I have never experienced true catastrophe in my life. I have witnessed others go through it, helped a few through it, and pray every day that the world no longer must experience it. I have never personally experienced one and believe this is because I am blessed well beyond what I deserve and is not because of my own doing. I am, however, a planner and believe that having a plan—no matter how flawed or how often things don’t work out the way they are planned—is essential to avoiding or at least being better equipped to navigate catastrophes.

In business, I believe there are three primary plans that are essential for any leader and their team to be best prepared for whatever happens:

1. A strategic plan that looks 3 to 5 years forward.
2. An annual financial plan for (at a minimum) new sales, revenue, costs, gross margins, capital expenditures and cash flow.
3. An organizational development plan for your people and their roles, and the support of both.

Strategic plans

Strategic plans are essential to help the leader(s) of the business outline the goals of the business and the team, while identifying the key needs to achieve them. A working strategic plan should look 3 to 5 years into the future and include a financial component that influences and guides the annual financial plan.

The strategic plan should be updated annually to reflect progress and new intelligence about the future. It should also guide the organizational development plan in order to best support the organization’s future goals.

Annual financial plans

Annual financial plans should reflect all the pieces necessary for the team to run the business and consistently measure success:

Sales plans should outline what type of work is to be sold, in what volume, and by whom.

Revenue plans should be based on the recurring renewed revenue stream and the conversion of new sales dollars to revenue.

Cost plans should be broken down in building blocks of Cost of Goods Sold (COGS) by business unit and revenue stream to provide target sold margins on new sales and renewal margin targets on recurring agreements. Indirect operations costs and overheads should reflect standards and future needs of the business.

Once these pieces are established, a month-by-month cash flow plan should be built to reflect not only the annual operating activities but also capital purchase costs so the leaders can be prepared with financing or other cash draws as available.

A well-thought-out annual financial plan, based in reality, will be your greatest asset in navigating not only the day-to-day operations and measured success of the business but also when things go off course. If a key team member leaves, you can use the plan and their place in it to guide a recovery and mitigation plan for the business. Understanding how your strategy, finances and operations fit together is the key to overcoming or even avoiding catastrophe.

Organizational development plan

A complete organizational development plan that outlines key people, roles and their training and development can reveal areas of strength and weakness in your team. This can be used in the previously mentioned scenario but also to prepare for possible hurdles during times of growth, change or challenge in the business.

Understanding the needs of the business as it relates to roles and responsibilities over time can help avoid catastrophe due to being understaffed or lacking in key expertise. This expertise might come from team members or from outsourced experts who can help cultivate team members who wish to take on new responsibilities.

Having a plan in place can not only help you respond to a catastrophe but also to avoid one. If you don’t already have these plans in place, I suggest you seek counsel to establish them and a process by which you can maintain them.

David Gallagher is principal for Spiritus Business Advisors. He has over 25 years of experience as a senior service-oriented leader on all aspects of property service. Contact him at david@spiritusba.com.