9 Tips To Plan for an Unpredictable 2021
Editor’s Note: This is the time of year when marketing departments begin looking at their budgets for the coming year. But with Covid-19 still running rampant and a presidential election on the horizon, planning for the coming year is well… unplannable, really. However, not planning is far worse. Here are 9 fundamental tips to make the best possible plans in an uncertain future. Think flexibility!
The Covid-19 pandemic has affected different businesses in different ways. Our clients in the home improvement/DIY space are working 14-hour days, 7 days a week, with sales up 40–50% over 2019. They are in a “sales tsunami” of unprecedented proportions.
Contrast that with our clients in the fitness business who have been closed since March, may not open before year-end, and are facing possible bankruptcy. No matter the circumstances in 2020, all businesses must plan for an unpredictable 2021.
So what might 2021 look like? I see four possible revenue scenarios based on the shape of economic recovery:
- V-shaped: This is the most desirable scenario for next year – our unprecedented economic collapse followed by a consistent growth pattern back to normalcy by mid-year.
- U-shaped: This shape depicts an economic collapse that is extended over a long period followed by a gradual recovery late in 2021.
- W-shaped: The W shape represents multiple rounds of Covid-19 infections causing additional shutdowns and reopenings for many sectors.
- L-shaped: This represents an economic collapse that simply never recovers, and commerce, as we know it today, is changed fundamentally.
Dynamic budgeting for 2021
Do not give up on planning for 2021! Create a rolling 12-month budget that you can review and update monthly based on your actual experience. Use a spreadsheet program so you can easily make a change and see how the new story unfolds. (Find a free template for your rolling 12-month budget and cash flow forecast on our website). It all starts with predicting your sales for 2021 and using a tool that enables you to quickly and easily recalibrate your expectations as time goes by.
Forecasting 2021 sales
If you lack confidence in your ability to forecast 2021 sales, you are in good company. You have several options. If you are having a great 2020 and are feeling optimistic, you may be tempted to set your sights up 10% from this year. Perhaps it is safer to budget level with 2020. Some will choose to use 2019 results as a base and budget up 10% to 20% from there.
Real results will depend on changing consumer buying behaviors. How will they affect your business? Will you need to invest in product changes, new marketing, or technology to adapt to the new behaviors? Today, more than ever, it is essential to track your sales trends and seek to understand how changing buying habits can drive sales forward. It’s time for innovation, creativity, and bold moves.
What to put in your budget
So what should be included in your 2021 budget? Flexible sales goals and realistic expense plans!
Flexible sales goals. As you set goals, be aware of your product mix and the margins that are driven by each line item. Part of setting sales goals should be a clear focus on improving gross margin for 2021.
Realistic expense plans. Your expense plan should incorporate expected staffing changes. Will you add staff or replace poor performers? How will you find the best available new hires? Will you incur recruiting costs? How will new paid time off (PTO) and PPP loans affect your decisions?
Many businesses must now change their marketing focus, investing differently and possibly investing more than in previous years. The marketing plan must align with the sales plan, driving the level of inquiry necessary to result in the forecasted sales.
What about overhead? Most have already cut all the excess expenses possible and should consider whether investments are needed to develop new products, reinvent sales processes, or create new marketing assets.
Some tips for better budgeting
First and foremost, Just Do It! Beyond that:
- Align your advertising/marketing expenses with your marketing calendar and be sure you have established a clearly thought-out and aggressive marketing schedule for 2021.
- Run a 12-month P&L statement from 2019 for reference to be sure the plan you are creating has some validity based on a normal year.
- Estimate your fixed expenses based on your monthly dollar spend.
- Estimate your variable expenses as a percentage of sales.
Operating without a budget puts you at a distinct disadvantage to competitors who know their costs, monitor their results, and make business changes quickly if things do not go to plan. This takes process, discipline, and some basic financial acumen. If the terms fixed and variable expenses are not familiar to you, or if you do not know your monthly breakeven, take advantage of the financial education available on our website.
9 planning tips for 2021
Finally, incorporate these 9 tips into your plans for a great 2021:
- If sales are strong, drive profits now while you can and build cash reserves.
- Modify your products or services and your customer experience to align with customer buying behaviors.
- Keep personal and business expenses scalable.
- Keep your accounts receivable clean.
- Stay current with suppliers.
- Don’t use credit cards to finance your business.
- Pay attention to your balance sheet – don’t let debt get out of control.
- Cultivate an ongoing relationship with your banker.
- Monitor your flexible, dynamic budget and recalibrate your plans as your future unfolds.
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