Business Planning in Uncertain Times · • Just began $3 million capital raise for new factory. Then COVID-19 happened. Revisited all assumptions • Vendors are hungry (including

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Business Planning in Uncertain Times

For

Vermont Specialty Food Association &Vermont Retail & Grocers Association

April 3, 2020Bryan Ducharme


This is different

Strong economy deliberately shut down to save lives.

Unprecedented government support.

Long-term economic and psychological impact.


Unprecedented Business Uncertainty

Decisions are inherently emotional.

Analytical planning tools can help.


Step 1 – survival

Manage cash flow aggressively.

Take advantage of any credit available to you.

Reduce expenses aggressively.

How long can you last under various revenue, spending and investment scenarios?


13 Week cash flow forecast

Source: Marty Mooney of Equity38, published on CFO.University


Data-driven decision making

Predict

MeasureAdjust

A detailed understanding of the business.

What-if analysis.

Bring hard data into an inherently emotional process.

Questions?


Adapting your business model post-covid-19

Economic headwinds.• Geopolitical instability?• Unemployment and reduced discretionary spending.• Budget deficits, higher taxes, slower growth.

Changes in business and consumer behavior.• Acceleration of digital vs. in-person business.

• Remote work policies.• Distance learning.• Telemedicine.• Ecommerce.

• Changes in medical systems and availability?

There will be opportunities too.• Migration away from dense cities?• Hiring flexibility.• Low interest rates.• Government stimulus spending. • Distressed equipment sales.• Business acquisition opportunities.


Financial Sensitivity “What If” analysis

Testing business assumptions.

Assumption

Selling price per unit $12

Variable cost per unit $5

Fixed Cost per year $200,000

Forecast sales (units) 50,000



Assumption

Selling price per unit $12

Variable cost per unit $5

Fixed Cost per year $200,000

Forecast sales (units) 50,000

What if your assumptions are off?

Forecast

Revenue: $600,000

Variable Costs: $250,000

Fixed Cost: $200,000

Profit: $150,000


Assumption(Prediction)

Assumption(10% worse)

Selling price per unit $12 $10.80

Variable cost per unit $5 $5.50

Fixed Cost per year $200,000 $220,000

Forecast sales (units) 50,000 45,000


What’s the impact of each change in assumption?


Assumption(10% worse)

Forecast Profit

Profit Difference(vs. $150,000)

Selling price per unit $10.80 $90,000 -40%

Variable cost per unit $5.50 $125,000 -17%

Fixed Cost per year $220,000 $130,000 -13%

Forecast sales (units) 45,000 $115,000 -23%

Impact of changing one variable by 10%.




Advantages

• An easy way to test business model assumptions.

• Identify the assumptions with the greatest impact on profit.

Limitations

• Aggregate level data may not reveal all issues.

• This approach can only test one assumption at a time.

Questions?


financial Modeling

Income Statement

Balance Sheet

Cash Flow

Revenue Projections• Product/Category• Volume• Price

Cost of Goods Sold• Volume• Raw materials• Equipment• Labor

Cash timing• AR• AP• Investment

Multi-variable “what if” testing & financial projections.


financial Modeling – Example spreadsheet

Management Buyout of a Consulting Company (simplified)• Projected various scenarios• Business improvement ideas• Deal value / negotiation• Deal structure • Operating performance

Focus on “Rev Worksheet”• Staff• Billing rate• Utilization• Direct vs. indirect labor


financial Modeling EXAMPLE: Strategic PivotFast growing manufacturer of specialty tools.

• Bad experience with vendors.

• Decision to make parts in-house.

• Growing factory with CNC machine tools & staff.

• Just began $3 million capital raise for new factory.

Then COVID-19 happened.

Revisited all assumptions

• Vendors are hungry (including big ones).

• Make key parts and source the rest.

• Postpone factory by 1 year or more (look for deals).

• Increase revenue 2.5x in current footprint/fixed costs.

• Owners equity forecast to be almost twice as high in 3 years.

Complete strategic pivot planned in about 3 weeks with business modeling!


Business Planning in uncertain times

Survive by preserving cash and securing additional capital.

Test your business assumptions with sensitivity analysis.

Complex plan changes call for more complex financial modeling.

Predict

MeasureAdjust


LarryChernicoff

Managing Partner Partner,Master Entrepreneur

BryanDucharme

ScottHardy

PartnerCreative Director• Co-founder, Kodiak Group• Founder, GreenHeart Global• Founder Windhorse

Communicatons• Award-winning designer &

musician

• Co-founder, Kodiak Group• Founder, TrueNorth

Construction• CEO, Senix Corporation• Founder, Venture 7

Advisors.

• Founder, New England Overshoe (NEOS)

• Founder, Ulu Boots• Founder, Linckia

Development

Documents

Business Planning in Uncertain Times · • Just began $3 million capital raise for new factory. Then COVID-19 happened. Revisited all assumptions • Vendors are hungry (including