Preparing for the start of a new year presents particular challenges this December. How do you make plans when the world is facing something that literally has not happened before? Well, to start with, you have to think about it differently than you did in previous years.
Ordinarily I’d advise you to look at this year’s earnings and expenses as a way to project the coming year’s earnings and expenses. But that won’t fly for 2021. 2020 was unlike any year we’ve ever seen (and hopefully will ever see). And, unfortunately, the beginning of 2021 is likely to follow suit. Instead of assuming that Q1 of 2021 will look like Q1 of 2020, take a look at various other data sets for precedent. It may be that your best predictor is Q1 of 2016 or Q4 of 2018. It may be that one line of business is likely to follow the 2020 pattern while another might follow a pattern more reminiscent of 2015. 2020 taught us to keep an open mind; here’s where it comes in handy.
In addition, you should expect different parts of 2021 to look quite different from each other. The Covid pandemic is worsening in the US and that’s definitely having an impact on many sectors of the economy. It’s likely that the worsening will continue as long as there is cold weather. On the other hand, people are beginning to be vaccinated—a glimpse of the beginning of the end.
Despite the worsening of Covid, January and February 2021 aren’t likely to resemble March and April of 2020. Governments at every level are less likely to call for widespread business closures. If there are restrictions, customers will expect you to have a plan in place to work around them. We’ve all been through this once already. If your restaurant can only work on a takeout basis, diners will expect you to be geared up and ready to do it. They will be less tolerant of businesses that aren’t prepared and less patient than in the spring when we believed that closures and inconveniences were just temporary.
So how do you plan for the new new normal? The big thing is to be prepared to pivot if necessary. This is definitely a situation where things could change quickly and without warning. You need Plan A and Plan B—and probably Plans C and D just to be safe. That way if changes come along, you won’t feel stuck. If your business is in danger of being shut down—or partially shut down—think about how you would do it. Prepare a shutdown financial plan and a stay open financial plan. If you might have to move some of your business online, get ready to do it now. Consider how you can keep your employees on the payroll.
The good news is that experts are predicting that there’s reason to believe things will start returning to normal in the fall. We can allow ourselves to feel somewhat optimistic. But, if 2020 has taught us nothing else, it has shown that we need to be prepared for unexpected changes.
Can Office Accomplice help you with your future preparations? Contact us!