Preparing Your Business for the What Ifs

Small business owners are uniquely tied to the success of their business. This can be incredibly rewarding or incredibly precarious should something go wrong. Inventory damage, interrupted operations, even cyber security are all viable threats that could impact your future. That’s why it’s imperative to have the right financial plan in place, protecting you, your family and your business from the what ifs.

The importance of what-if analysis

Not only does your business need a plan for growing and meeting goals, you also need a plan for unanticipated challenges. With the global pandemic, businesses experienced first hand the pitfalls of a sudden crisis. While there were aspects no one expected, having a plan of action for general possibilities, like what if we have staffing issues or a drop in demand, can keep you prepared for any scenario.

How do I create a financial plan with what ifs?

When factoring major shifts into your financial plan, there are four important aspects to outline:

1. The impacting event
2. The outcome you want to pursue
3. The strategy to get there
4. The plan of action and steps in your strategy

Before you can get started on those steps, you need to consider a list of potential scenarios relevant to your business. Ask employees in different sectors for their “what-ifs.” Then pull priority concerns from the overall list. You can’t dedicate resources to every scenario, so consider where a solution could deliver the most value, where you make your money, and what issues impact your biggest customers.

If you’re struggling to come up with potential scenarios, try out these common questions:

• What if a major external event occurs, like a natural disaster?
• What if we lose a key customer or they pause all sales?
• What if there’s a sudden drop in revenue or a cash crunch?
• What if our team is too busy or we have a staffing issue?
• What if we need to pivot our business model?

Remember, the goal isn’t to lock in an absolute solution for every outcome. It’s to plan a range of responses with built-in flexibility. That way your business can pivot and act quickly even in crisis.

Preparing for the good with the bad

Not all what ifs are bad! When tackling your financial plan, don’t forget to include positive scenarios. What if we need to keep up with increased demand? What if we grow faster than expected?

You don’t want to miss out on a good opportunity because you’re unprepared. Plan for how sudden expansion might affect:

• Increased product/service demand.
• Increased overhead.
• Personnel needs.
• Staff capacity.
• Tax liability.

Create avenues for being transparent with customers and employees as operations shift. If growth brings change, open communication will make your stakeholders more understanding.

Tips for the what ifs

Now that we’ve broken down the thinking behind scenario analysis, here are some ways to build flexibility and preparation into your financial plan.

• Consider a wide range of scenarios and potential end results.
• Stay involved with your customers, so you have a good relationship when crisis strikes.
• Think about the ways things could go wrong, and plan for that.
• Analyze business activities and remove any not making a profit.
• Invest in a management reporting system to track business segments.
• Build resilience into your team for when times get tough.
• Find the right business advisors.

Risk management with SME and Avantax Planning Partners^SM

At SME CPAs, we’re invested in the success and welfare of your business. That’s why we’ve partnered with Avantax to provide a comprehensive solution for all your risk management needs. Our consultative approach means that Avantax can address the unique needs of you and your business — all while connecting tax and financial strategies to help you reach your long-term goals. Services include: 

• A team approach that can also incorporate your legal advisors
• Independent objective analysis of your risk management situation
• Representation of multiple insurance carriers to match your needs with the appropriate product from a quality company at a competitive price
• Regular, ongoing service reviews
• Coordination of your risk management program with wealth management objectives
• Life, long-term care and disability insurance as well as group life and health plans
• A full array of insurance planning solutions including business continuation, advanced estate planning, executive benefits and personal planning

Let us provide for all your accounting, tax and financial planning needs in one convenient location. Contact your local SME CPA to learn more about our affiliation with Avantax Planning Partners℠. Together, we can safeguard your business for generations to come.

Investment advisory services are offered through Avantax Planning Partners^SM. Commission-based securities products are offered through Avantax Investment Services^SM, Member FINRA, SIPC. Insurance services offered through licensed agents of Avantax Planning Partners. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019. The Avantax entities are independent of and unrelated to SME CPAs.  Although Avantax does not provide or supervise tax or accounting services, our Financial Professionals may offer these services through their independent outside business. Not all Financial Professionals are licensed to offer all products or services. Financial planning and investment advisory services require separate licenses.