There is an adage: “Climate is what you expect but weather is what you get.” Are you planning for weather or hoping for a mild climate?
Climate is built on averages over time and does not translate well to a single day, while weather is a time fraction of climate and highly changeable. Climate defines seasons and weather defines the details within any given climate. A strategic plan, like climate, is based on long term objectives. It lays out priorities for growth and use of capital, and breaks it down into annual budgets, or “weather periods” that are built on more detailed goals and metrics, applying the capital to specific uses.
As we face a pending recession, the need for planning has never been more acute. Hoping the impact on you is minor won’t protect you.
During the “Great Recession,” companies that planned for market share growth recovered 12-15 months faster than those that did not plan for growth, even though they cut expenditures substantially. Growth-oriented companies focused their limited capital on functions that would set them up for future growth. They did reduce expenses, but these reductions were specific and strategic. Others cut expenses across the board without a strategic plan, and the strategists soon grabbed market share from the cutters.
The coming impact of the recession depends on your industry. If you are related to residential real estate, the recession is already here. If you are in industrial property construction, you likely have a two-year backlog on the books. Business planners must develop multiple, alternate plans for multiple scenarios. They focus on economic climate change and build alternate strategies for things like credit drought, competitor heat rise, and supply chain rising tides. Tactics that are developed from these scenarios become near-term weather forecasts. They may cause you to rethink your strategic plan.
When facing increasing uncertainty, flexibility in thinking and actions is needed. Hurricane Ian left thousands of people wondering where it would hit land and what should they do to prepare. Those that prepared a long time ago with adequate insurance and buildings built to withstand 140 MPH winds, fared far better than most. Their climate forecast led them to believe that inclement weather is inevitable and did not merely hope for the best. Some who relied on hope lost their homes and businesses.
An agile business owner is continually planning and adjusting their climate plan based on weather changes that are occurring. So too must a company business plan be flexible to allow for change. Planned change is not the same as reacting to an event that just occurred. Now is the time to plan on how to keep key customers, conserve cash, fine tune inventories, motivate employees, and grow your business while others fret. Standing at the top of the hill looking for the possible storm, leads to much better results than hoping you can find the umbrella somewhere in your car.
C Squared Solutions provides interim or fractional CFOs, COOs, and CEO advisors in nearly all industries. We analyze and advise on these issues frequently through sophisticated modeling and experienced management. Give us a call or visit our website for more information and details. We have been there and done that!