Too many organizations get into trouble because they don’t plan very well. And even when they are good at planning, they essentially only plan for what they expect to happen; the business they expect to deliver. In our experience, life and business is “like a box of chocolates”, you really can’t be sure what you’re going to get next!
So, how do you prepare for the unexpected? What’s your backup plan?
In business (at least) you need to prepare for surprises in the marketplace by having a robust, proactive and continuous contingency planning process. By contingency planning we mean – a proactive process of planning for both the short-term and long-term security of your company. Our definition of contingency is a product or service that has already been researched, developed, and cost justified, and can be activated on very short notice. And it’s a key part of your sales planning process. But don’t limit your contingency planning to just designing new products and services. It may be that some level of growth can be achieved through suitable acquisitions. We generally recommend that product and service innovation contingencies are greater than or equal to 15% of your overall sales plan.
In a perfect world your sales or revenue line wouldn’t fluctuate; it would grow consistently and evenly according to plan. But we’ve rarely found that to be the reality in most of the organization’s we’ve worked with. Most sales or revenue lines resemble roller coaster rides, caused by unexpected canceled orders, customers going out of business, new competitors starting up, difficulties in meeting orders etc. In order to manage your business successfully, you need to have as much control over your sales line as possible.
Here are the four benefits of having control of sales with contingency planning:
- It makes planning easier.
- You have better control over your profits.
- It enables you to plan your materials and purchases more accurately.
- Gives you a clearer indication as to how many people you need to employ.
Bonus! If you appear to have control of your business, it gives comfort to your employees, your board, your shareholders, and the financial and stock market institutions.
So, right now, what would you do if 10% to 20% of your revenue suddenly disappeared? What’s your plan to get the business back? Do you have a contingency plan?
Well, you should and you should be able to activate your contingency plan quickly!
Here are the five items that should be in place or completed when you are ready to activate your contingency plan:
- The market research should be complete.
- You should already know what the customer would buy.
- Processes should already be designed and tested, software written, and materials sourced and priced.
- How you plan to go to market, and through what distribution channels should already have been decided.
- Pilot runs initiated, costs understood, and pricing agreed. Initial marketing materials should have been discussed so they can be designed and executed quickly.
So when do you activate contingencies?
Contingencies are activated when you realize that your revenue is likely to drop because of unexpected events in the marketplace. They are also activated when they become part of the next year’s sales growth plan. They might also provide you with a way to respond to sudden increases in customer demand or market opportunities. If the growth targets can be achieved by expanding current lines of simply selling more, you may not need to activate a contingency the entire year.
When one or more of the contingencies are activated, another one needs to take its place on the list. In fact, the Contingency Plan is a “living document” that is revised and updated on at least a quarterly basis and consists of a list of fully developed projects, projects in development, and a list of ideas for consideration. These ideas show the Board of Directors that people are thinking beyond just the next 12-month period.
Make contingencies part of your standard operating procedure! There is NO excuse for not have contingencies in place. If you don’t have a well-developed program of contingencies in place you will almost certainly pay the price for being unprepared!
Need help with getting started or stuck on your contingency planning? We are here to help, contact us.