SlideShare a Scribd company logo
1 of 3
Download to read offline
==== ====

For business planning strategies that work, check out
http://www.business-plan.co.za

==== ====



How one writes a business plan in recessionary economy works differently. One needs to
approach the business plan from a different perspective. And one must make special efforts to
avoid errors that in a good economy one would conveniently get away with.

Fortunately, one can do several simple things to write a better, more realistic business plan in a
recession:

Recession Business Planning Idea #1: De-grandiose-ize the Plan

In a frothy economy, one can find it easy to get over-excited about an opportunity or venture. And,
in a sense, that's may be good. Excitement, optimism and confidence can be contagious. If the
entrepreneur or management team displays, say, excitement and confidence, those feelings can
infect - in a good way - the perception of customers, vendors, investors, lenders, and employees.

In recession, however, probably one wants to be more cautious for a couple of reasons: First of
all, in a sputtering or shrinking economy, one will have more trouble selling. Period. Customers
and clients spend less on everything. And this "less cash for purchases" will particularly affect non-
essential purchasing.

A second factor relates to the "less money for everything" issue: With fewer dollars to spend,
customers and clients will logically require more time for and exercise more caution about their
purchases. In other words, even if some customer does choose ultimately to buy a product, the
customer may take six months longer to make the decision.

Recession Business Planning Idea #2: Focus on Cash Operating Profits

In a recession, businesses need to focus their business planning on maximizing cash operating
profits.

This admonition sounds, perhaps, a little too obvious. But to make the point here stand out: Many
business plans focus too much on the liquidity event... the transaction that allows the entrepreneur
to exit the business at some point in the future with a generous financial windfall.

For example, the business plan may focus on doing the things perceived necessary to get to an
initial public offering. Or the business plan may optimize some element of the business that in the
past, large companies have used to value the small companies they buy. Like top-line sales
revenue or customer counts.

When the economy is healthy, dreaming about and planning for "liquidity event" issues may make
sense. Focusing on the "liquidity event" issues when major public corporations need government
bailouts to make it through the next week is dumb.

Recession Business Planning Idea #3: Strip Out Geometric Growth Rates

Commonly, in business plans, the people forecasting revenue, profits and cash flow use geometric
growth rates. In a good economy, one can often get away with an assumption of geometric
growth. Maybe. But geometric growth rates don't make sense in a recession.

A geometric growth rate says that some value in the business plan grows by a specified percent.
For example, the business plan might assume revenues will grow (almost automatically) by 5% a
year. Or that inflation will trigger annual (dependable) price adjustments of 3% for the foreseeable
future. Or that customer counts will grow (magically) by 10% a year.

Geometric growth rates create exponential growth - and implicitly assume that the business will
just always get better and better.

Note: The subprime mortgage meltdown that triggered the current economic crisis stemmed in
part from people using geometric growth rates. Investors, lenders and policy makers assumed that
home prices would continue to almost automatically, dependably, magically increase...

The alternative to a geometric growth rate is an arithmetic growth rate. With arithmetic growth, you
assume that a value grows by a specific value. For example, a retailer assumes that revenues
grow by $500,000 each time a new retail location is added.

Arithmetic growth assumptions provide two benefits to the business planner. Arithmetic growth
removes exponential growth from the business plan. Arithmetic growth forces the entrepreneur to
explain the details of what drives growth.

Recession Business Planning Idea #4: Do Serious Scenario Planning

In a recession - particularly in a recession that looks to be as bad and deep as the current one -
the business planning process needs to include serious scenario planning.

Scenario planning means redoing the business plan for some crazy, nearly unimaginable event.
Like deflation. Or the collapse of an entire industry. Or commodities prices rising or falling to levels
not seen in recent history.

Scenario planning delivers two benefits: Thinking the unthinkable should give the entrepreneur the
opportunity to avoid some kinds of risks. And thinking the unthinkable - if the worst case occurs -
should mean the entrepreneur can more quickly respond to a threat.

A final comment: Scenario planning should not look only at bad scenarios--though that bias may
be easy in the current economy. Some of the surprises we see in the coming months will be
unimaginably good.
Seattle CPA Stephen L. Nelson is the author of the MBA's Guide to Microsoft Excel, a reference
for business users of Microsoft Excel, the Write a Business Plan web site, and the Limited Liability
Incorporation Explained web site.




Article Source:
http://EzineArticles.com/?expert=Stephen_Nelson




==== ====

For business planning strategies that work, check out
http://www.business-plan.co.za

==== ====

More Related Content

Recently uploaded

Top Rated Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...
Top Rated  Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...Top Rated  Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...
Top Rated Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...Call Girls in Nagpur High Profile
 
call Now 9811711561 Cash Payment乂 Call Girls in Dwarka Mor
call Now 9811711561 Cash Payment乂 Call Girls in Dwarka Morcall Now 9811711561 Cash Payment乂 Call Girls in Dwarka Mor
call Now 9811711561 Cash Payment乂 Call Girls in Dwarka Morvikas rana
 
Pokemon Go... Unraveling the Conspiracy Theory
Pokemon Go... Unraveling the Conspiracy TheoryPokemon Go... Unraveling the Conspiracy Theory
Pokemon Go... Unraveling the Conspiracy Theorydrae5
 
KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...
KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...
KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...Cara Menggugurkan Kandungan 087776558899
 
2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)Delhi Call girls
 
LC_YouSaidYes_NewBelieverBookletDone.pdf
LC_YouSaidYes_NewBelieverBookletDone.pdfLC_YouSaidYes_NewBelieverBookletDone.pdf
LC_YouSaidYes_NewBelieverBookletDone.pdfpastor83
 
the Husband rolesBrown Aesthetic Cute Group Project Presentation
the Husband rolesBrown Aesthetic Cute Group Project Presentationthe Husband rolesBrown Aesthetic Cute Group Project Presentation
the Husband rolesBrown Aesthetic Cute Group Project Presentationbrynpueblos04
 
2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)Delhi Call girls
 
$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...
$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...
$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...PsychicRuben LoveSpells
 
2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)Delhi Call girls
 
2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)Delhi Call girls
 
WOMEN EMPOWERMENT women empowerment.pptx
WOMEN EMPOWERMENT women empowerment.pptxWOMEN EMPOWERMENT women empowerment.pptx
WOMEN EMPOWERMENT women empowerment.pptxpadhand000
 

Recently uploaded (14)

Top Rated Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...
Top Rated  Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...Top Rated  Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...
Top Rated Pune Call Girls Tingre Nagar ⟟ 6297143586 ⟟ Call Me For Genuine Se...
 
call Now 9811711561 Cash Payment乂 Call Girls in Dwarka Mor
call Now 9811711561 Cash Payment乂 Call Girls in Dwarka Morcall Now 9811711561 Cash Payment乂 Call Girls in Dwarka Mor
call Now 9811711561 Cash Payment乂 Call Girls in Dwarka Mor
 
Pokemon Go... Unraveling the Conspiracy Theory
Pokemon Go... Unraveling the Conspiracy TheoryPokemon Go... Unraveling the Conspiracy Theory
Pokemon Go... Unraveling the Conspiracy Theory
 
KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...
KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...
KLINIK BATA Jual obat penggugur kandungan 087776558899 ABORSI JANIN KEHAMILAN...
 
2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Dashrath Puri (Delhi)
 
(Anamika) VIP Call Girls Navi Mumbai Call Now 8250077686 Navi Mumbai Escorts ...
(Anamika) VIP Call Girls Navi Mumbai Call Now 8250077686 Navi Mumbai Escorts ...(Anamika) VIP Call Girls Navi Mumbai Call Now 8250077686 Navi Mumbai Escorts ...
(Anamika) VIP Call Girls Navi Mumbai Call Now 8250077686 Navi Mumbai Escorts ...
 
LC_YouSaidYes_NewBelieverBookletDone.pdf
LC_YouSaidYes_NewBelieverBookletDone.pdfLC_YouSaidYes_NewBelieverBookletDone.pdf
LC_YouSaidYes_NewBelieverBookletDone.pdf
 
the Husband rolesBrown Aesthetic Cute Group Project Presentation
the Husband rolesBrown Aesthetic Cute Group Project Presentationthe Husband rolesBrown Aesthetic Cute Group Project Presentation
the Husband rolesBrown Aesthetic Cute Group Project Presentation
 
2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Palam (Delhi)
 
$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...
$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...
$ Love Spells^ 💎 (310) 882-6330 in West Virginia, WV | Psychic Reading Best B...
 
2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Mukherjee Nagar (Delhi)
 
(Aarini) Russian Call Girls Surat Call Now 8250077686 Surat Escorts 24x7
(Aarini) Russian Call Girls Surat Call Now 8250077686 Surat Escorts 24x7(Aarini) Russian Call Girls Surat Call Now 8250077686 Surat Escorts 24x7
(Aarini) Russian Call Girls Surat Call Now 8250077686 Surat Escorts 24x7
 
2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)
2k Shots ≽ 9205541914 ≼ Call Girls In Jasola (Delhi)
 
WOMEN EMPOWERMENT women empowerment.pptx
WOMEN EMPOWERMENT women empowerment.pptxWOMEN EMPOWERMENT women empowerment.pptx
WOMEN EMPOWERMENT women empowerment.pptx
 

Featured

Everything You Need To Know About ChatGPT
Everything You Need To Know About ChatGPTEverything You Need To Know About ChatGPT
Everything You Need To Know About ChatGPTExpeed Software
 
Product Design Trends in 2024 | Teenage Engineerings
Product Design Trends in 2024 | Teenage EngineeringsProduct Design Trends in 2024 | Teenage Engineerings
Product Design Trends in 2024 | Teenage EngineeringsPixeldarts
 
How Race, Age and Gender Shape Attitudes Towards Mental Health
How Race, Age and Gender Shape Attitudes Towards Mental HealthHow Race, Age and Gender Shape Attitudes Towards Mental Health
How Race, Age and Gender Shape Attitudes Towards Mental HealthThinkNow
 
AI Trends in Creative Operations 2024 by Artwork Flow.pdf
AI Trends in Creative Operations 2024 by Artwork Flow.pdfAI Trends in Creative Operations 2024 by Artwork Flow.pdf
AI Trends in Creative Operations 2024 by Artwork Flow.pdfmarketingartwork
 
PEPSICO Presentation to CAGNY Conference Feb 2024
PEPSICO Presentation to CAGNY Conference Feb 2024PEPSICO Presentation to CAGNY Conference Feb 2024
PEPSICO Presentation to CAGNY Conference Feb 2024Neil Kimberley
 
Content Methodology: A Best Practices Report (Webinar)
Content Methodology: A Best Practices Report (Webinar)Content Methodology: A Best Practices Report (Webinar)
Content Methodology: A Best Practices Report (Webinar)contently
 
How to Prepare For a Successful Job Search for 2024
How to Prepare For a Successful Job Search for 2024How to Prepare For a Successful Job Search for 2024
How to Prepare For a Successful Job Search for 2024Albert Qian
 
Social Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie InsightsSocial Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie InsightsKurio // The Social Media Age(ncy)
 
Trends In Paid Search: Navigating The Digital Landscape In 2024
Trends In Paid Search: Navigating The Digital Landscape In 2024Trends In Paid Search: Navigating The Digital Landscape In 2024
Trends In Paid Search: Navigating The Digital Landscape In 2024Search Engine Journal
 
5 Public speaking tips from TED - Visualized summary
5 Public speaking tips from TED - Visualized summary5 Public speaking tips from TED - Visualized summary
5 Public speaking tips from TED - Visualized summarySpeakerHub
 
ChatGPT and the Future of Work - Clark Boyd
ChatGPT and the Future of Work - Clark Boyd ChatGPT and the Future of Work - Clark Boyd
ChatGPT and the Future of Work - Clark Boyd Clark Boyd
 
Getting into the tech field. what next
Getting into the tech field. what next Getting into the tech field. what next
Getting into the tech field. what next Tessa Mero
 
Google's Just Not That Into You: Understanding Core Updates & Search Intent
Google's Just Not That Into You: Understanding Core Updates & Search IntentGoogle's Just Not That Into You: Understanding Core Updates & Search Intent
Google's Just Not That Into You: Understanding Core Updates & Search IntentLily Ray
 
Time Management & Productivity - Best Practices
Time Management & Productivity -  Best PracticesTime Management & Productivity -  Best Practices
Time Management & Productivity - Best PracticesVit Horky
 
The six step guide to practical project management
The six step guide to practical project managementThe six step guide to practical project management
The six step guide to practical project managementMindGenius
 
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...RachelPearson36
 
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...Applitools
 

Featured (20)

Everything You Need To Know About ChatGPT
Everything You Need To Know About ChatGPTEverything You Need To Know About ChatGPT
Everything You Need To Know About ChatGPT
 
Product Design Trends in 2024 | Teenage Engineerings
Product Design Trends in 2024 | Teenage EngineeringsProduct Design Trends in 2024 | Teenage Engineerings
Product Design Trends in 2024 | Teenage Engineerings
 
How Race, Age and Gender Shape Attitudes Towards Mental Health
How Race, Age and Gender Shape Attitudes Towards Mental HealthHow Race, Age and Gender Shape Attitudes Towards Mental Health
How Race, Age and Gender Shape Attitudes Towards Mental Health
 
AI Trends in Creative Operations 2024 by Artwork Flow.pdf
AI Trends in Creative Operations 2024 by Artwork Flow.pdfAI Trends in Creative Operations 2024 by Artwork Flow.pdf
AI Trends in Creative Operations 2024 by Artwork Flow.pdf
 
Skeleton Culture Code
Skeleton Culture CodeSkeleton Culture Code
Skeleton Culture Code
 
PEPSICO Presentation to CAGNY Conference Feb 2024
PEPSICO Presentation to CAGNY Conference Feb 2024PEPSICO Presentation to CAGNY Conference Feb 2024
PEPSICO Presentation to CAGNY Conference Feb 2024
 
Content Methodology: A Best Practices Report (Webinar)
Content Methodology: A Best Practices Report (Webinar)Content Methodology: A Best Practices Report (Webinar)
Content Methodology: A Best Practices Report (Webinar)
 
How to Prepare For a Successful Job Search for 2024
How to Prepare For a Successful Job Search for 2024How to Prepare For a Successful Job Search for 2024
How to Prepare For a Successful Job Search for 2024
 
Social Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie InsightsSocial Media Marketing Trends 2024 // The Global Indie Insights
Social Media Marketing Trends 2024 // The Global Indie Insights
 
Trends In Paid Search: Navigating The Digital Landscape In 2024
Trends In Paid Search: Navigating The Digital Landscape In 2024Trends In Paid Search: Navigating The Digital Landscape In 2024
Trends In Paid Search: Navigating The Digital Landscape In 2024
 
5 Public speaking tips from TED - Visualized summary
5 Public speaking tips from TED - Visualized summary5 Public speaking tips from TED - Visualized summary
5 Public speaking tips from TED - Visualized summary
 
ChatGPT and the Future of Work - Clark Boyd
ChatGPT and the Future of Work - Clark Boyd ChatGPT and the Future of Work - Clark Boyd
ChatGPT and the Future of Work - Clark Boyd
 
Getting into the tech field. what next
Getting into the tech field. what next Getting into the tech field. what next
Getting into the tech field. what next
 
Google's Just Not That Into You: Understanding Core Updates & Search Intent
Google's Just Not That Into You: Understanding Core Updates & Search IntentGoogle's Just Not That Into You: Understanding Core Updates & Search Intent
Google's Just Not That Into You: Understanding Core Updates & Search Intent
 
How to have difficult conversations
How to have difficult conversations How to have difficult conversations
How to have difficult conversations
 
Introduction to Data Science
Introduction to Data ScienceIntroduction to Data Science
Introduction to Data Science
 
Time Management & Productivity - Best Practices
Time Management & Productivity -  Best PracticesTime Management & Productivity -  Best Practices
Time Management & Productivity - Best Practices
 
The six step guide to practical project management
The six step guide to practical project managementThe six step guide to practical project management
The six step guide to practical project management
 
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
Beginners Guide to TikTok for Search - Rachel Pearson - We are Tilt __ Bright...
 
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
Unlocking the Power of ChatGPT and AI in Testing - A Real-World Look, present...
 

How to Write a Good Business Plan

  • 1. ==== ==== For business planning strategies that work, check out http://www.business-plan.co.za ==== ==== How one writes a business plan in recessionary economy works differently. One needs to approach the business plan from a different perspective. And one must make special efforts to avoid errors that in a good economy one would conveniently get away with. Fortunately, one can do several simple things to write a better, more realistic business plan in a recession: Recession Business Planning Idea #1: De-grandiose-ize the Plan In a frothy economy, one can find it easy to get over-excited about an opportunity or venture. And, in a sense, that's may be good. Excitement, optimism and confidence can be contagious. If the entrepreneur or management team displays, say, excitement and confidence, those feelings can infect - in a good way - the perception of customers, vendors, investors, lenders, and employees. In recession, however, probably one wants to be more cautious for a couple of reasons: First of all, in a sputtering or shrinking economy, one will have more trouble selling. Period. Customers and clients spend less on everything. And this "less cash for purchases" will particularly affect non- essential purchasing. A second factor relates to the "less money for everything" issue: With fewer dollars to spend, customers and clients will logically require more time for and exercise more caution about their purchases. In other words, even if some customer does choose ultimately to buy a product, the customer may take six months longer to make the decision. Recession Business Planning Idea #2: Focus on Cash Operating Profits In a recession, businesses need to focus their business planning on maximizing cash operating profits. This admonition sounds, perhaps, a little too obvious. But to make the point here stand out: Many business plans focus too much on the liquidity event... the transaction that allows the entrepreneur to exit the business at some point in the future with a generous financial windfall. For example, the business plan may focus on doing the things perceived necessary to get to an initial public offering. Or the business plan may optimize some element of the business that in the past, large companies have used to value the small companies they buy. Like top-line sales revenue or customer counts. When the economy is healthy, dreaming about and planning for "liquidity event" issues may make
  • 2. sense. Focusing on the "liquidity event" issues when major public corporations need government bailouts to make it through the next week is dumb. Recession Business Planning Idea #3: Strip Out Geometric Growth Rates Commonly, in business plans, the people forecasting revenue, profits and cash flow use geometric growth rates. In a good economy, one can often get away with an assumption of geometric growth. Maybe. But geometric growth rates don't make sense in a recession. A geometric growth rate says that some value in the business plan grows by a specified percent. For example, the business plan might assume revenues will grow (almost automatically) by 5% a year. Or that inflation will trigger annual (dependable) price adjustments of 3% for the foreseeable future. Or that customer counts will grow (magically) by 10% a year. Geometric growth rates create exponential growth - and implicitly assume that the business will just always get better and better. Note: The subprime mortgage meltdown that triggered the current economic crisis stemmed in part from people using geometric growth rates. Investors, lenders and policy makers assumed that home prices would continue to almost automatically, dependably, magically increase... The alternative to a geometric growth rate is an arithmetic growth rate. With arithmetic growth, you assume that a value grows by a specific value. For example, a retailer assumes that revenues grow by $500,000 each time a new retail location is added. Arithmetic growth assumptions provide two benefits to the business planner. Arithmetic growth removes exponential growth from the business plan. Arithmetic growth forces the entrepreneur to explain the details of what drives growth. Recession Business Planning Idea #4: Do Serious Scenario Planning In a recession - particularly in a recession that looks to be as bad and deep as the current one - the business planning process needs to include serious scenario planning. Scenario planning means redoing the business plan for some crazy, nearly unimaginable event. Like deflation. Or the collapse of an entire industry. Or commodities prices rising or falling to levels not seen in recent history. Scenario planning delivers two benefits: Thinking the unthinkable should give the entrepreneur the opportunity to avoid some kinds of risks. And thinking the unthinkable - if the worst case occurs - should mean the entrepreneur can more quickly respond to a threat. A final comment: Scenario planning should not look only at bad scenarios--though that bias may be easy in the current economy. Some of the surprises we see in the coming months will be unimaginably good.
  • 3. Seattle CPA Stephen L. Nelson is the author of the MBA's Guide to Microsoft Excel, a reference for business users of Microsoft Excel, the Write a Business Plan web site, and the Limited Liability Incorporation Explained web site. Article Source: http://EzineArticles.com/?expert=Stephen_Nelson ==== ==== For business planning strategies that work, check out http://www.business-plan.co.za ==== ====