Why plan B should be your new plan A
I wrote the original draft of this post over a month ago… and decided to sit on it and see how the first quarter finished off. While there are some signs that the economy is no longer plummeting downwards like an elevator with a broken cable, there is still plenty of cause for concern.
We're heading into the reporting period for Q1 – already you can feel the storm clouds gathering. Remember that many companies chose to give no guidance at all for this quarter so there's no warning flurry of pre-announcements to provide a harbinger of things to come. I don't believe it's going to be an out and out disaster but I don't expect many to outperform.
With that comforting thought in mind, I offer you the following – if you haven't already done what I suggest below, you might want to give it some serious thought. The road out of the current economic wreck is going to be long and slow – a slog if you will.
Many companies have two plans…
Plan A – the plan of record (POR) that defines how the company will execute over the next year or so to achieve its goals. The POR acknowledges the assumptions, risks and future capital requirements for the company to continue to expand.
Plan B – the contingency plan that says what the company will do if plan A falls apart due to external factors (the economy? Duh!) or failures in execution, customer demand, external vendor screw ups etc.
This is the time to make that plan B your plan A.
Invert the psychology – instead of having a set of assumption that IF NOT MET cause you to take corrective actions (often with not so happy consequences like layoffs, a down round, going into hibernation…), do the opposite.
Put in a base case and then factor in what you would do when you have met or achieved the base case. Meet milestones that give you confidence on the business – spend more money to expand. Remove product or sales risk – move aggressively to the next phase.
In a nutshell, plan based on achieving confidence not having to sweep up the broken glass.
Apart for giving you more stability in your company, it will expand your cash runway and give your investors more confidence to boot.
Take out plan B, put it into action and use the original plan A to expand as your progress.
No plan B? Time to go back and read about Darwin…