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6. Your Contingency Plan (The Lender's Top 10 Tips)

Updated: Sep 15, 2023

Prepare for the unforeseen – that's the goal of the contingency plan.

To best secure your financial future, planning is key. Below we present a guide to risk mitigation:


Analyzing the Unknown: An Exploration of Risks


Embrace the position of a forward-thinking strategist, anticipating the intricacies that the future may bring. Leave no detail unexamined as you carefully analyze both internal and external vulnerabilities. Nevertheless, mere identification of these vulnerabilities falls short; it is essential to formulate an all-encompassing strategy to effectively address and surmount each obstacle. Keep in mind that, within this domain, clarity stands as the top priority.


The Art of Disclosure and Mitigation


Engage in a transparent exchange with your financial institution. For every risk you unveil, present a corresponding roadmap to conquer it. Alleviate their concerns by demonstrating your unwavering preparedness to confront adversity head-on.


Tempering the Storm: Notable Risk Scenarios


Think expansively, think resolutely. Lenders crave insights into your resilience in the face of impending storms:


1. Sales falling below expectations, hinting at negative cash flow.

2. Escalating leasehold improvement costs.

3. Unforeseen launch expenses lurking in the shadows.

4. Delays in inventory procurement.

5. Machinery breakdowns.

6. Departures of key personnel.

7. Debts casting a shadow over your financial records.

8. New and existing cyber threats lurking.


PESTEL & Porter's 5 Forces


In the landscape of risks, the PESTEL analysis emerges as a helpful tool. Navigate through the realms of Political, Economic, Social, Environmental, and Legal factors as you meticulously sculpt your contingency strategy.


You may also wish to use Porter's 5 Forces framework which cover: Threat of new entrants, threat of substitutes, bargaining power of customers, bargaining power of suppliers, and competitive rivalry.


Learn more about the PESTEL analysis and Porter's 5 Forces here.


An Interactive Exploration: Confronting the Unknown


Extend an invitation to your peers to participate in an interactive exploration, offering them a glimpse into the world of contingency planning. Pose questions that mirror the concerns of your lenders:


1. How will you navigate the turbulent waters of sales falling half short of projections within your initial three months?

2. What strategies will you deploy if an unforeseen illness sidelines you for two or four weeks?

3. A 10% surge in minimum wage - how do you intend to navigate this challenge?


In this test of uncertainty, your contingency plan serves as your unwavering guardian, a shield against the unknown. Craft it with meticulous care, and observe as lenders embrace your readiness, acknowledging that each challenge you address strengthens your resolve to prevail.



This is part of our series: What A Lender Looks For: The Top 10 see the main post here.

 

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