COVID-19 dealt businesses a devastating blow, and not all may survive it or make it to the next year. This year is going to be a lot different because of the crippling impact of the pandemic.
It’s getting to that time of the year when marketing departments begin to assess accounts and plan for the coming year — 2021.
While some businesses (mostly those who had established online presence like communication, sales, and entertainment) are experiencing an unprecedented increase in patronage, other industries like tourism and transportation are looking at a bleak future.
Sadly, some businesses may not be open before the year-end. As bad as the financial situation was in 2020, there is still a need to plan and have an outlook for an unpredictable 2021. As the famous saying goes, “failure to plan is planning to fail.” And you will agree that nobody goes into business to fail.
What Will 2021 Look Like for Businesses and The Economy?
From both financial and business point of view, 2021 is most likely going to hinged and focused on recovery — economic recovery, financial recovery, and business recovery.
Speaking of economic recovery, let’s look at some possible recovery pattern types that may play out.
This scenario denotes a sudden economic activity collapse, followed by a consistent growth/recovery pattern back to where we were before the pandemic struck.
Will recovery be U-shaped?
As the shape implies, the economic collapse could be protracted or linger for a long time before a gradual recovery sets in.
As you can imagine, this type of recovery depicts multiple rounds of COVID-19 infection (like the often talked about the second wave) that will force another series of lockdowns and reopening.
The L-Shaped Recovery
An L-shaped economic collapse never recovers. As much as nobody wants to talk about further decline or stalemate in economic activities, more businesses will be lost if adequate plans are not made to keep businesses afloat.
Dynamic Budgeting for 2021
With so many uncertainties about COVID-19, it’s almost impossible to roll out a budget for the coming year confidently. But then, you can’t give up on planning. Instead of doing a fixed budget, you can set out a rolling or dynamic budget. This way, you can review and update your budget as things unfold.
You can start by predicting sales and cash flow and then using any convenient tool to track activities. If you get this right, you can easily tweak and recalibrate your budget to reflect the future reality of situations.
Forecasting Sales For 2021
Similar to making budgets for 2021, forecasting sales won’t be as easy as it used to be. The few businesses thriving in 2020 and are feeling optimistic may be tempted to project north of a 10% increase in revenue in 2021.
However, it would be safer to make conservative budgets and forecast sales based on 2019 accounts. This way, you won’t be setting your expectations too high or struggling to reach unrealistic targets.
Stepping into 2021, business and financial strategies will be reflective of changing consumer behaviors.
Many strategies will be based on “what consumers expect from businesses” and accommodate and cater to the new consumer behaviors.
Adapting to new consumer behaviors during and post-COVID will involve investing in new technology, product changes, and revamped marketing.
While you are at it, you should have a robust and reliable tracking mechanism to help you understand how consumer behaviors like buying patterns affect your finance and what measures you should put in place to keep your business going.
Think innovation and creativity!
What should you have in your 2021 budget?
What is a plan if it’s not realistic and flexible? While setting your business strategy for 2021 would be best if you set flexible goals and realistic targets. In this instance, realistic targets will include staffing — will you be recruiting new staff or replacing poor performers?
To drive sales, you should also consider aligning your marketing plan with your sales plan.
There is also a need to consider overhead costs. You may need to reinvent/repurpose your sales funnel, develop new products, or enhance your services.
Tips for Better Budgeting In 2021
Not everyone indeed has experience with finance and budgets. However, having a bit of knowledge of how they work will help you understand how your business is holding up.
Here some tips to get you started:
- Clearly outline your marketing schedule and align it with your advertising/marketing expenses.
- Have a 12-month P&L statement for tracking your progress. Running a business without a budget puts you at a disadvantage to competitors who have invested their time understanding the dynamics of costs and how it impacts finance.
You should monitor costs and make calculated and real-time changes to financial plans whenever the need arises —doing all of these requires some financial acumen and discipline level.
You also need to understand basic concepts like fixed and variable expenses and what it means to breakeven.
If you have no idea what all of these means, you should consider flexible financial education programs. Thankfully, the internet has made everything easy. You can learn from the comfort of your home or office anywhere in the world.
Setting Your Business Up for A Great 2021
- Take advantage of strong sales momentum to drive sales and build cash reserves.
- Modify your products and services to maximize the customer experience while adapting to new customer behaviors.
- Don’t lose touch with your suppliers.
- Using credit cards to finance your business is a big No!
- Never turn your back on your balance sheet. You risk debt getting out of control if you do.
- As you match into 2021, monitor your dynamic budget and recalibrate your plans as you go on.
Steps to Position Your Business For Success In 2021
Considering all we have discussed so far, you should know how to manage your business in the coming year.
You can take a cue from these simple steps:
Assess Your Financial Situation
- The idea is to understand what improvements need to be made in your business, gauge your competitive strengths and weaknesses during COVID-19, and identify business trends relevant to your business.
- Review your goals and adjust strategies.
- Call Your Accountant! Yes, you need a professional to highlight important metrics that affect your finance. Your accountant is in a better position to help you answer essential questions about tax strategy, deductions, capital gains, and whether there is an available tax credit you can benefit from.
With all we have shared so far, you should know how to make a realistic forecast and build a resilient financial strategy to enhance cash flow and working capital.