We are in a “losses avoided” climate and that means breakeven and cash neutral are gold medals. Managing your cash flow is the priority.
While I believe we should plan the for the worst-case scenario projections. I’ve found the most valuable projection is based on a slightly pessimistic version of what you think is probably realistic. Then have some triggers and milestones that cause additional adjustments or cuts to expenses, if required.
The key is a plan that is flexible and can be adjusted to accommodate revenue or cash flow surprises. Knowing what adjustments are required if it turns out revenue or cash flow is off by 20% is critical to a realistic and flexible plan.
When bad things happen, the speed, accuracy, and clarity of your response is vital.
In a downturn, cash flow is what keeps you in business. Aim to be cash neutral first, then review it weekly, know your triggers for cutting costs before you need them, and talk to your key people and suppliers early rather than late. If you want to build a forecast you can trust, have a read of cash flow forecasting for business owners. For some general background, there is a helpful overview on Wikipedia.
