Defining Your Financial Assumptions and Contingency Plans
Defining Your Financial Assumptions and Contingency Plans
First within this section, you must answer the question, “What assumptions have you made in order for your financial projections to work? What happens if those assumptions are incorrect?” Are you assuming that your spouse will continue to work at his job, where he can obtain sufficient health insurance? Then that assumption goes here. Along with that assumption, write a contingency plan. What if he changes jobs? How much extra would you need to pay for health insurance? (Granted, he might leave his job five years from now, but you should have some idea of the cost of any alternatives.) What happens if your rent is raised higher than you anticipate? What if your homeowners association raises its rates beyond the expected $10/month?
Defining Marketing and Logistics Assumptions and Contingency Plans
Next, answer the question, “What assumptions have you made in your marketing and logistics? What happens if those assumptions are incorrect?” If you find that you cannot use the space you set aside - say a lengthy construction project starts on that side of your home as soon as you set up an office - where else in your home would you place your business? If you believe five of your current clients will come with you when you leave your employer, what happens when only three of them actually do? What you need to do here is think of the obvious assumptions you are making and come up with a plan that addresses, “What if it isn’t like that, after all,” as outlined in these scenarios:
• You’re assuming that you will work out of an area in your home. What happens if construction, noise, or natural disaster strike? What if you had to sell?
• You’re assuming that you will have health insurance coverage for your family through your spouse or partner’s employer. What if your spouse or partner were laid off?
• You’re assuming that you can work and watch your children. What if you can’t do that? What if you need to work and they need to be at violin lessons - at the same time? List, one by one, all the assumptions you are making. This can be difficult - because the very nature of an assumption is that we just “assume” and don’t think about other options or disruptions to the plan. To be sure that you address all of your major assumptions, visualize a day in the future - your ideal business day.
What do you do, during that day, step by step? These are your assumptions. They are right there - from assuming that the time you get up will be 7 a.m. to assuming that the phone will be quiet until your project is finished to assuming that you can get your work done before the kids return home from school at 3 p.m. Yes, this is a little like taking your dream and looking at it through nightmare-focused lenses, but that is how you unearth assumptions and consider alternate solutions in the event that those assumptions are incorrect.
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