Why Simulations Matter

Retreat • November 8, 2023

You will hear me talk about business simulations a lot. Start-ups and new businesses, entrepreneurs with just the seed of an idea, mature businesses, in fact businesses of every kind and class, will benefit from running effective simulations. But it is perhaps smaller businesses where simulations are vital. Typically these are the businesses who can least afford to make mistakes. In the beginning, it might have been acceptable to wing it, but now that you’re up and running, and running with investors’ money, there’s no more room for gut feeling alone. It can be tough to know for certain how your decisions will impact the bottom line. There are just so many variables at play when you take something from idea to reality. That’s where business simulations come in—they provide a low-risk way to “test drive” strategies before fully committing to them.

I’ll admit, the idea of simulations sounded repetitive and a little pointless when I was first introduced to the concept early in my career. Especially where there was a seemingly obvious answer staring us in the face. Why not just get on with it, I would think to myself. But after working with simulations in the competitive luxury hospitality sector, I was shocked by how much we could learn. It opened my eyes to new possibilities and potential pitfalls which even global brands with years of experience on their teams hadn’t considered. Best of all, it was low-pressure since we knew it was just a practice run. 

We started small, just simulating how different pricing structures for our departments could affect revenue over the next year. Getting actual numbers in front of us helped solidify which approach seemed most viable. It was also interesting to play out how things like supply chain delays (especially during COVID with all of THOSE variables!) or increased marketing costs could impact results. Seeing it all on paper rather than just guessing was invaluable.

From there, we tried simulating bigger changes like adopting a new reservation process or trying out loyalty-based programmes. Getting a sense of the financial ripple effects in a risk-free setting gave me the confidence to recommend strategies that fit my client’s goals. It would have been dangerous and expensive to learn these types of lessons through trial and error.

One thing I learned from conducting thousands of simulations, is to tailor each simulation to my client’s specific business. I am not a fan of some generic plug-and-play model and during my planning retreats, I take the time to really understand your operations, so together we can build projections based on your actual metrics (we’ll talk about things like capacity, customer retention rates, soft skills and vendor relationships). That granular level of customisation makes the results so much more meaningful for your specific business.

If you are just starting out, I’d recommend starting simple. if you want to try business simulations first get a sense of the basic mechanics and value they can provide before diving into complex modelling. 

But please, don’t write simulations off thinking they’re just for big corporations. Projecting sales of a new product line or how staffing schedules could impact productivity, will yield powerful insights. The initial time investment pays for itself many times over in informed decisions down the road. Of course, you could join us for my next retreat in Barcelona in January, where we will be planning for your best business year yet in 2024. Please message me directly for details on how to get onto the waiting list. 

In the end, being able to “gamble” safely through simulations is one of the best risk management tools for any small business. They give owners the confidence to place bigger bets when they can see the probabilities start to tilt in their favour.

I hope this perspective helps you see the value simulations can provide, no matter the size of your operation. 

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