Washington is in panic mode right now. Between President Trump telling James Comey “You’re fired” and the former FBI director’s bombshell testimony to the Senate Intelligence Committee, to the twists and turns of the Russia investigation, lawmakers have had little time to move forward with their legislative agendas.
Potentially game-changing developments are happening at breakneck speed, yet progress is at a standstill. As a result, companies trying to plan for the future are in limbo.
What are business owners to do? Short answer: Buckle up and make contingency plans. With the uncertainty principle governing Washington and widely varying possibilities in the pipeline, business owners need to be ready to adjust to multiple scenarios quickly.
Here’s a five-step prescription for getting out of planning purgatory.
1. Pinpoint the elements of uncertainty that are most pertinent to your business.
Three examples of areas where your business may be impacted by turmoil in Washington are:
- Tax reform: President Trump’s proposed tax reform, though not yet committed to a bill, is slated to slash the corporate tax rate from 35% to 15%. Companies’ overseas profits would not be taxed, but corporations would be incentivized to bring home the estimated $2.6 trillion currently cached in tax havens. The Trump administration, however, has not offered details on how this might be achieved. Business leaders trying to budget or decide where to invest are stalemated by the gridlock in Washington.
- Healthcare: Senate Republicans unveiled their revised version of the GOP healthcare bill on Thursday. With an updated CBO score forthcoming and Republican lawmakers spending political capital fighting off claims of potential Russia collusion and allegations of obstruction of justice, it’s by no means a done deal that the bill will be passed by both chambers of Congress. This creates a huge unknown variable in businesses’ budgets.
- Immigration policy: The travel ban is locked in the courts, and more than 100 major U.S. companies have publicly spoken out against it, including Google, Adobe, HP, TripAdvisor, Airbnb, PayPal, Uber and Yelp. These companies have raised concerns that their businesses and surrounding communities may be impacted. In the wake of the ban, we’ve already seen tourism to the U.S. drop and universities report a reduction in applications from foreign students.
Depending on your business, there may be other elements of uncertainty, including trade issues and the political shockwaves shaking the U.K. and EU following Trump’s decision to withdraw the U.S. from the Paris Climate Accord.
2. Create an impact analysis for your business.
For each element of uncertainty you pinpoint, chart out a best-case scenario, a neutral scenario and a worst-case scenario. Because this is about planning not advocating for any particular policy, you should try to set your political views aside for this undertaking.
The exercise is deceptively challenging. If you’re talking about your company’s 2018 tax liability, it’s easy to run a high, low and mid-range scenario. The effort becomes more difficult when you’re examining issues like the travel ban or healthcare reform. There is no perfect way to predict all of the potential outcomes, but going through the steps is half the battle – and will put you ahead of many businesses.
Next consider how each of these scenarios would impact your business model. Do you notice any weaknesses in your business plan? Do you notice areas where your company could be particularly flexible and resilient?
3. Based on that impact analysis, form a contingency plan for the most likely scenarios.
Contingency plans are highly specific to each company – and even different segments of one company – but below are some strategies you might consider.
If your goal is to expand, take into account how much you might expand in the best-case scenario versus the more neutral scenario. The same goes for, say, investing capital in manufacturing equipment. How wise would it be to invest given a positive, middle-range or unfavorable scenario? Don’t be afraid to include calculated risks in your plans, so when the smoke clears, you can quickly take advantage of opportunities.
In worst-case situations, you may have to cut back in certain areas. Could you trim your inventory? By how much? Do you need to consider consolidating while trying to minimize harm? It can sometimes be necessary to streamline, but be careful not to go so lean that you lack the personnel and resources to help you adapt, innovate and grow.
If you are considering eliminating one aspect of your business, pause to take a telescopic view of its future value. In the angst of uncertain times, a business might cut a department or product line that isn’t relatively costly and has major long-term potential.
4. Keep focused on what you do well and on your core mission.
Just because you have contingency plans in place doesn’t mean your focus should be pixelated. Research from the Wharton School at the University of Pennsylvania found that getting distracted by plan B diminished individuals' motivation to achieve their main goal.
Your day-to-day operations should be calibrated to achieving your mission. Get clear on your company’s purpose, and communicate your goals and progress to your employees. It’s important to prepare for eventualities, but keep your backup plans in your back pocket until they’re needed. And even if you never need to implement contingency plans, making them will reduce your fear and help you make clearer, more confident decisions.
5. Keep your eye on the long game.
Steve Jobs and Warren Buffett have famously advised following Wayne Gretzky’s motto: “Skate to where the puck is going, not where it has been.” Of course, if it were easy to anticipate where the economic puck was sliding, everyone would do it. But it’s a good motto to keep in mind when the puck is ricocheting so erratically it’s hard not to be hypnotized by it.
Do we have nothing to fear but fear itself? Perhaps. But it’s reassuring to note that the day Comey testified, the U.S. stock market rose slightly. And the Economic Policy Uncertainty Index reached a mere 28 on June 8 and 67 on June 9. Compare that to the week following the 2016 election, when it peaked at 339. We’ve weathered recessions and wars and the slings and arrows of outrageous fortune; we’ll weather the turbulence of the Trump administration.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.
