As y’all know, we’re a big believers in planning and forecasting at Harvard Grace, and 2020 is going to make 2021 one of the most difficult years to a forecast. I have a tip for you, as well as a reference to another great article in Forbes: just plan as if this year never happened. Go back to what’s generally called “zero based budgeting” or baseline planning.
Go analyze your company and where you are today. I know many companies who have thrived in 2020, and they’ve been more technology or media oriented and/or otherwise use technology to deliver their product or service. Other companies–maybe they’re retail or hospitality based–they’ve really suffered. Regardless of where you are, and this applies mainly to small businesses because larger businesses have additional tools, but even bigger businesses are going to have difficulty planning with 2020 numbers…
My suggestion and my encouragement to you is go back to the beginning. Don’t rely upon any other forecasts. Don’t rely upon 2020 financials. Analyze your business from the ground up, and in most small businesses that means from a customer level up. If you have multiple business units, I would analyze each customer in each of those units. Talk with them over the coming weeks. Find out what they’re looking at. Talk to them about what they’re planning on doing and build your forecast off of that. In most small businesses, once you build your revenue forecast, then the rest of it sort of falls out of that. You build your revenue forecast, then you can plan your staffing forecast, and then the rest of it.
The other thing is, because we’re in a brave new world, build that financial model and then very early in 2021 test that financial model. Ronald Reagan is known for his phrase “trust but verify.” You build the financial model, so you trust in it, but you’ve got to make sure it’s right and that your assumptions are correct. That is something that we do for clients at Harvard Grace, so if there’s any way we can help you plan for next year, please let us know!