Armanino Blog

The Power of Reforecasting

by Michael Hogan
July 06, 2020

Whatever growth stage your business is in, understanding the power of reforecasting can help you successfully navigate through disruption and make fast pivots. Willingness to revisit strategic business plans, perform a 13-week cash flow analysis and bring all key stakeholders to the table to consider and anticipate disruption impacts will be the key to your business longevity.

Here are four considerations to build into your business habits when managing disruption:

1. Be willing to invest the time to understand where you are today and what a “new tomorrow” may need to look like.

Disruption brings about crossroads and strategic moments. You need to take the time to conduct a strategic assessment of your current and future situations.

First ask yourself: Where are we now? Where are we headed? And how are we going to get to our desired business result? Second, you need to gain the participation of all internal stakeholders to seek answers to these questions, and assess them and compare them to your point of view.

2. Perform 13-week cash flow analyses.

Performing a 13-week cash flow analysis (and redoing it as needed) is imperative to a company’s successful navigation through disruption and significant change, particularly for companies that find themselves in financial distress. A distressed company must be able to determine what costs they need to cut in order to achieve a cash-neutral position as soon as possible.

A young company’s success often rests on having a clear picture of where they will be over the next 13 weeks. A more established company can leverage a 13-week cash flow analysis to anticipate organizational changes and pivots that may be needed to survive a particular season, whether one quarter, multiple quarter stretches or more.

3. Build a plan not to fail.

Building a six-month strategic operating plan is also a best practice during disruption. Be sure to include toggles, off-ramps and on-ramps (plan B, C, and D type roadmaps) in case things don’t work as expected.

For example, if you can’t achieve the desired savings in one department, what are alternative areas that you can pause or cut? The plan should be aggressive and serve as a conservative starting point toward achieving a desired business result of 25% to 30% in overall cost reductions. (Yes, 25% to 30% in overall cost reductions.)

By basing your strategic operating plan on a conservative starting point, you will save yourself from “death by a thousand cost reduction cuts.” This will allow you to evaluate business units and other large cost centers for savings and efficiencies, rather than moving from one small cost cut to another until you end up in the same place with a 30% cut but essentially have demoralized your organization to get there.

4. Bring in an objective set of eyes.

One of the most impactful actions you can take in times of disruption and change is to bring in a third-party advisor. In times of crisis, business leaders are often too deep in the forest to make objective decisions for their organizations. An outside advisor can provide objective reviews and advice on how to manage the company during the turmoil and help you build a go-forward plan.

A third party can also be a significant confidence builder for your investor and stakeholder relationships. (Look for an advisor with deep experience in your industry.)

July 06, 2020

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