What a year 2020 has been. So many things happened, or are happening, that we have never had to plan for historically. It’s an election year, there’s a pandemic, there is so much unrest around the world, and we are dealing with unprecedented environmental challenges from fires to hurricanes. And yet this is the time of year when small business owners need to be looking ahead to 2021 and crafting a strategy to thrive.
In spite of the unknowns, or perhaps because of them, there is so much that can be done to set the stage for the best possible outcome next year. Here are some areas to consider as you plan:
- If you build it, will they come?
If your business provides technology focused or consumer products, 2020 may have been a banner year. You should be looking at trends and evaluating whether this will continue, and if there is a seasonal aspect you should consider as you look ahead. If your business is consumer service oriented, it may have been a tough year. Have you done all that you can to pivot to the “new normal”? Are you using technology and social media to position yourself to maximize business? Are there modifications you can make to your physical space to enhance customer feelings of safety and comfort? Projecting revenue in times of uncertainty is no small task, so it may be wise to look at multiple possible scenarios and plan what would cause you to execute plan B or C. The more realistic you are with your projections, the better.
- Are you going to need a bigger boat?
Once you have a sense of your revenue projection, you will want to evaluate your resources. If you are projecting growth, will you need to add employees? Will they be part time or full time? If you just need a little help, maybe it’s something you can outsource for a better ROI? Does your office space meet CDC guidelines? Will people work from the office or from home? Do you have the ability to purchase the things you need? Are they coming from farther away than they used to at a higher cost, or with a longer lead time? Have you taken the necessary steps to meet your anticipated demand? Once you’ve determined your resource requirements, do you feel that your margins are healthy? Is there anything you should consider as it relates to pricing your product or service to better cover your costs? You may need to use more or different, and sometimes more expensive, products to offer your service so now is the time to make sure your business can still be profitable with the revenue you planned in step one.
- Will the check be in the mail?
Cash is still king and it’s important to plan for potential payment delays from your customers. Do you serve customers who will be struggling with cash flow? Is it possible to change your payment terms to collect more as a deposit of via milestone payments? Do you have access to a line of credit? Do you have resources available to cover your operating costs if things don’t go smoothly on the collections front?
- To infinity and beyond
Finally you have a plan for 2021 and you can enter the new year with confidence. As you move ahead, always keep the future in focus. If you plan to acquire another company, roll out a new product, sell your business, or any other major change, you have an opportunity to map that out now too. Entrepreneurs with liquidity may have terrific purchase options in the next year or two, and should be evaluating opportunities for growth.
WhippleWood CPAs has a full team at your disposal ready and able to help you every step of the way, including; maintaining accurate financial statements, budgeting, cash flow forecasting and life planning.
Learn more about our services at WhippleWood which can help your business plan for 2021 and beyond.