With inflation hitting record highs across the globe, labor shortages, supply chain issues, the pandemic, and more, financial planning for your business is no longer something you can go into half-heartedly. Approaching any investment with due diligence is key during periods of volatility, but there's also some other approaches to take that will all serve to safeguard your business in tough times.
While it's true that you can't predict which way the market will go, by planning for multiple scenarios and analysing historical movements, you'll be better prepared to captain your business through unexpected storms.
It may seem difficult to maintain a realistic forecast or plan, however, being able to focus on multiple facets of the business can help you create a fluctuating plan that can withstand economic uncertainty.
There are 3 important aspects that companies should keep in mind when responding to a volatile climate:
- They should ensure they're measuring the right KPIs
- Businesses should forecast with more frequency and accuracy
- They should manage risk for competitive advantage
How to adapt your financial and operational planning for today's environment
We're all trying to navigate the numerous reality shifts that the Covid-19 pandemic has brought with it. Not to mention the supply chain crisis, rising interest rates, war, etc. These, among other factors, have triggered increasing complexity in the marketplace, causing financial teams to shift their ways from the more traditional planning methods to a more agile, flexible, and strategic way of thinking.
Dive deeper into driver-based planning
This type of planning can help you be more agile in your planning and plan for granular-level details. By working to break down key business drivers, you can better predict how they will impact your financial and operational performance. It is valuable as it makes up for a lot of what traditional budgeting lacks in terms of scenario planning as it allows for adjustment in activity and resources.
Use scenario analysis to predict potential outcomes
Scenario analysis allows you to better prepare for changes in your company's key activities and resources. This helps you prepare for a multitude of different scenarios such as worst-case scenarios, best-case scenarios, etc. to allow your business to take proactive planning measures to achieve its goals.
Look into rolling forecasts
Rolling Forecasts are a way to help you respond effectively and quickly to opportunities amid market changes. This report uses historical data to predict future numbers in order to project results for budgets, expenses, and other financials based on their past results.
Use collaborative planning
Collaboration between business leaders and budget owners can improve overall planning efficiency while increasing the value that your planning process provides. Collaborative planning will help you gain better insight.
Break plans into smaller steps
By breaking longer-term plans into smaller, more manageable steps you can better support your goals by allowing you to be more adaptable and agile. While you should still have your long-term plans in place, perhaps focus on how your short-term plans drive them.
Tools to growing your business in volatile markets
While volatile markets may be stressful, there are ways in which businesses can grow. These can include attracting the right clients, emphasizing the company's value, optimizing client referrals., considering complimentary reviews, etc.
If you haven't already, you'll need to identify what your ideal client looks like. Begin by examining your most engaged, most profitable clients and identifying similarities between them such as personality, lifestyle, key traits, etc. This will help you more easily tap into and target the right audience for your business.
Market fluctuations also offer an opportunity for businesses to show that they are there for their clients, in the good as well as in the bad. This can help businesses connect and network more meaningfully and build brand trust.
Do you get any client referrals? Well, when you do, be sure to express your interest in reaching out and try to obtain relevant details about the referral so that you can initiate contact around a talking point. This personalisation should help you do better when reaching out.
And since many people welcome financial advice during uneasy times, you could even offer complimentary reviews to help your clients' contacts. For example, you could share advice and tips with them free of charge or offer a free trial, etc. to lay the foundations for a potential new business relationship.
In truth, while market volatility is scary, there are ways in which your business can leverage that uncertainty and instability to grow and take advantage of opportunities that other businesses may not have identified as yet or are too weary to take.
However your company chooses to tackle its planning during this volatile market, there are specialised tools that exist that can make your life easier while saving your business valuable time and resources. While you may still be on the fence about whether to choose a specialised tool or stick to the traditional spreadsheet method, a huge benefit you can't ignore is the software's ability to integrate into your existing accounting tools.
For example, we at Crunch have integrated with forecasting tool, Brixx, to help you better plan for your company's future. By integrating with your existing records, you can better forecast ahead of time and compare your results with initial projections.
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