How to De-Risk Your Business Plan in the Age of COVID-19


“Social distancing.” “Flatten the curve.” “Zonotic transfer.” “Individual protection equipment.” “Community Spread.” “Containment area”. “N95 Masks.” Phrases that made no sense to most of us in January are now used in everyday language.

The changes we have witnessed over the past few weeks obviously go beyond rhetoric. The current crisis has revealed unmet needs not only for medicine, vaccines and diagnostics, but also for teleworking, home entertainment, distance learning and disinfection. Meeting these unmet needs may require technological innovation (eg, particulate respirators with extended shelf life) or market-based innovation (eg, improved distribution channels for toilet paper). Despite this need for innovation, society may currently be more risk averse.

Risk aversion impacts the business plans that innovators create to convince others of the feasibility of their business concept. While all business plans are ambitious, those that contain a lot of guesswork are not believable. Unconvincing business plans are rejected because they are considered risky.

To boost the credibility of your business plan, filter the risk. The three elements discussed in this article will help you create a flawless business plan.


Innovations that arise from public health crises often provide public benefit. In fact, many of these innovations are promoted through not-for-profit corporations (not to be confused with non-profit organizations), which are legally bound to have a positive impact on society or the environment. . Even though the goal of your startup is to provide a public good, the fundamental goal of your business plan is to prove profitability.

Hypotheses: Business plans demonstrate profitability by projecting how the business will perform under future market conditions. Yet, not all future market conditions are predictable. For example, how many five-year business plans from 2015 anticipated a pandemic that would bring the global economy to a screeching halt? Probably not too much. Sound business plans, however, anticipate reasonably foreseeable contingencies. Your job is to determine the set of market conditions that need to be anticipated.

Market research: The starting point for supporting your assumptions is not a crystal ball, but market research. All important assumptions in your business plan should be referenced, preferably citing reliable sources. Depending on your particular business idea, your sources may come from primary research (such as interviews and direct observation) or secondary research (such as online research).

Free Resources: When constructing bottom-up forecasts, use current statistics (eg, from the US Census Bureau’s online database) and consider future growth rates. For top-down models, borrow heavily from market analyzes created by investment banks and the annual reports of publicly traded companies, both of which are readily available online.

Warnings: if the relevant data are not readily available, rough estimates may suffice. However, you should ensure that your business plan explains the rationale for your estimates and assumptions. These justifications are your qualitative warnings. In the financial projections of the business plan, you should perform sensitivity analysis and scenario analysis to provide quantitative warnings. These quantitative caveats are described below.


Use sensitivity analysis to demonstrate how your financial metrics will be affected if the value of a single assumption changes. Sensitivity analysis essentially asks the question: “But what if…?” For example, your sensitivity analyzes might show the impact of increasing COGS by 15% or decreasing sales by 50%. The results of your sensitivity analysis can be reported as absolute figure (e.g. Year 3 Adjusted EBIT, as in Figure 1) or the incremental change from the base case financial metric.


Business plans sometimes contain hundreds of assumptions and estimates. It would not be practical to perform sensitivity analyzes on all of these assumptions. When selecting assumptions for your sensitivity analysis, choose those that have been (or are likely to be) most strongly contested by your stakeholders. Also include assumptions that are poorly supported. An assumption commonly included in sensitivity analyzes is “number of units sold”. If your pricing strategy is market-based (meaning you will have little flexibility when pricing your business), you can also include “price” in your sensitivity analysis.


Sometimes two or more hypotheses are closely correlated. For example, an R&D investment that increases COGS may result in an earlier launch date (i.e., reduced time to launch) and increased market share. In such cases, these business plans should include a scenario analysis, which essentially asks the question: “But what if…and…and…?” While the sensitivity analysis sequentially adjust individual assumptions, scenario analysis simultaneously amended various assumptions (as shown in Figure 2).


The assumptions of your base scenario should reflect the conditions your startup will most likely encounter. Beyond this base case, you can add best and worst case scenarios by changing certain assumptions. Assumptions that are typically changed in scenario analysis include:

  • It’s time to get started
  • COGS
  • Market share peak
  • Ramp rate (i.e. the time taken to reach peak market share).

Going back to our previous example, while the 2015 business plans may not have anticipated a global pandemic, they could have included a scenario in which market forces caused a substantial decline in throughput and supply chain sales.

In summary, incorporating the above three elements will remove much of the uncertainty and risk that usually plagues business plans. So rather than being distracted by ambiguities when reading your business plan, your business partners and investors can focus on the ingenuity of your innovation.

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