Strategic forecasting – a valuable tool for all business leaders
If there is one thing that Covid19 forces us to have, is a strategic crystal ball to gaze into the future to let us know what else is coming ahead. We want to know how long the recession is going to last; we want to know what will happen to our customers; we want to know when they will buy from us again; we want to know the volume of consumption; we want to know if their tastes remain the same or whether they have changed; we want to know if we will be able to receive our goods that we ordered from our overseas suppliers; we want to know… we want to know… we want to know…
Indeed, we are in unchartered waters today. Covid19 has forced the whole world to adopt new behaviours – working from home is one example – and that might radically change our customers’ behaviours. Public health considerations may sound the death knell for some businesses as social distancing may not allow for a critical mass of customers to ensure that the business remains viable; restaurants are a case in point.
In fact, I recently got to talking to a restaurateur. Needless to say, Covid19 has changed her business landscape significantly, and she is worried that, despite the financial support that the government has poured onto businesses, that would not be enough to pull hers out of the doldrums. The truth of the matter is that while the government has given financial support for employee wages (only 50%) and, to some extent, for rent, there are still other overheads to bear, like the recent renovation loan payment, the equipment maintenance and insurance. Even CPF contributions continue!
Food costs have risen somewhat – though thankfully not too much - and it is very hard to predict demand. The takeout business has only generated less than 30 percent of her normal turnover, and she is seeing that slowly decline as well since the start of the lockdown. She fears that once the government financial support is pulled (the Jobs Support Scheme ends in August 2020), she might have depleted all the reserves in her account, and the business would not be able to restart. She is now at a difficult crossroad – to stay open and hope for the best, or to call it quits now. This, needless to say, is a very difficult decision and she called for a coaching session (we offer coaching for business owners who want to play a more strategic game and earn twice the revenue in one year!).
Her question to me was as simple – and as difficult - as this, “What should I do?”
As a business coach, you will know better than to answer this question. Our role is not to solve their problems, but to help our client get clarity. So, I asked, “What would you need to answer that question?”
“I will need to know what is going to happen to the business over the next 2 years,” she replied. “But,” she continued, “no one knows what’s really going to happen. Not even the government. So, better to be safe than sorry, right?”
“Not necessary,” came my response. “Certainly, your business will not be the same. But therein also lies the opportunity. If you can change the way you do things, and create a new normal for yourself, you can still thrive. And to help you with that, I am going to introduce you to ‘strategic forecasting’.”
And what follows in this article is a summary of our coaching session. I hope you find it as useful as my restaurateur coachee had…
WHAT IS STRATEGIC FORECASTING?
Some people call it scenario planning, but scenario planning is just the means to perform strategic forecasting. Basically, it is the combination of environmental scanning and scenario planning to create the most likely outcome. The aim of strategic forecasting is to be able to paint the most-likely picture of the business environment in order for us to make strategic business decisions like upsizing or downsizing headcount; modifying or totally abandoning our product or service offerings; or investing in technology to meet capacity changes; or positioning ourselves for demographic changes. Indeed, strategic forecasting is a KEY business tool in times of uncertainty, as it is now.
There are 9 steps in this process: