(Bloomberg Businessweek) -- Right now, there's good chance you've just gotten off the phone with a creditor, or you're about to get on the phone with one. As important as reaching out to those you owe money to—and those who owe you—is planning for future. And not just for the difficult next few months, but for the recovery to follow. That may seem premature, since nobody knows when the pandemic will end or how much damage it will inflict before then, but the earlier you plan, the more prepared you will be. (And you can be sure that at least some of your competitors thinking about this.) You need to anticipate what your costs will be, how much in sales you'll need to cover the costs, and many other factors.
1. Create a cash-flow forecast.
Estimate all streams of income and expenses for each month through at least the next year. "Initially, these cash-flow forecasts are what we call a WAG, which is a ‘wild-ass guess,'” says Steve Burke, a counselor with the Washington Small Business Development Center in South Seattle. “What we're tying to do is get to a SWAG, which is a ‘scientific wild-ass guess.'”
A cash-flow forecast “becomes your business plan in the most flexible way,” says Burke. “This is the kind of thing you can look at daily. And you can say: ‘Wait a minute, based on what I hear today, my estimate on that—whether it's a cost, or income, or whatever—is probably not accurate. You can make changes to it as you learn more.”
You can also use the forecast it to consider alternate scenarios—a rapid economic recovery, say, or a slower one.
2. Get acquainted—or reacquainted—with your business.
What you'll learn from this exercise is how much revenue you'll need to cover your expenses. Given the uncertainty around the economy, your cost projections will probably be more accurate than your best revenue guesses — it's just too difficult to predict how consumers will behave going forward, at least in the current environment and immediate aftermath. Then it'll be up to you how to figure out how to generate the required sales. Perhaps the post-pandemic world will call for new products and services or, more likely, new ways to deliver them safely.
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All this forecasting and planning will hinge on how well you know your business. For the many entrepreneurs who don't really know their company, the forecasts can be the opportunity to learn about it — to develop the skills a business owner needs to survive, and then thrive.
“That is the essence of the business: doing the research and collecting the data, and then building the systems to manage the process, and then having fun,” says Burke. “It's a huge amount of work," but even in such challenging circumstances, "it can be a whole of fun.”
Consider this: if your company's doors are closed, you might have some time on your hands. This is the best thing you can do for your businesses future.
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