Challenges in Budgeting and Forecasting for 2021
Part of what makes 2021 different from past years in terms of planning are the challenges that businesses could face . Russ Preite , President & CEO of PLNTF Holdings , LLC , said , “ The past predictability of the business has changed , and there is still a possibility of significant volatility during Q1 that needs to be taken into consideration .” He also pointed out that it is important for franchisees to be agile depending on what happens in January . It is essential to plan to be able to adjust from a budgeting and strategic planning standpoint .
Peter Amato , chief financial officer and managing partner of Easy Mile Fitness , said that the unknown is the biggest challenge franchisees will face on the budgeting front as they head into 2021 . In the past , data points allowed for confident forecasting for standard club ramps and new club openings , and the cost structure stayed consistent . “ However , in light of a changing pandemic world , not only do we have to try and budget and forecast EFT growth in an unknown situation , but we have to consider items that we cannot reliably forecast , such as state or local mandated shutdowns ,” said Amato . “ Yet , at the same time , there is the potential for the impact of pent-up demand and vaccine development , which could drive above average joins .”
To be prepared for the potential volatility of the year , franchisees must be ready to cover their fixed expenses . Matt Raimondo , controller at PF Raimondo Group , said that conserving cash is extremely important . “ While it ’ s always wise to have cash on hand , it hasn ' t been a huge priority of ours ,” he explained . “ This has changed over the past year . For instance , before COVID-19 , you might set aside two to three months of reserve capital , [ but ]
this might have changed to four to six months ( or more ) for certain areas of the country . There is nothing more detrimental to a business than a complete lack of cash flow .”
“ This year , we created an annual forecast and strategic plan but plan to recast and review each quarter due to the uncertainty of COVID .”
– Scott Sanders , managing partner with PF Houston
Lisa Monterosso , Julian Monterosso and Pat Schafer , co-owners of PF West Michigan , echoed the need to have ample amounts of money in reserve . “ Cash and cash preservation are of utmost importance ,” they said . “ We need to prepare for the worst-case scenario of another shutdown given current trends of the pandemic this winter . Given the fact that we have gone through this already , be prepared to partner with your lenders , landlords and most of your vendors to work together to defer costs . Start to have those conversations now and have ‘ what-if ’ conversations to move quickly if another shutdown occurs .”
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GearedUp | 2020 Issue 4
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