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Business planning for uncertain outcomes

Uncertainty is all around us - so what tools and techniques do you use to cope with it?

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I've been working on a series of articles about future predictions, forecasting and planning around uncertain outcomes and the tactics accountants use to steer businesses through confusing times. This seemed like an appropriate day to ask for some advice on these points.

My research so far has highlighted some basic frameworks, including:

  • VUCA assessments - volatility, uncertainty, complexity and ambiguity (different classifications of the factors that might trip you up)
  • Scenario planning
  • Rolling forecasts

What I've got are a lot of management (and software theories), but I'm curious about how they play out in real life. Have you every used any of these techniques - or have I missed out some key future survival techniques from my list?

I particularly want to hear examples of approaches that have worked for you in the past. And perhaps what you're doing in the current circumstances...

What kind of scenarios have you worked up around the regulatory, supply chain and economic impacts of Brexit - and what planning footings have you put in place in your businesses?

If I can get a sense of what current practice is among AccountingWEB members and draw on some real life experiences, it's bound to make the next couple of articles more relevant and useful for everyone else.

Thanks in advance for any comments offered.

Replies (5)

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RLI
By lionofludesch
31st Jan 2020 09:48

These management theories all end up relying entirely on your estimates.

Or gut feeling.

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Mohit Baheti
By camohitbaheti
31st Jan 2020 11:30

For me, the bottom line has always been in offering what the customers actually need, think ahead and find an appropriate solution that is futuristic and sustainable. The real challenge is to arrange all the ingredients for it, set the right product and pricing strategy and everything else just follows you automatically.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
31st Jan 2020 12:28

Thanks for all the replies - they're some great, practical points.

But can you help me with examples of those approaches in action: for example, if you used to have video/DVD rental shops as clients, how aware were they of impending changes in the marketplace? How long did it take them to spot the signs - and could they have spotted them earlier if they'd invested some effort in variance analysis or market-scanning? And how did businesses facing big changes navigate successfully through them?

I've got lots of content repeating things experts say accountants should do. They would be more credible if we can read about how they worked in real life situations.

So please do share any (anonymous) business survival and change management stories that would substantiate the theories.

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Replying to John Stokdyk:
paddle steamer
By DJKL
31st Jan 2020 14:17

It is often gut imho- a bit like the Wall Street Crash story of knowing things have gone too far when shoeshine boy gives tips.

I think in practice, unless you niche in a particular sector, there is too much going on to really spot things ahead of the crowd in any particular industry, the idea that an external accountant is more in touch with the nuances of a particular trade than his client who only works in said trade is imho unlikely.

Working in industry (In our case property )we do no formal analysis, plenty of agents like Retties and Savills already do that and I get all their newsletters etc, plus loads of stuff from solicitors, we more sniff the air, watch who is doing what, where and why.

For instance when is the student accomodation market going to become saturated, when is Edinburgh Council going to get so fed up with Air B N B owners here that they heavily regulate them, when will rent capping come in, what are the trends re EPCs re commercial property, is Princes Street going to turn into bars, food and holiday accommodation with little except tourist retail, what fate for inner city shed retail (will it all become flats, or Gyms?) or when we are the last Edinburgh landlord with small size industrial units left near the city centre will we be able to demand ever higher rents with little competition left?

We also ask is the trend re small is beautiful re offices/studios continuing, which offices will likely get converted to flats (often what some of them were originally anyway), this process tends to be myself and my surveyor colleague shooting the breeze at the close of business.

Our outlook is far more parochial, property does not move, but we certainly do not do original research, data gathering etc, we instead keep an ear open to what others are saying, we gossip, prop up bars, find out who is developing what site, which banks are lending we get input from solicitors; in effect we follow the market with our gut.

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Replying to DJKL:
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
06th Feb 2020 11:56

Thanks for a fascinating insight into your analytic approach (not to mention the Edinburgh property market).

I wanted to use some of it in the resulting article, which is now live:
https://www.accountingweb.co.uk/business/finance-strategy/how-to-keep-a-...

You may notice that the piece goes on a bit, so I couldn't fit the material in. But I appreciated your insights and wanted to respond here.

The informal gossip you pick up and the gut feel that it generates are all useful - if a bit unstructured - strategic data about "known knowns" and less obvious ambiguities or complexities in the market (eg does the council have the political will to act on AirBnB, or what factors might alter that stance?).

What if you catalogued your informal snippets and used them to make a few predictions about what you thought might happen (the Bayes/Superforecasting approach)? Then tracked your hunches against the Edinburgh property market mix and rates of return over time?

I don't think it would take that much work to corral the data sources, and might be quite entertaining to do so. But before too long, the rolling prediction archive and supplementary data might give you a predictive model to supplement your intuition and provide some good starting points for conversations with clients.

If you started sharing your punts via client emails or social media, you might start picking up more snippets of useful information and could build your reputation as a firm that really had its finger on the pulse of the local property market. The sense of being on top of the prevailing uncertainties is reassuring in itself and I'm sure it couldn't do any harm to your business prospects either.

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