You’re finally self-employed. When you woke up, you noticed a chill in the air. Then when you looked out of the window you saw a white blanket of snow over your lawn. You’re glad you don’t have to bundle up in layers and go to work. You don't have to sweep the snow off your car and struggle through traffic to go to a job you hate. Now that you’re self-employed, you’re your own person.
After you make your coffee, you sit in front of your computer monitor. As you sift through your emails, you experience a vague sense of anxiety. You didn’t get any new work today. One client, who has already paid you, says you didn’t do what she had asked and wants you to redo the entire project. This will take several hours of your time. You won’t have much time to do any lead-generation work today. Looks like today will not be a profitable day. You’ll be earning about as much as someone working at McDonalds.
You start to worry about cash flow. You have more money going out than coming in. You would be fine if more clients paid their invoices on time. The Internet lifestyle is a little different than you had imagined. No fast cars or tropical vacations for you. Automating your marketing was much harder than you anticipated. You thought that you could create a stream of passive income. But it cost you more to place Facebook ads than revenue from sales on your ebook. Now you’ve gone back to trading time for dollars.
One thing about having a regular job was that you just did your thing and let the boss worry about the big picture. Now everything depends on you. If you don’t pay attention to the details, you don’t eat. Perhaps, you should have thought things through a little more before quitting your job.
Still, the thing is you like working from home, and you just want to turn things around.
The good news is that can by using Scenario Planning.
What Is Scenario Planning?
A scenario is a fictional story about what can happen.
You have to create worst case scenarios to learn how to prepare for them. These are things that can get out of control. Once they unfold, it can be hard to predict what will happen next. By preparing for them ahead of time, you can cut them off at the pass before they escalate.
You have to create best case scenarios to learn how to nurture them. Based on what you now know, how can you upgrade the things that have worked in the past?
Stress test your current strategy. Are you flexible enough to survive a worst case scenario? Are you adaptable enough to do well with a best case scenario.
How Does It Work?
Scenario thinking has six steps:
Step 1: Identify the issue.
You like working from home. You actually have enough clients to pay the bills, but cash flow is slow. You need a few more clients to create a surplus. You also have to spend a lot of time revising work that stops you from looking for new clients.
Step 2: List what you know right now.
Clients like you and the work you do because you have a high degree of technical skill. So you know how to set up a business, bring in the clients, do good work, and bring in the money.
Step 3: List what you don't know right now.
You don’t know how to manage cash flow. You could look into accounts receivable insurance from Universal Funding to help you if clients are not able to pay at all. This is insurance from a commercial insurer that helps protect your business from unexpected losses when customers suddenly become insolvent or go bankrupt and can't pay your invoices.
You don’t know how to manage your time well. You could download a Kindle book on time-management.
You know how to set up a business, but not that much about how to run it efficiently. You could join a mastermind group to ask successful business owners on how to run a business better.
Step 4: Sketch out different scenarios.
Create best case scenarios and worst case scenarios. A best case scenario is that you get better at marketing to always keep the pipeline full. A worst case scenario is that you can’t pay the bills and will have to go back to a 9-5 job. (Something you worked hard to escape.)
Step 5: Assess the probability of scenarios.
It's possible that cash flow will get worse, but it’s not likely to happen. You have always been able to catch up on your bills since the day you started your small business. It’s possible that you get better at marketing. There is a high probability that you can do it. You have some marketing experience and just need to learn a little more. You have a great website and plenty of samples to show the quality of your work.
Step 6: Remove implausible scenarios.
It's more likely that you will be successful and less likely that you will fail. So, you should focus on how you can carve out the time you need to get much better at marketing your business. You can prepare for the worst case scenario by regularly saving a part of your income. You can also update your resume and revive industry contacts with a few phone calls.
Use Scenario Planning to Get Unstuck
Starting your own business takes courage. Along the way, you'll come across many challenges. By using conceptual tools like Scenario Planning, you can pick yourself up, dust yourself off, and continue heading in the direction of your dreams of financial independence.