Written by: Steven Scheidler, Former Director of Treatment for the Americas for Xylem, Inc.
As we start to approach fiscal budgeting and strategy review “season” in the business world during this most unprecedented time, I would suggest adding a new regimen to your business meetings to account for the uncertainty.
The one thing I know from my experience in big business is that tomorrow will bring challenges. Whether it be a contract cancelling, a forecasted bid opening that didn’t go your way, or a significant warranty issue in the field. There is always something business leadership will need to manage while ensuring fiscal planning doesn’t go sideways. Small business owners are impacted harder in these cases because they don’t always have the staffing and skill set to navigate these challenges.
Planning should always include contingency to keep things on the rails. Here are a few suggestions to help you manage the dendritic flow of business throughout the year, and protect your profit from getting away:
Manage expectations on special considerations: We all have excitement when we budget for special projects, whether it be a research and development project or a Christmas party we are planning for the employees. But it’s important to communicate that these are investments, and as such, are tied to business performance. The leadership team should always value these types of expenditures as discretionary, and not must haves. When difficult decisions come around, these are the first items to be questioned. And making sure your team understands that is extremely important. Be sure to communicate and track the requirements for the expense early on in the process.
Challenge the team early on what they would give up: Top down planning, and bottom up verification to get to a stretch top line goal seems like a solid approach to building a budget with enough line of sight to achieve goals. However, in challenging times, you need to have a means to cover the bottom line and protect that profit you are targeting when top line expectations change. Consider prioritizing spending early in the budgeting process, and build a list of items you are willing and able to cut/delay when your outlook starts to change.
Scrub the pipeline and know your next focus: Every opportunity pipeline has high, all the way down to “why not take a shot” probability in it. This is the time to make sure you understand what opportunities make sense. As a leader, you know you have limited resources, and you need to ensure they are all focused to maintain effectiveness and achieve their stretch goals. It might be obvious to plan using those resources to capture high probabilities first, but make a contingent list of those “why not” opportunities that have tremendous value and could be pulled in when capacity is available, should something change in your plan. Providing vision to your team around these plan “B” opportunities allows them to keep the pulse on the “why not’s”, and either meet or exceed your budgeted goals even when times are tough.
These exercises are crucial to ensure your business stays in the black. A contingency plan built ahead of time gives you the freedom to execute savings and selling strategies quickly, without having to create an emergency meeting fraught with departmental disagreement and negotiation. The plan can simply be put into motion when your KPIs signal the need. When the time comes, you will thank yourself and the team for being proactive.
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