How do we attempt to predict the future?
In section 3, The Nuts & Bolts of Scenario Planning, they share their template for moving forward.
Get a Handle on Your Company’s Cash Position & Start Looking Forward
- First, assess where you’re at, so you can see where you’re going. What is your current cash situation? Next, form your assumptions on our current economic standing into possible outcomes from the pandemic. What does the future look like in the best to worst case scenarios?
- Then, determine the actions your business will need to take to adapt to each potential outcome and what the impacts of each outcome could be. Plan for the worst, so your wheels are already turning and you minimize surprises down the line. Hope for the best, knowing that you’ve taken a realistic approach and are as prepared as you can be during such uncertainty.
“A good plan might say, ‘Let’s wait 30 days and if the following things happen, we’ll do X, and if the following things happen, we’ll do Y,” Kopelman said.
Plan Your Scenarios: Using First Round’s 5-Step Process
Step 1: Identify Your Key Uncertainties
Considering the virus, current lack of vaccine and social distancing measures, what are the top 6-10 things caused by COVID-19 that you’re most uncertain about for the next year?
Step 2: Bucket Them into Scenarios
Create three (or more) future scenarios using different, plausible combinations of your projected outcomes, e.g:
- Best Case -- Old Normal
- Middle Case -- Soft Rebound
- Worst Case -- No Return
Step 3: Craft Responses to Each
Think about what your business looks like in each scenario and the things you would need to adapt or do differently in each case.
Step 4: Look for Trigger Points
Begin thinking about the future of not only your business but the greater economy.
- Macro Triggers: Extensions or changes to shelter-in-place policies, job loss trends, small business closure rate...
- Internal Triggers: Customer churn stabilizing or dropping, pick up (or drought) in inbound sales leads...
Step 5: Revisit, Revise and Repeat
Every two to four weeks, create a new version of your scenarios based on the most relevant information available to you at that time. Highlight what changes every time you recreate your plans to track your assumptions versus progress.
“Once people decide on a model, there’s a risk of getting entrenched. Try to come out of this planning process with a list of things that might be true of the world and a list of signals that would tell you that a V, U or L-shaped recovery was occurring. Write those down and then be vigilant in looking for those signals. Don’t get trapped in your own initial assumptions. This will make you more agile and flexible as the world starts to send you signals, which is especially important when there is a lot of uncertainty,” Kopelman said.