“It wasn’t raining when Noah built the ark”

My previous article discussed immediate actions that a management team needs to do during a crisis, in particular taking control of cash with a cashflow forecast. Here I turn to what every management team should have had and should have going forward….a business plan…..a proper business plan.

Traditionally a business plan has largely been used to raise finance or, in a different form (an Information Memorandum), as a tool for selling a business. Once it has served its purpose it is put in the proverbial “drawer” and is never seen again. It typically has lots of information about the business and its product or service and its historic and projected trading numbers and details about how good its management team is. 

It will also typically have an obligatory SWOT analysis paying lip service to the reader as the reader will expect one. You’ll see lots of strengths (usually including “experienced management team” who often haven’t managed through an economic downturn) and opportunities (always new markets, new products and overseas roll out potential and other generic textbook opportunities). To balance the analysis there will a small number of weaknesses and threats which coincidently are all counterbalanced by great opportunities for each weakness and threat. The real weaknesses and threats are not disclosed. Why would you want to disclose them? You wouldn’t on your CV so why cast any shadows on your business?

Well, in our new world we are hopefully learning many things. One key learning point is that a business plan isn’t just for a one-off event. It should be continuously reviewed, monitored and updated, reflecting the changing trading environment.

In our studies we learned about business models such as Porters Five Forces, PESTLE and SWOT analysis. Legend would have it that they were purely invented for accountancy or MBA studies or to generate fees for accountancy firms and other consultants. However, this economic crisis has fast taught us that this is a myth. These models are crucial to business robustness and success.

Good management teams use a business plan (that they and not their advisers have produced) to succeed throughout all economic conditions, not just during crisis. At its core should be a thorough risk analysis. It’s an internal confidential document and so it can and needs to be honest and should be based on input from the entire senior management team.

So now hopefully the title makes more sense…….“Always plan ahead. It wasn’t raining when Noah built the ark” by Richard Cushing.

My next article, that I will share later this week, will focus on how I see business models and supply chains changing post crisis.

Craig Richardson