The Top Three Examples of Scenario Planning and Why it Works

When it comes to owning a business, it can be challenging to feel certain about the future. If COVID-19 has taught us anything, it’s that the unexpected is always possible. The real challenge is, how exactly does an entrepreneur prepare for these unexpected events? By planning for multiple financial forecasts, instead of one.

Every decision is made with some level of uncertainty – an outcome will occur, but there’s no telling what that outcome will be. Rather than move forward blindly, with one potential outcome in mind, why not prepare for multiple scenarios? At Rare Strategies, we do not believe in waiting for the future to unfold. Instead, we want our clients to be prepared for multiple scenarios so they have the best response plan for whatever outcome unfolds. This strategy we’re discussing is known as scenario planning. As business consultants, part of our services includes helping clients forecast their financial future to better prepare for what comes next.

Today, we’re going to unpack what scenario planning is, examples of scenario planning and how it can benefit your business, and why it’s so important. Instead of waiting idly by, together, we can take matters into our own hands and develop a strategic plan that secures your company’s future.

What is Scenario Planning? 

Scenario planning is preparing for a range of different futures that all have different economic outcomes. You make an assumption about the future and plan for that potential outcome and how it will impact your business. Essentially, you’re planning for several uncertainties in case one or multiple of these uncertainties becomes a reality. While the risk might not always be great within each scenario, having a response plan in place in case that scenario unfolds is essential.

To start scenario planning, you first need to:

• Identify possible factors
  • First, identify possible events or shifts that could impact your organization – for example, an election. A change in office could affect the economy, and in turn, have an impact on your business. Or dramatic social or environmental changes, like COVID-19 this last year and a half.
  • Events like this are all likely; however, consider which circumstances would most negatively (or positively) impact your business. 
    
    
• Consider what uncertainties could impact your business
  • After you identify which events could impact your business, consider which ones would have the greatest effect. Again, it’s better to have a handful of scenarios rather than one, so consider one’s with extreme impact as well as more realistic ones.
    
    
• Develop several scenarios
  • After identifying the uncertainties, you can truly begin scenario planning. Start by developing multiple scenarios, ranging from most likely to least likely.
    
    
• Discuss possible outcomes and develop a response plan
  • After thinking of several scenarios, it’s time to plan for their possible outcomes. The more you account for, the greater the likelihood that one of them will occur. Once you have identified those outcomes, start thinking about appropriate response plans. Having the appropriate response plan means you’ll know how to act with confidence and avoid potential financial loss in case of these events.
  • By the end of this exercise, you should identify any potential risks or even revenue opportunities. Scenario planning is an incredibly detailed process; however, the long-term rewards help mitigate any possible damage during these events.

While no one enjoys thinking of negative possibilities, the reality is that the unexpected happens every day. Our scenario planning examines extreme situations and provides realistic outcomes in case these events occur in the future. Instead of acting with uncertainty, your business will have a detailed response plan and can avoid financial loss. Our examples of scenario planning are here to help secure your financial future, no matter your industry.

3 Examples of Scenario Planning Benefiting Your Business

In light of recent events, examples of scenario planning are essential to consider. While no one saw a pandemic coming, it’s made the world more aware that anything’s possible – which means discussing examples of scenario planning. While there are many examples to choose from, we’re going to highlight three that most business owners consider or likely experience in their careers.

 

1. Expanding Your Business

Most entrepreneurs have one goal when it comes to running their business – keep growing. Expanding your business could mean several possibilities, like acquiring a new location, moving to a larger warehouse or retail space, onboarding more team members – whatever is most relevant to your industry.

While growth is essential to success, the harsh reality is that not all business ventures go according to plan. For example, if you’d like to acquire a new location or expand your business within the next year or two, scenario planning can help you account for every outcome and decide if this is the right time for growth.

 

2. New Product Release

New product launches and services are a necessary part of increasing your profit and keeping customers satisfied. However, there’s no guarantee that your product will be a success. Scenario planning is ideal for strategizing possible outcomes for a successful or unsuccessful product launch. You can forecast potential financial losses and strategize how to avoid them.

At Rare Strategies, our scenario planning services help you prepare for multiple outcomes so you feel confident in your decisions before launching that new product. Here, we want your business to reach its maximum potential; however, we know how important it is to prepare for the worst-case scenario. By actively scenario planning, you’ll also have responses ready if the product succeeds or fails to make an impression on your customers.

 

3. Preparing for An Economic or Natural Disaster

After the events of 2020, it’s best to prepare for the unexpected. There’s no telling when another disaster could strike. Instead of sitting and hoping to avoid this eventuality, scenario planning gives your business the chance to get ahead of financial risks. Plus, you can potentially discover risks or rewards you’ve been overlooking.

No one enjoys thinking about the worst, but the reality is that we’re living in a time where change is inevitable. There’s no telling what tomorrow will bring. If you don’t have a plan of action in case of disaster, you are doing your business a disservice. At Rare Strategies, we’re here to tell you the truth, no matter how difficult it is to hear. Our approach is simple – find practical solutions that keep your business secure and successful.

Why Scenario Planning Works

Are you still wondering if scenario planning is necessary for your business? While it might seem like a lengthy process, the alternative is being unprepared for the future. The truth is, when planned properly, you can feel confident in times of crisis that your business won’t just survive – it will succeed. Our examples of scenario planning are simply a few possibilities. Preparing yourself for multiple outcomes simply helps yourself, your employees, and your investors make decisions during impossible situations. Better yet, damage can be avoided altogether.

At Rare Strategies, we believe that scenario planning is an exercise no one should overlook. Examples of scenario planning can help prepare your business for any outcome so that you can stay on the path to success. Our unique business consulting services are here to help you face these challenges and be better prepared for disaster and success.

 

Is your business ready for unfiltered honesty? At Rare Strategies, our business consulting services go beyond scenario planning. As business consultants in Winston-Salem, Greensboro, Charlotte, and Raleigh, we’re here to help take your business to the next level. If you have questions about our services, explore our Frequently Asked Questions, or contact us to book your free consultation.