Part of the answer is in the hyper-connected nature of the world’s economies and financial markets.  In Greece situation, we are contemplating the potential default of €1.5 billion to the International Monetary Fund¹, which are due today June 30th.  An additional €25 billion to multiple creditors are due in the balance of 2015, mainly treasury bill holders, the European Central Bank, and the IMF.  A potential default by Greece would touch far more than just their economy.

Another element of the answer is described by the potential chain of events that would follow a default, which could include separation of Greece from the Eurozone, re-adoption and subsequent devaluation of the Drachma, inflation, and general unrest in the country.  Commerce with other nations would be affected, even tourism.  As these events unfold the investor confidence would significantly drop, not only in Greece’s financial market, but also in the European market and its ability to maintain an economically stable, integrated Union.

Yesterday’s market reaction was just an anticipation of the above.  The Dow Jones lost 348 points, S&P 500 lost 40. The investor confidence is impacted, risks increase and automatically adjust the value of financial instruments, including bonds, stocks, currency, even commodities.  The big question is, if Greece does indeed default, how would it affect your business?

Global corporations have, and are affected by international sales.  When foreign markets are affected US based corporations see this impact in their bottom line.  In meeting financial goals corporations will take measures to compensate for any negative impact, including cost reduction and discretionary spending rationalization.

If your business sells to global corporations it is possible that any cost reduction initiative may affect you directly, either through reduction or elimination of business, or just by generating pricing pressure.  If your business does not sell to corporations but to medium-size businesses you could still see an impact if your customers’ customers are large corporations.  Even if your business sells only to consumers a drop in our financial markets would affect you indirectly; your average consumer might reduce their spending and with that reduce your sales.  

What to do next?  anticipate!  In the same fashion as the investor community is anticipating the consequences of a Greece default you can anticipate the need for cost curtailment.  A few ideas include:

1. Evaluate your cost structure, assess where can costs be rationalized, what is optional, and what is critical for your business operations. Examine with detail your discretionary expenses.

2. Be ready to contact your key suppliers and request price concessions.  Describe the situation and seek support.

3. Explore alternative sources for your raw materials, goods, and services.  This may be a good opportunity to test the market for new suppliers.

4. Challenge your team to reduce operating costs.  If  you have manufacturing operations explore more efficient production methods.  If you deliver services, challenge the team to deliver more efficiently to your customers.

5. Diversify your customer base.  This may be a long-term project, but it is always a good business practice to have balanced sources of revenue.

6. Refresh your “What if” plan². 

In conclusion, could Greece affect your small business or start-up? the answer in many cases might be yes.  Can you prevent it? probably not, but you certainly can anticipate and proactively prepare for tough times.  Start today, develop a plan, and prioritize the actions that will best support the needs of your customers.

¹  WSJ.com

² “What if” plan is a set of scenarios describing risks, impact, mitigating actions, and contingencies.

This is certainly an excellent initiative.  From our own experience, it took us a few days to complete several basic steps including name search, registration at the State level, registration at the Federal level, obtain franchise tax contributor number, then register for sales and use tax, and more.  It sounds too good to be true; to be able to do all this in one day, in one website, but all seems to indicate that this will soon be a reality.  As of June 28 eleven cities have pledged to this initiative.

For more information visit the SBA website, Start-up in a Day

While this is in part true, investors will most of the times ask you for one, there is a different reason that highlights the importance of the business plan, which is to allow you to answer the following question: “should I do this?” or if you are an existing business: “Am I going in the right direction?…”

Indeed, the main reason to create and maintain your BP is to thoroughly evaluate all the areas responsible for the success of the idea or business, and confirm that given certain assumptions the business is feasible, and has reasonable probabilities of being sustainable.

Another question often made related to BPs is, once I do it what do I do with it? The answer is, keep it as a living document, maintain it, and review it periodically. A BP is not a one-time effort, and the full potential is achieved by monitoring the evolution of the business to the anticipated results shown in the BP, barring of course natural adjustments and sensitivities.

Over time, a BP evolves into an operating and financial plan. For existing businesses there will be an annual planning period, where the expectations for the following fiscal year will be set. The result will be a Plan which drives mainly the financial performance, but is closely related to separate plans: sales and marketing, operations, supply chain, manufacturing, etc.

In summary, when considering the creation of a business plan remember:

1. It is not just a document for investors, is for you as entrepreneur or business owner to validate the merit and probability of success of your idea. And helps you answer the question: should I do this?
2. A business plan is not a one-time effort, done and archived. A Business plan is a living document that helps you validate the evolution of the business to the anticipated performance.
3. As business grows, the business plan will evolve into an annual Plan, which will usually focus on the financial results, but will be closely tied to the individual plans for the different functional areas

If you have questions or would like help building your business plan please contact us