You might think that today's economic uncertainties make planning a moot point. Bill Soward, president and CEO of Adaptive Planning -- which offers cloud-based, on-demand budgeting, forecasting, and reporting solutions -- says that kind of thinking is just asking for trouble.
Nobody saw the current economic crisis coming, at least not in its full ferocity. And now that it's here, it's tempting to throw up your hands and say it's impossible to figure out what's going to happen next. In fact, however, now is the time to redouble your company's planning efforts to be prepared for whatever happens.
To gain some insight into the best ways to do that, bMighty publisher and editor-in in-chief Fredric Paul talked with Bill Soward, president and CEO of Adaptive Planning, about how moving planning beyond cumbersome spreadsheet-based planning processes can help smaller companies better cope with uncertainty. First thing to remember? When times get tough, cash is king!
bMighty: What's the biggest challenge facing small and midsize companies right now?
Bill Soward: Right today, it's gotta be the economy. How to manage your business with so much uncertainty around. Some companies may actually be going backward instead of forward!
The next couple of quarters will be very difficult. And then what comes after that? Liquidity is very important. If ever there was a time for planning, it's now. And with all the uncertainty, that means not just Plan A, but also Plan B and Plan C.
bMighty: For many busy companies, strategic planning means little more than choosing which fire to put out. Given those stresses, how can smaller companies find the time for strategic planning?
Soward: I would say to shy away from strategic planning, and concentrate on financial planning for the next year, pulling together the various pieces of your business into a coherent picture. How much are you spending, where are you going to invest, what are your hiring plans, what's the impact of cash flow? The idea is to create different scenarios for the next year, bringing in all of the possible variables.
Trouble in the financial services sector means a lot of SMBs are wondering if their line of credit is going away. You had better figure out what that could mean to your business. At the same time, collections may slow, so you need more focus on predicting and understanding what that does to your business.
It's time for a complete rethink of 2009 and 2010 capital requirements. You need to understand when it's going to turn, and be able to scale down and then snap right back up when the economy starts to recover.
bMighty: How will this crisis affect different kinds of small and midsize businesses?
Soward: This particular recession is going to hit various sectors in different ways. Software companies backed by venture capital firms -- which constitute many of our customers -- are going through severe liquidity crises. In the last six weeks there is suddenly a lot less cash to invest than there was. VCs are going to their funded companies and telling them to conserve cash, and not just because of underlying business causes. So cash is even more important a determinant of what you're going to do.
In the consumer space, there is a slowdown in spending, and you need to understand what that will do.
The common thread is access to cash and expense management. This is not the time to be going over budget.
bMighty: How can companies leverage technology for better planning?
Soward: Business intelligence software lets you build plans with different scenarios and outcomes, so you can better understand the factors driving the business. You can plan more rapidly and get real-time updates. That means you can check in real time whether your company's actual results indicate that you are on plan or not. It's much tighter management, because in this environment, the details matter even more.
bMighty: What about specific technology approaches?
Soward: Software as a service is an obvious choice because of its lower risk. SaaS' time has come. In addition, people are continuing to gravitate to open source solutions, because it often offers better value and lower financial risk.
bMighty: What about vendor risk?
Soward: It's going to be really brutal for the next 60 to 90 days. There are gonna be a lot of casualties. There will be bankruptcies among SaaS and open source vendors. Go for low-risk, rapid-reward products, and strategies that you can scale up -- or down -- as needed. Software as a service is priced per seat; your charges are based on head count. There's not some huge investment in software sitting on a shelf.
And remember, it's your data. Make sure that even if the company goes away, you can get your data out -- even if you have to export it back to Excel -- as we provide at Adaptive Planning. It's not pretty, but you can do it.
bMighty: What are some best practices for situations like this?
Soward: With this kind of uncertainty, the key factors are how much worse will things get, and when does it start to turn around? You have to think through a variety of outcomes ... begin to game it out with your executive team. There are still a few surprises coming; you need to take the time now and make sure you have a Plan B and a Plan C in your back pocket.
bMighty: Is there any bright side to the current situation?
Soward: There will be winners that come out of this recession. It's not just about defense -- it's also about offense. You're making some real important bets that you're going to have to live with for a long time. If you cut back too much you won't be able to recover as quickly. Someone else could be better positioned to pounce on your market, if they are able to deal with these issues more cleverly than you are. It's like figuring out when to take a pit stop in an auto race. If you can time things right, when you come out of the pits you can zoom right by everyone else.
And if nobody's buying anything, then you should have plenty of time to plan.
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Fredric Paul is publisher/editor-in-chief of bMighty.com.