Page 16 - Newsletter July - Sep 2020__

PERSPECTIVES BY SKC
2. Create business sustenance model
In current times of uncertainty, it is of prime importance that you first assess the minimum
volume of business that you think you can do with a reasonably high degree of certainty in
the current financial year. This may be relatively higher at 70-80% of your existing business
or at lower levels of 30-40%. This does not really matter. What matters is that all processes
and systems are in place to assure deliveries of this assured business and earn profits from
this.
Now, this would require you to assess your costs associated with the probable revenues. File planning at this level, you would need to be cautious that this minimum level of projected revenue covers both the direct and fixed costs.
Remember, do not include the possible growth scenario figures at this stage, and plan
considering the worst-case scenario. This planning once done will settle you emotionally too,
while creating a financial model which would give reasonable assurance that you would keep your ship floating for a year or so comfortably.
3. Create growth scenarios
Once the minimum business plans have been made and restructuring implementation plans have been rolled out, it is then time to plan for possible growth scenarios to start building up from the base of your minimum projections.
Here you would need to answer questions like:
a. What products/services can sell in the emerging scenario?
b. What would be the profit margins?
c. Additional fixed costs and investment that would be needed to support higher sales?
d. The additional need for working capital
This growth model needs to be built in a way where costs increase proportionately to the revenue and not as lumpsum investment (unless liquid funds are not an issue or future revenues are guaranteed through confirmed orders, advances received etc).
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