Infographic: Scenario Planning Trends
To date over 138k scenarios have been planned for in Float. From office moves and new hires, to reduced sales and even temporary closures. That’s a huge number of what-if situations planned for – and, hopefully, a lot of sleepless nights avoided for business owners too.
Scenario planning can prepare you and your business for the great unknowns. It makes the future clearer and helps you make big plans for growing your business.
Scenario planning trends
Scenario planning is a tool that has been steadily growing in popularity, with increasing numbers of business owners seeing how it can support their business planning.
Over the last year we’ve seen some fascinating trends in how Float customers are using our scenario planning feature. Through uncertain times, business owners have turned to scenario planning to map their way throughout the coronavirus pandemic – and out the other side.
In some research we’ve conducted, we looked at scenarios still active in Float (approximately 30k different scenarios), to help us understand just how important this tool has been to business owners over the past 12 months.
Perhaps unsurprisingly, the numbers of companies creating what-if scenarios in their cash flow forecast in Float skyrocketed in April 2020. This coincided with the initial impact of the coronavirus pandemic across the globe – and scenarios planned for during that month in Float hit an all-time high of nearly 2,000. Comparing April 2020 with April 2019, that’s a 339% increase in scenario planning. Looking at scenario planning in 2020 compared with the previous year, there was 221% growth in businesses planning for the unknown.
And this increased scenario planning activity wasn’t simply a one-off. Businesses have continued to use Float’s scenario planning tool to map their way through the uncertainty of the past year and well into 2021.
Types of scenarios
We’ve also analysed the names businesses have been giving their scenarios, which offers a fascinating insight into the types of situations businesses have been planning for. It shows how the priorities of business owners have changed from month to month.
For example, in January and February 2020 the full effect of the pandemic had not yet been felt. Scenarios planned for during this period were based around more typical themes such as sales, forecasts, salaries, new staff and new business.
However, in March and April 2020, the word ‘Covid’ featured heavily in scenario naming, as did the words ‘reduction’, ‘furlough’ and ‘income’.
May 2020 showed a mixed bag, with the word ‘loan’ featuring heavily – most likely as governments introduced business support schemes to help companies deal with the economic impact of the pandemic and the effect of local lockdowns.
From June 2020 ‘sales’ regained its position as the most used word in scenario planning and in August 2020 it appears hope started to creep in with more companies starting to plan for growth scenarios.
More recently, in March 2021, the words ‘increase’ and ‘revenue’ appeared as commonly used terms in scenario planning. As the world prepares to step into the new normal, it appears business owners are preparing their cash flow forecasts to reflect potential increases in sales and revenue.
“Two trends we are seeing (in scenario planning). First around physical offices, scenarios for closing or downsizing. Second is around employment. Lots of our clients are hiring which is really positive!” Emma Fox @FreshFinancials on Twitter
Scenario planning by industry
Comparing 2020 with 2021 so far, there are interesting differences in the average number of scenarios planned by industry too.
For example, in 2020 recruitment businesses using Float planned for an average of 0 scenarios, however in 2021 that number has already leapt to an average of 3 scenarios planned for.
Scenario planning amongst those in the retail sector has also seen a significant boost, with the average number of scenarios planned for in 2021 sitting at 2.19 compared with 1 in 2020. Likewise, cafe and restaurant owners have upped their scenario planning from an average of 1 scenario planned for in 2020 to 2.33 in 2021.
“Scenario planning can give you the breathing space to consider your options proactively before a crisis is on your doorstep.
“The use of cash flow scenarios are also increasingly being accepted by banks during loan applications and negotiations (including the new Recovery Loan Scheme in the UK) so having it on hand can save you time and stress.
“Scenarios are often used when uncertainty is at its highest. But I would argue they’re just as valuable when it’s smooth sailing.
“For example, you could play with different scenarios to see where best to reinvest in your business to optimise the return from any excess cash.”
Mattea McClean, Chartered Accountant & Accounting Education Manager at Float
While our scenario planning feature has been available to Float users for several years now, it’s clear that business owners have relied on this tool to plot out potential scenarios throughout the pandemic and will continue to do so going forward.
If you’d like to start scenario planning for your business, try Float for free for 14-days now.