Meet the Suns and Clouds chart

I first created the Suns and Clouds chart in the early 1990s. Since then, I’ve seen it reproduced in various forms in reports by my consulting competitors. They say imitation is the sincerest form of flattery, but I still kick myself that I didn’t copyright it back then!

The reason it keeps getting copied is that it works. It manages to encapsulate in one chart conclusions on the relative importance of all the main issues in the plan. It shows, diagrammatically, whether the opportunities (the suns) outshine the risks (the clouds). Or vice versa, when the clouds overshadow the suns. In short, in one chart, it tells you whether your plan is backable. Or not.

The chart (see Figure 8.1) forces you to view each risk (and opportunity) from two perspectives: how likely it is to happen; and how big an impact it would have if it did. You don’t need to quantify the impact, but instead have some idea of the notional, relative impact of each issue on the value of the firm.

In the chart, the more likely a risk (or opportunity) is to happen, the further to the right you should place it along the horizontal axis. In Figure 8.1, risk D is the most likely to happen, and risk B the least likely.

The bigger the impact a risk (or opportunity) would have if it were to happen, the higher you should place it up the vertical axis. In the same chart, opportunity B would have the largest impact and opportunity C the smallest.

For each risk (and opportunity), you need to place it in the appropriate position on the chart, taking into account both factors – its likelihood and its impact.

Don’t worry if things don’t make that much sense initially. This chart changes with further thought and discussion. Always. Arguably its greatest virtue is that it serves as a stimulus to discussion. I have often given PowerPoint presentations of 100 slides or so, with no more than a couple of questions for clarification every now and then. Then, when the Suns and Clouds chart comes up, towards the end of the presentation, it can remain on the screen for half an hour or more. It stimulates discussion and provokes amendment. A client may choose to debate for 10, maybe 15 minutes the precise positioning of one risk, or opportunity, and what can be done to shift its position favourably.

Remember, you cannot be exact in this chart. Nor do you need to be. It is a pictorial representation of risk and opportunity, designed to give you a feel for the balance of risk and opportunity in your business plan.

It is up to you whether you include a Suns and Clouds chart in your business plan – 99% of plans won’t have anything like it. If you include it, your plan will be distinctive, special, backer-sensitive. But, if you’re grilled on it, will you be able to respond vigorously?

Whether or not you include the chart doesn’t matter. The critical thing is the thought process. You must try to visualise the balance of risk and opportunity inherent in your plan. You must separate out those risks and opportunities of little significance from those of great significance. You must screen out the background chatter and let the metaphorical voices of the main proponents of risk and opportunity be heard – and may the most convincing win.

Because this is what your backers will do. They, or their advisers, may well use a tool like the Suns and Clouds chart, but, whether they do or don’t, for sure they will be assessing risk and opportunity. That’s their job. It’s what they do, day in, day out. Whether analytically or instinctively, that’s how your backer thinks.

And you must be prepared to answer from the same perspective.