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Business Reset Planning Framework.

A tool for quick decision making

 

Check The Reset Program for more details.

Business leaders and founders face the task of ensuring business continuity, and at the same time reconfiguring the business to adjust to the new normal that the world will settle into. That the picture of what the new normal will be is yet blurry adds to the complexity to planning for an uncertain future - most certainly uncertain in the immediate and mid-term.

Here's a framework that will help you take quick, well-thought-through decisions for the short and mid term.

Step 1: Assess the type of impact your business will have

Step 2: Make a detailed month-by-month excel sheet with all possible expenses and revenues to assess how much runway you have

Step 3: Make a detailed list of all possible expenses that can be reduced / eliminated

 

 

First, assess which of the four buckets your business falls under.

  1. ​Short term blip - demand will be back to near normal when the lock downs, etc. end
  2. Mid-term disruption - your value proposition is still relevant but it will be a few quarters till business gets back in decent shape 
  3. Long-term impact - fundamentally things have changed, or are likely to change, because of which the relevance of your current offerings may not have a market anymore 
  4. Blessing in disguise - unfortunate as the circumstances may be, it has made your offerings a lot more relevant or has speeded up the adoption 

Step1: Clearly define which bucket you are in, because what the appropriate response is will clearly depend on it.

,

Assess how much runway you have with your current resources.

Evaluate multiple scenarios and plan with the worst-case scenario.

Irrespective of which bucket your business falls under, it is advisable to take measures to extend your runway to at least 12 months, ideally 24. (External capital is going to be hard to come by, especially if you are beginning a fresh round of fund raising. And even if there is a reasonable chance of raising capital via VCs/angel investors, it will take 4-6 months to materialize.)

Step 2: Make a detailed, month-by-month excel sheet listing all possible expenses that you have currently and revenues that can be expected in the changed circumstances. Make a very, very conservative re-assessment of your revenue projections.

 

Even if you have a sense of the runway you may have, it is useful in these kind of circumstances to have a detailed excel sheet that you can track weekly, so that it gives you early-indicators on the adjustments you need to make in your operating plans. These times require for quick, real-time adjustment of plans.

Note: This excel sheet that you make initially will undergo multiple iterations as we go through multiple steps. But it is important to start with an excel, so that you can assess where the changes can be made.

 

Extend your runway

Broadly, there are two ways in which you can increase runway:

  1. Reduce expenses 
  2. Increase revenues 

Not all businesses will have the option of exploring both options, but do a good assessment of both options and optimize both to whatever extent you can.

Step 3: Make a detailed list of all possible expenses that can be reduced / eliminated

Reduce expenses:

  • Renegotiate rents - either seek reduced rentals, or deferred payments
  • Stop subscription services that are not required or downgrade to free/lower plans
  • Significantly reduce/travel 
  • Reassess inventory, warehousing and logistics optimisation wherever relevant and possible
  • Optimize product costs, wherever possible. E.g. If you are a Reassess aspects about packaging that can be eliminated/reduced without impacting experience e.g. can you reduce the thickness of packaging of paper packaging? Will it make any significant difference to costs? Is the effort worth it?
  • Stop / reduce hiring as best at possible: Deploy existing resources to key priorities. Figure out a way to train quickly and as comprehensively as possible. Given the challenges and lack of options, people will adapt quickly. 
Retrenchments, salary reductions, deferred salaries, etc.
How you treat your team in these trying times will go a long way in defining the relationship, and their commitment to you and your brand. Cost reduction via retrenchments or reduced salaries or deferred salaries should be the last option, if everything else that you can do does not seem to be enough.
Even where retrenchments are not avoidable, be humane and considerate in how you do it. Some individuals will have a better ability to absorb financial shocks than others. Consider all possible aspects.
If you have to implement pay cuts, explore ways in which you can compensate people. ESOPs in lieu of the reduced salary can be one option. Giving x% over and above the cut as bonuses when the markets turn for the better can be another option. You may not finalize a solution. But even communicating to the team that the intent is to make good when we can is good.

Different businesses will be impacted differently. If you are a B2B company assess if your current target customers are going to have the bandwidth to adopt your solutions. Even if they can really benefit from your product/solution, it may be difficult for many businesses to find the time and resources to readjust their current processes to migrate to your solutions. If so, reassess the following:

  • What changes can you make in the product to make it easier for companies to adopt
  • Would a different customer segment than what you are currently targeting be more receptive to your product/solution
  • Would customers in different markets than you are currently targeting be more receptive
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