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I’ve been asked a few times recently, “what might I have not thought of that I ought to be planning for?”.  On the face of it, it seems a really hard question to answer, but when you stop and think about it, there are several unknowns that you can plan for, because you can think of them in general terms even if you don’t know when (or if!) they might happen.

Confused? Let me explain ...

Quiet months

Regardless of what your business is, there will be busy months and there will be quiet months. Sometimes, the quiet months are planned in but often they can sneak up on you and take you by surprise.  Either way, planning for that reduction in income is possible as you will know what your regular costs are within your business (ie staff, rent, direct debits for bills etc) and what income you need to be able to take out of the business each month. 

Once you know this you have a figure that you need to have sat aside for a quiet month. If you plan on the basis of it suddenly being a zero income month then that really is a worse-case scenario.  You can then decide how many quiet months you want to have the cash set aside for … one, two, three? That is going to be personal to you, your risk profile and how long you think a quiet period would last, but you can then look to set up savings within the business to cover this.

Supply chain problems

For businesses who manufacture or buy in goods to resell, then problems with the supply chain can cause a real issue, for example:

  • if you ship in goods, adverse weather could delay a shipment

  • if you have an overseas manufacturer then any problems with them (staffing, quality) could result in a lack of product to sell

  • if you import goods, changes to customs procedures could result in a longer time for goods to clear customs and be with you

Looking at how much stock you hold, how long it lasts and how reliable your supply chain is will help you assess the risks but you cannot cover all eventualities but you also can’t hold enough stock to last forever either.  It’s about assessing your risk profile and how likely you think something is to go wrong and what steps you can take to mitigate it.

What’s the key?

In both of these examples, I refer to your risk profile.  Knowing how risk adverse you are will help you with assessing whether something is a genuine concern or your brain going into overdrive on what-if’s. It is possible to come up with a million and one worse-case scenarios but if the chance of something happening is so remote then you probably don’t need to plan for it, but if a few hit that magic spot where you think “hmmm.. “, then chances are you ought to be looking at it in more detail and planning accordingly.