Although Already Frustrated and Exhausted, Entrepreneurs in Planning Must Have Multiple Scenarios

'The plan is nothing. Planning is everything', are the words of American author and professor Dwight David Eisenhower. Over the past two years, managers and business owners have written potential scenarios more than ever for well-known reasons – from the pandemic, supply chain issues, shortages, and rising prices, they have almost become professional screenwriters. What every consultant will say is that in times of crisis, everything needs to be re-evaluated, recalculated, and hoped to hit the mark. The problem currently is that entrepreneurs are quite tired and somewhat crazy from all the calculations and planning.

The tone of their voice and a certain apathy in their rhetoric suggest that they are fed up with guessing and trying to predict global movements that are impossible to foresee at this moment. But which business can afford a strategy of waiting for the outcome of the situation? Business plans need to be adjusted to possible scenarios, and there are almost always three on the table: from the mildest, that the crisis will pass quickly, the middle one, that there will be problems but with limited consequences, to the third darkest one, that the situation will spiral out of control and that business and life as we know it will come to a halt. Not only in Croatia but globally. Fortunately, although not at all optimistic, our entrepreneurs have not stepped into the darkest waters, and, after all, to return to Eisenhower, 'pessimism never won a single battle'.

In this topic, we spoke with leading experts specialized in various areas of consulting, according to the plans developed by each company, which include budget planning, procurement, hiring, investment, and crisis management. Given that they help companies daily in developing their plans, the consultants also provided their assessment of the current mental capacity of Croatian entrepreneurs.

– Although Croatia is a small market, the speed at which we import all global problems is unprecedented. Psychosis is present in all segments. Entrepreneurs are frustrated, exhausted. Such an attitude is not supportive of creating new values. If you are continuously thinking about recession, inflation, shortages of raw materials, materials, reading news, and receiving messages about instability on a global level, whether you want to or not, you enter 'fire fighting' mode, extinguishing fires, fighting for cash flow, thinking about costs that are skyrocketing. In such circumstances, planning for business growth seems like fiction. This is the state today in traditional industries. On the other hand, in certain industries such as IT, ICT – digital platforms that have reach in global markets, software solutions can plan for growth. I am not saying that they are not affected by the crisis, but they feel negative trends to a much lesser extent – emphasized Irena Jolić Šimović, director of the HR company Studio5.

However, despite all the challenges, Nikola Nikšić, director of the consulting firm Konter, believes that the current circumstances in entrepreneurship are in some way a natural state of affairs.

– Price increases, geopolitics, armed conflicts, tax policies, bureaucracy, labor force fluctuations, these are all facts that entrepreneurs can be more or less angry about or fear, be tired for a longer or shorter time, but when they sit down at their 'command post', they will continue to act in accordance with their mission and vision. Optimizing business and minimizing risks, initiating and implementing changes that will eliminate obstacles and find new paths to success, safe and stable, long-term sustainable business. That is their habitus, and by that, they are special and key not only for the economy but for every social community – pointed out Nikšić.

He also added that, according to currently available data on entrepreneurs’ operations in 2021 compared to several good previous years, concluding with 'the best' 2019, and 2020 as the year of the pandemic and recession, entrepreneurs were significantly more prepared (both in terms of competencies and finances) than they were at the beginning of the previous long-term economic crisis that began at the end of 2007.

What he considers a weakness is the tendency of entrepreneurs to stick to only one planning scenario, which arises from the lack of managerial knowledge of owners and managers who are either sponsors or key participants in the planning process.

– Burdened by a lack of time, largely due to their own fault for not recognizing priorities or fear of delegating and unwillingness to be open and share information, entrepreneurs are irritated even when creating one strategic option, let alone embarking on developing several planning scenarios. Entrepreneurs sometimes overestimate their belief that intuition supported by courage can never, ever, let them down. Likewise, they do not like to think about 'unresolved' or 'defeat', believing that it can harm their optimism, status, and the image they want to create in others. However, when things do go wrong, a previously made alternative 'plan B' can help make sleep calmer and stress lower. And thus, in crisis situations, coherent and good decisions can be made and succeed as much as possible – narrated Nikšić.

When asked whether this crisis will discourage entrepreneurs from realizing existing and launching new investment plans, Željko Perić from the company Caper said that on one hand, some entrepreneurs will be extremely cautious, so those with limited amounts of liquid assets will behave very rationally, but also that the crisis is always an opportunity for some, so he does not expect significant delays in overall investments.

– For example, activities related to mergers and acquisitions have not slowed down due to corona; rather, after calming the initial panic, interest is far greater than in normal times. It is certain that some investors will take a step back if there is a serious threat that the war in Ukraine will spill over into neighboring countries – believes Perić.   

– Cash flow problems, extending payment terms to suppliers, inability to make advance payments are serious warnings that entrepreneurs have been pointing out lately – emphasized Boris Sruk, director of the consulting firm Argus Group.

Entrepreneurs, at least those who were ready for change and who took certain actions to mitigate the crisis in business, are, he adds, still in the market. They are seeking alternatives and are more involved in business than ever before.

– All business plans should include at least a four-week period of inflows and outflows. Cash flow should be monitored on a weekly basis, but also prepare a quarterly plan of inflows and outflows. It is important to have enough free 'cash' because we know that banks cannot be relied upon in a short time. Cash is king. If you do not have cash in your business account or regular inflow from sold products or services, it is hard to do anything in the short term – says Sruk.

And in the circumstances of rising and changing business costs on a daily basis, it is certainly not easy to keep under control. The level of inputs is currently something that is the hardest to plan, the hardest to influence, and what gives everyone the most headaches.

Concrete advice from economic experts and examples of planning from leading companies in Croatia can be read in the new printed and digital edition of Lider.

—

—