As human beings our most basic instincts are either “fight or flight” with responses to most important situations based on faith or fear.
Subconsciously, this also tends to apply in many business situations.
In talking to start ups, entrepreneurs and small businesses every week about business plans, projections and many other topics, we find they generally talk to us about their aspirations and fears, their best and worst case scenarios.
Optimism and excitement are at the heart of the entrepreneurial spirit and why we love working with small businesses so much. Business owners are also generally pretty clued up these days and conscious of worst case scenarios. When applying for investment or finance you’d look pretty naiive if all your projections and plans only assume fantastic runaway success. Hence, the worst case scenario is generally considered and included in business plans and projections and, to the extent possible, planned for.
There’s lots of good content online about planning for best and worst case scenarios – here’s an example.
The difficulty with best and worse case business projections is that neither tend to the be the most likely real world outcome. Most businesses end up somewhere in the middle and that’s why it’s always important to plan for that as well.
But hold on a minute – how can you project and model a middle ground, the most likely scenario as a start up? You have no data to go on. That’s a fair point so some initial guesswork or just taking a median between best and worst case figures is one approach.
Ways to seek out the most likely outcome
In many industries or sectors, competitor analysis can help regarding likely turnover, costs and so on. This is something we specialise in and for many types of businesses we have data from other clients who have been at the start up or early development stage which means we can add value to plans and projections for clients. Talk to us about how we can help.
If you have been trading for a while, things should be much easier.
In this excellent article the writer explains his methodology for setting base line figures and creating a most likely scenario as well as a best and worst case one. There’s even a nice graph which we’ve reproduced below :
Business owners tend to be very emotionally involved in their businesses. Talking to independent advisors is often a good way of seeing the reality of your situations, prospects or problems. When we say we’re not involved, we can’t in all honesty say we’re completely detached either – we want our clients to succeed and share their excitement and disappointments.
If you like what you hear and see the value in good planning, good monitoring and getting regular business information that helps you make better strategic decisions, talk to us. We’d love to work with you.