be honest about the future of your product or service.
Re-analyze whether your product or service has a future. In times like these, there is no use in being adventurous or dreamy; it’s time to be conservative. Take advantage of what people already know how to do and move forward. – Roberto Malpica, M&T Consulting Group
4. Review your largest revenue accounts.
Step one is to review your largest revenue accounts. If one, two or even three of them went away tomorrow, for whatever reason, how would you respond? Will you trim costs? If so, where? What is your plan to replace the revenue? How quickly can you make that happen? – Kimberly Lucas, Goldstone Partners
5. Diversify your customer acquisition processes.
The first step to making sure your business is ready for anything 2021 throws your way is to diversify the way you acquire customers. Have multiple front-end offers, multiple marketing channels and multiple entry points. This way if something is impacted you have more ways to generate new customers. Without new customers, you don’t have a business, so customer acquisition must be a priority. – Greg Rollett, Ambitious Media Group
6. Consider what you would do if one part of your business was shut down.
At the most basic level, most businesses have an operations side (e.g., the kitchen) and a service delivery channel (e.g., the dining room). Think about these two main areas of your business and assume one of them is shut down for various time frames (24 hours, 48 hours, two weeks and so on). What could you do to operate in those circumstances? Then assume the other side is closed and develop alternatives for it. – Ryan Morris, First State Bank
7. Don’t disregard the ‘unimaginable.’
Every business must spend more time picturing and thinking about the “unimaginable.” Organizations often rush through the threats when setting their short- and long-term strategies and creating their annual operating plans. The events of 2020 have taught us not to just “glance over” the unimaginable — your business could be open one day, following all the rules and regulations, and shut down the next through no fault of your own. – Mike Sipple, Centennial Talent Strategy and Executive Search
8. Look at the macro factors.
Always be cautiously aware of macro-environmental factors that can affect not only your business but also your clients’ businesses, and prepare in advance for any scenario. Make sure the core business and operations are stable and that employees feel that stability when there is uncertainty in the world around them. – Jessica Hawthorne-Castro, Hawthorne Advertising
9. Ask these five questions.
I ask five questions when doing a scenario analysis. “Where am I at now? What do I want to happen? What will it take to make it happen? What barriers/blocks/challenges will I need to overcome? How will I overcome them?” Armed with these answers, I set the new course and move forward. – Linda Bishop, Thought Transformation
10. Account for possible circumstances beyond your control.
In times of crisis, companies must blend historical information with plausible outcomes to determine ramifications for all parts of an organization. Scenario plans give leaders breathing room to slow down and evaluate environmental, political and economic factors. Those prioritized factors are an important part of crisis scenarios. – Wesleyne Greer, Transformed Sales
11. Go in with a flexible mindset.
The first step is to ensure current clients’ needs are met. Maintaining the business of business comes first. The next step can be determined based on the depth of the unexpected. Can a derivation work or is a pivot required? As elaborate as what-ifs may be, having a flexible mindset and culture is key for any unexpected scenario. – Rachel Namoff, Arapaho Asset Management
12. Look ahead to where you’re going.
Action plans need to be flexible. I learned to drive at 15; now, in my 30s, I’ve evolved my technique, my skill, my braking time and so on. Action plans need to meet your team where they are and flex when needed to meet where you are going. If you do not have the time and commitment in your action planning to be flexible, you are setting yourself up for disappointment. – Crystal Lazar, Habitat for Humanity East & Central Pasco County
13. Attend industry webinars on this topic.
Industry organizations and the Small Business Administration have webinars that address this with examples shared by other business leaders. Log on to your local organization and you will find an abundance of resources and video interviews addressing these exact topics. Take what’s relevant and apply it to your business. There are more resources available now than ever before. – Jean-Paul Gedeon, JPG MEDIA
14. Identify who can do each of your company’s essential jobs.
Aside from keeping our business continuity plan current, it is critical to identify trusted team members who can do your job and the other essential jobs throughout the company. – Robert Antes, TradeTrans Corp.
15. Think outside the box.
When conducting a scenario analysis, you should be creative and be able to utilize out-of-the-box thinking. Come up with other scenarios that may impact your business. You should allow other concepts to exist so that you can expand your preparations to less-likely occurrences. – Jack Smith, Fortuna Business Management Consulting