Opportunities/Challenges Planning ⟨What-If⟩

Explanation

Opportunities / Challenges Planning, The “What If” tool, allows you to plan for new opportunities and challenges. If you are satisfied with the outcome of the “What If” scenario, you can activate them and make adjustments to your budget throughout the year. This will help you to take advantage of an unexpected windfall or to account for an unexpected emergency.

Instructions

To see the effect on your “Sales”, “CoG”, and/or “Total Expenses” of a particular opportunity or challenge, you will need to distribute the effect in the appropriate months for which an opportunity or challenge will be faced.

All fields that you will need to fill in to see the effect of a momentum event are located at the bottom of the “Opportunities / Challenges Planning” page. Start by describing the Momentum Event. This will help you and your financial planner understand the event and what it means to you and your business.

Next provide the yearly adjustment to Sales, Cost of Goods' and/or Total Expenses. To understand how the event will affect your yearly budget, you need to decide how much of the Sales, Cost of Goods and/or Total Expenses will come from Momentum or will need to be Budgeted.

To understand how to apportion to Momentum or Budget you need to understand that when you create your budget you are looking to increase your company's profitability through increased sales and reduced costs. Each of Sales, Cost of Goods and Total Expenses will be increased or decreased from the prior year - This is your Momentum. This momentum is not attached to any single event, this is just what you are planning for. Any event may be accounted for by the Momentum you defined using your budget. For example, if you have an increase to Sales for the year of $200,000; you have a +$200,000 Momentum. If an unexpected opportunity arises, you can chose to include this opportunity in the Momentum defined by your budget or you can chose to increase your budgeted sales. Another way to explain this is your base momentum is defined by your budget when it is first created. By seeking out new opportunities you may simply be trying to meet the goal of the budget momentum you have defined or you may be seeing an opportunity for further growth. If an opportunity/momentum event is planned during your budget planning phase you can safely set the impact or % to Momentum at 100%. This will not increase or reduce your budget, but simply inform you as to how close to meeting your budget momentum you are.

If an opportunity/momentum event is unplanned during your budget planning phase you need to decide how much of the increase or decrease will affect your budget and how much to allocate to your momentum. For example, if you had planned on a $50,000 contract with one of your customers, then all that would be added to your momentum. However, if your client decided to double their order to $100,000 then 50% of that total may be used to increase your budget for the year. You can chose to have that unexpected $50,000 increase come from your momentum and thus reduce the workload of your sales team, or you can chose to have that extra $50,000 increase your sales budget for the year. The choice is yours, but be aware that you can never allocate more to momentum than you have budgeted for, so if you have used all of your momentum for the year and another opportunity arises, then you should allocate all that extra to your budget and increase your budget for the year. If this happens you can congratulate yourself and your team for exceeding your budget!

Ascribing the momentum event on a month to month basis: Once you have described your momentum event and added the adjustments of Sales, Costs of Goods and Total Expenses and decided on the allocation toward momentum and the effect to budget you can click the Add Momentum Event button. This will save the event in the system and present you with 12 months to distribute the momentum adjustments on a per-month basis. You are required to distribute the momentum adjustments on a per-month basis because only you know when you will be paid and what months your Sales, Cost of Goods and/or Total Expenses will be affected by the opportunity/challenge. For example, you may have a $200,000 sales contract that you'll be paid for at $75,000 in June, $50,000 in July, $25,000 in August and $50,000 in November. So it is up to you to tell Profit Navigator for what months you expect to see the increase or decrease.

Once you have distributed the increase or decrease total from the To Distribute blue column, you can review the effect to your end of year totals in the Momentum Events Testing Budget section above the events worksheets. If you are satisfied, you can click the Set To Working Budget button and add any accepted momentum events (Opportunities/Challenges) to your working budget.

If you are undecided and want to research more before committing a momentum event to your budget, you can simply click the Remove From Testing Budget button. This will keep the momentum event saved, but will not affect your budget.

If an event was added to your budget you can always remove the event from your budget. For example, if you had been working on a sales contract that you added to your budget but the contract fell through at the last minute you can remove that event from your budget by clicking Remove From Working Budget.

We encourage you to review this section with your financial advisor and review your opportunities and challenges with your financial advisor so that you can be a more informed and proactive business leader. By using an informed budget you will more easily be able to handle unexpected challenges and opportunities for growth.

For Advanced Learners

Every business has opportunities and challenges throughout the year. By understanding the impact of these, you can better guide your business to success. Having a budget in place is the first step in creating your roadmap for the year. During the year external events may change the momentum of your business or you may be presented with an opportunity to greatly enhance your businesses profitability. In this section, you can plan for new opportunities and challenges and see the impact these would have on your plan for the year. If you are satisfied with how these what-if scenarios will affect your budget you can activate them and make small adjustments to your budget throughout the year.

Report Documents

For details on Printing Reports see the section on Opportunities/Challenges Planning ⟨What-If⟩ Printing