Now is the Time to Develop a Contingency Plan
You’ve built your company on a solid foundation and have taken all the right steps to ensure success in every area of your business – that is, those areas over which you have control. But suddenly, we’ve found ourselves in the midst of unprecedented circumstances – brought about by external factors over which we had no control – that have impacted literally every business in one way or another.
Having an awareness of the external factors that affect your business is the first step in being prepared to meet them when they come. And, as we see, they will come!
NOW is the perfect time to develop a contingency plan for your business, or review and revise the one you have in place. You are living your own case study and have an opportunity like no other to assess your level of preparedness and what changes you need to make to improve it.
One way to do this is by conducting an environmental scan. It can prepare your business to not only roll with external disruptions but to be in a position to take advantage of unexpected opportunities. First, take the time to answer these questions.
- How has your business been impacted, positively and/or negatively, by the events associated with COVID-19?
- How has your contingency plan, if you have one, enabled you to continue doing business?
- What steps have you taken to adapt to doing business in the current climate?
- Will this change how you do business moving forward, including after the crisis has passed? If so, how?
- What are the most important factors to consider for your individual business as you develop or revise your contingency plan?
Now consider the points of the environmental scan as they apply to your business.
The Environmental Scan
An environmental scan is a process of gathering, analyzing, and interpreting data about the outside world – the broad environmental context within which your business operates – that enables you to forecast threats or opportunities. One of the most widely used methods is the PESTEL, or PESTLE, analysis which focuses on six categories of data.
- (P)olitical: Government policies and actions that influence the economy
- (E)conomic: Economic conditions that may impact supply and demand for a product or service
- (S)ocial: Changes in the socio-cultural market environment that influence consumers’ needs and wants
- (T)echnological: Technological innovation, new products or services, and rates of adoption of change that could impact particular markets or industries
- (E)nvironmental: Ecological and environmental factors like access to renewable resources, weather events and climate change
- (L)egal: Changes to labor laws, consumer protection regulations, health and safety requirements and other legal requirements
Diving In to Your Own PESTEL Analysis
Here are the 3 steps you can take to analyze the political, economic, social, technological, environmental, and legal factors that can impact your business:
- Identify the factors within each PESTEL category that may impact your business. This will likely require some brainstorming, perhaps a look back at the history of what has impacted your business, or even consulting an expert in some of these six areas.
- Determine the likely implications to your business of the external factors you’ve identified. Assess the impact of each by asking and answering some questions and rate the probability that the identified risks or opportunities may occur.
- Rate the potential impact to your business – whether positive or negative – from low to high.
- How will these factors affect my business specifically?
- Will the impact be positive or negative?
- Will the business be affected short- or long-term?
- What is the significance to the business overall – will it increase, decrease, or not change staff needs, operations, revenues, etc.?
- Will the effects of these external factors likely require a modification to the strategic plan?
Once you’ve completed the PESTEL analysis, take additional action by further analyzing and interpreting the results of your environmental scan with a SWOT assessment. Determine and list the specific Strengths, Weaknesses, Opportunities, and Threats that apply to your business, relative to the findings of your environmental scan. Then put plans in place, including adjusting your strategic plan if appropriate. This will better prepare your business to respond to and manage changes in the external world in which it operates.
This process is not just for large corporations. Small to medium-sized businesses, without the revenue, brand recognition, or resources of larger companies are more susceptible to the effects of external factors, as many of us are experiencing now.
I’d welcome the opportunity to help you assess the external factors that have, or may impact the sustainability of your business success and develop a proactive approach to addressing them. Contact me to schedule a complimentary review of your financial situation.