I was crazy enough to start two businesses at the same time — OnlyBusiness.com and Polaris Blue. My partner and I run them concurrently, and fortunately both have done well. No doubt we got lucky, but I want to share a concept critical to our success that might help other founders, especially in this uncertain market. Create three versions of your strategic plan, one each to address a different potential outcome for your business: the overnight success, slow-but-steady growth and survival mode.
OnlyBusiness.com is a community platform that offers web tools and services to small businesses. My partner and I developed a multi-outcome strategic plan, detailing how the operation would perform under three, clearly defined scenarios. The exercise gave us more options for coping quickly with surprises that might ordinarily have caused big problems.
I’ll show you what I mean, by sharing how we staged three critical budgets for each potential outcome.
I. Marketing
PLAN A (Overnight Success): If sales growth is 120 percent of target per quarter, consistently, we’ll know our marketing is working and plan to ramp it by 30 percent to 50 percent, but in a graduated manner, in case growth isn’t sustained.
PLAN B (Slow Growth): If sales growth is 80 percent of target in that time, we adjust up, but only where minimum marketing-to-sales ratio of 1 to 5 is still met (i.e., $10,000 of marketing generates $50,000 in sales.)
Plan C (Worst-Case Scenario): If we aren’t meeting minimum performance, we slash marketing by up to 50 percent, cutting generalized magazine and newspaper advertising, but not highly targeted web programs like PPC and SEO.
II. Payroll
PLAN A: If sales growth is 120 percent of quarterly goal, we expand aggressively, first by doubling ranks in the mission-critical areas of sales, marketing and customer support, with incremental expansion each quarter thereafter. Second, we add staff in production and project management, limited to 50 to 75 percent growth.
PLAN B: In slow growth, we maintain current payroll as long as possible, ensuring that no particular staff member is overburdened while all business aspects are covered. Any incremental additions are evaluated for their impact on profitability.
Plan C: We radically cut payroll, simply to keep the operations functioning. The owners take on more direct sales and marketing responsibilities. Our goal is to maintain sufficient financial reserves to operate at a bare-bones level for 12 months, in case income during this time is zero.
III. R&D
PLAN A: We ramp the engineering base by 200 to 300 percent over three months. New coders and maintenance teams are dedicated to additional system/module development, with dedicated project managers. A group for Q&A and testing is also implemented.
PLAN B: In the slow growth scenario, we meld a single team to handle all development, project management and testing. New product features are added in order of priority, and additions are interspersed with testing and maintenance activities.
Plan C: We cut engineering teams to focus on maintenance and system stability. Only new features that are extremely light, easy to implement and test, and that benefit a majority of customers are considered.
No starry-eyed entrepreneur wants to seriously consider worst-case scenarios, or even so-so performance outcomes. But entrepreneurs need options to trouble-shoot effectively under pressure. We had our initial budgets set for Plan B. Happily, OnlyBusiness.com adhered mostly to a hybrid of Plan A and Plan B, but at points we leveraged strategies mapped out in all three plans. When you stage your cost commitments and plan for ‘what if’ situations in advance, you prepare yourself to respond swiftly to the challenges of running a company. Giving yourself clear options increases your chances for success.
Daniel Meyerov is founder and CEO of OnlyBusiness.com.
