Scenario forecast for a business-unit exit

Situation

A business unit inside a global FMCG group was underperforming against the rest of the portfolio. Group management was considering whether to keep investing, reshape the unit or leave it altogether. Before any of those could be argued at group level, somebody had to put a number on each of them.

The unit had its own supply arrangements, its own customer contracts and its own people, all of which carried cost if it stopped.

Constraint

Exit costs are the part everyone underestimates. Contract termination, supply commitments, employee entitlements, stranded overhead and the trailing costs that continue for months after a decision rarely sit anywhere in a management pack. They had to be identified from contracts and from people’s knowledge rather than pulled from a system.

Group reporting standards also applied, so whatever was produced had to stand up to review by people who had not been involved in building it.

What was built

A forecast for the business unit with scenarios built on the same structure, covering continuation, a reshaped operating model and exit. Each ran on shared drivers so that differences between them came from assumptions rather than from inconsistent modelling.

The exit case included a full cost estimate assembled from the underlying commitments: contract exit terms, supply obligations, people costs, stranded overhead and the timing of each. Sensitivities showed how far the key assumptions could move before one option overtook another.

Who it was built with

Finance staff in the business unit provided the operational detail and validated the cost base. Commercial and supply chain people worked through contract terms. Group finance reviewed the structure and confirmed it met their reporting expectations, which meant the analysis could be used directly at group level rather than rebuilt.

Outcome

The group had a costed comparison of its options with the exit case priced from the underlying commitments rather than estimated. The planning that followed used the model’s cost profile and timing, so the decision and the execution plan ran off the same set of numbers.

What this looks like for you

If you are considering leaving a business line, a site or a market, the exit cost is usually the number that decides it and the one nobody has built. Price it properly before the decision, not afterwards. See strategic finance.