How to shorten your planning cycle to manage the ripple effect of tariffs

Mastering the business planning quick step

In an uncertain and volatile market, businesses will be forced to think and act quicker than usual. As a result, your planning cycle must be compressed to meet the pace of this new environment.

Typical business planning cycle

In a stable and predictable market, most business planning looks this:

• Short-term planning: 1 year
• Mid-term planning: 2-3 years
• Long-term planning: 3+ years

In a normal business cycle, you clearly understand the playing field, which is relatively unchanging. You can plan firmly for the next year, while your mid-term plan will include more assumptions and your long-term plan will rely more on trend analysis.

Compressed business planning cycle

In a volatile and unpredictable market, you do not know when or how the playing field will change. To respond, you must compress your planning cycle—months become weeks and years become months. This allows you to react to changes more quickly. You must also focus primarily on the elements inside your business that you can control. Your other focus should be to build resilience and efficiency.

• Short-term planning: 30 days
• Mid-term planning: 2-3 months
• Long-term planning: 6 months

Business planning cycles

New short-term planning: 30 days

Assess your company’s financial situation

Evaluating your financial health in a volatile market is like preparing your car for a long, bumpy road trip. You don’t know what’s ahead, so your car’s key components—engine, transmission, battery and tires—must be in top shape and ready for anything. They all have their specific purpose and use.

Track these four financial ratios

It’s the same thing when you measure your company’s financial health using financial ratios. These four types of measures, in particular, can provide important insight into your business finances.

• Liquidity: Your company’s ability to access cash and pay bills.
• Profitability: How much profit is your company making?
• Productivity: How efficiently is your company using its assets?
• Leverage: How much debt is your business using?

Calculate your company’s break-even point

Calculating your break-even point reveals how much revenue your business must generate to cover its overhead and financial costs. Knowing that can help you adjust if volatility impacts your company’s volume, product pricing or costing. 

Ensure you have the right financial tools

Having the right tools is always important to manage your finances, but it’s crucial in unpredictable times. Here are three tools every business needs to make informed decisions quickly.

• Operating budget: Forecast and manage your company’s finances, including sales, production costs, operating expenses, margin contributions, and net income. Identify whether potential tariffs will impact any of your costs or products.
• Cash flow planner: Track your business’s cash inflows and outflows to better plan your short-term needs and manage potential cash constraints.
• Costing tool: Estimate and analyze the costs associated with your product or service to make informed pricing decisions.

Once you understand your financial health and have the right management tools, you can plan for the next 30 days. Depending on how you’re doing, you could decide to:

• Delay payment of payables
• Adjust production or deliveries
• Delay certain expenses and investments
• Review contracts with key customers or suppliers
• Insert new clauses in key operating agreements

Ensure each item in your plan has a timeline and a person accountable for seeing it through.

Most importantly, if you don’t understand your finances or have the tools listed above, don’t take a wait-and-see attitude—contact experts for help.

Get closer to your customers and suppliers

Contacting your customers and suppliers every month may seem excessive, but predictability is key in a volatile market. They are also dealing with uncertainty, so they will appreciate hearing from you.

• Talk to your suppliers: Ensure they will be able to deliver and reassure them that you are still looking to buy.
• Contact your main customers: Let them know whether or not their existing and planned orders are still on track. 

Look for customer quick wins

Explore low-hanging opportunities to improve your customers’ experience. Is there anything your customers want that’s easy to do, especially on products that are likely to be impacted by shocks? Small changes can go a long way to deepening client ties and loyalty.

Understand your obligations

Work with your lawyers and financial advisors to explore clauses in your client and supplier contracts. Understand your obligations and exposure, and if possible, protect yourself against significant price fluctuations to increase predictability.

Some customers or suppliers may ask you to absorb price increases. The financial tools and ratios outlined above will help you understand how much margin and cash you can afford to give up.

Optimize your supply chain

Analyze your supply chain for improvement opportunities, including alternate suppliers. By optimizing your supply chain, you can reduce dependency on high-cost sources and improve overall resilience against economic fluctuations.

New mid-term planning: 2-3 months

Fine-tune your finances

While financial ratios and tools are critical to understanding your immediate situation, they are also key to helping you improve it. Since you can’t control a volatile environment, this is a good time to look at what you can control in your company.

Review your business’s cost structure

A line-by-line review of your expenses can help you identify opportunities to optimize costs.

• Separate your discretionary expenses from those that are committed and mandatory.
• Examine recurring costs.
• Review sales and profits by product to identify those you may want to phase out.

As you go through this exercise and identify where you can cut or whether there are activities you should stop doing, think strategically and don’t put your long-term viability at risk for short-term gain. 

Re-evaluate your pricing strategies

Due to the compressed planning cycle, you won’t have time to do extensive market research to review your prices. But here are some steps you can take instead.

• Talk to your customers: Understand how much they’re willing to pay. Communication and collaboration will be key to finding new mutually acceptable terms. You’re all in the same boat.
• Benchmark your competitors: Find out how much they charge and the product features they offer.
• Leverage higher-margin products: Consider changing the prices of those items to offset any market impacts on less successful or more price-sensitive items.
• Monitor the impact of your changes: Track your sales and customer behaviour. Adjust your strategy as needed.

Look for new suppliers or materials

You may want to look for options that are not subject to tariffs. Consider how changes could disrupt your supply chain.  

New long-term planning: 6 months

As urgent as the situation seems today, you must keep an eye on the long term. No one knows how long this volatility will last, so you need to prepare your business to build resilience in the long term.

Improve your business’s efficiency

Inefficiency eats into profitability. The more inefficient you are, the more time and money you waste. Your company’s resilience depends significantly on its efficiency and productivity.

Identify sources of waste in your business

• Review your processes: Identify where things are not working smoothly, where you are losing time or where you could avoid mistakes.
• Talk to your employees: Get their insights on where processes are breaking down; they will appreciate being asked.
• Build an action plan: Decide what to address, when and how.
  • Focus on high-priority tasks and quick wins.
  • Establish a clear timeline and accountability for each action.
  • Eliminate tasks or steps that don’t add value.
• Standardize processes: Doing things the same way reduces errors.

Don’t underestimate the impact these actions can have on your bottom line. We see it over and over again with our clients—their production capacity increases by 20% or more, their quality improves and they reduce costs.

Put technology to work

Technology is a powerful ally that can help businesses solve multiple challenges. For example:

Control costs

• Automating repetitive tasks
• Predicting equipment breakdowns
• Improving productivity

Increase sales

• Generating lead
• Contacting prospects
• Personalizing recommendations

Navigate uncertainty

• Improving forecasting
• Monitoring inventory
• Optimizing resource allocation

Investing in technology doesn’t have to be a huge, expensive undertaking either. The key is finding the right solutions for your needs. Take a step-by-step approach.

• Fully utilize your existing technology: Many businesses invest in machines or software and don’t use them to their full potential—taking advantage of what you already have is a quick way to boost production and cut costs.
• Explore simple solutions: For example, an online accounting system can help you get out of spreadsheets and eliminate paper and manual data entry. Artificial Intelligence-based tools like ChatGPT or Copilot can help take meeting notes, brainstorm ideas or create marketing content (just be sure to use cybersecurity best practices and review the output for accuracy).
• Consider complex solutions: Sorting and assembly lines, CNC machines, robotics and automation—these are more accessible than they used to be and can drastically increase productivity and accuracy in your business.

Diversify your business

In today’s context of trade uncertainty, we tend to think of geographical diversification as the best way to diversify. After all, Canada has free trade agreements with the European Union, several Asia Pacific countries, and Central and South American countries.

However, opening new international markets is a complex, long-term strategy. Selling more to customers in Canada may be the quickest way to diversify geographically. It’s a good time to take advantage of the Buy Canadian sentiment!

Meanwhile, there are other ways for businesses to diversify.

Target new customer segments

Different age groups, income levels or lifestyle preferences

Create new products or offerings

Based on consumer preferences and your products’ performance

Move into new industries

A textile manufacturer could move from fashion to healthcare by producing hospital gowns. A restaurant chain could enter the education sector by offering university cafeteria services.

Try new marketing channels

Are you making the most of social media or other online channels to promote and sell your products? 

Change your equipment

Could another type of machinery or tool expand your capabilities? 

Building resilience in a changing world

Five years ago, it was a pandemic. Then, inflation struck. Today, it’s tariffs and trade uncertainty. There will always be periods of volatility. During these times, remember to compress your business planning cycle. 

An all-hands-on-deck approach is key

Successfully managing a shorter planning cycle in an unpredictable environment requires the following:

• Constant and structured communication across your teams and business lines
• Weekly (even daily) leadership touchpoints and key metric reviews

Larger companies can create a task force of key team members who meet regularly to complete these tasks.

As the situation evolves, you may need to rethink your short-term and mid-term planning because situations you thought were resolved have changed. Getting caught up in the short- and mid-term cycles is easy, but don’t forget to build resilience along the way.

Next step

Looking for more advice? Consult our free resources on trade uncertainty and contact us for advice tailored to your business.