By Alex Madden
How much do SMEs plan? And how important is it?
npower Business #mybizplan research highlights SME planning habits
One in ten British small businesses are putting their financial survival on the line – by failing to follow even the simplest business plan.
We recently commissioned some independent research from One Poll which revealed that many small and medium-sized companies (SMEs) rely on just a few lines scribbled onto a Post-it® note as their only form of long-term financial planning.
The research, which involved 1000-key decision makers from SMEs, found that ad-hoc business projections are often jotted down at the time the company is formed when seeking initial finance, then never looked at nor added to again.
“Post-it note planning” is the favoured option of a third of all hospitality and events companies, with thousands of fast food outlets, cafes, bars and nightclubs reliant on planning on the hoof. A quarter of all transport and logistics SMEs also rely on improvised plans.
The research found that some 15% of retailers on Britain’s high streets also jot their plans down on a Post-it. While 88% of Britain’s retailers think it is useful for a company to have a business plan in place to support growth, just half have created one to support their company as it evolves.
These alarming statistics come at a time when many small firms are struggling to achieve significant growth – finding it increasingly hard to secure new funding from traditional high street lenders.
While post-it planning companies are the most disorganised and favoured by just 9% of British companies, three other categories of business planning emerged from the research: “Mini-planners” who prefer to draft bite-sized plans on smartphones and tablets (24%) ; “Detail addicts”, 50%, who see the value in producing a detailed, full-scale plan drilling down through the costings. Finally there are a further 17% of “Presentation planners” who only feel secure when they have drawn up a formal, visually pleasing presentation before they start trading.
Last year saw a record 581,000 businesses start up, according to Companies House with over a third of small business owners (36%) realising that running a company was harder than expected within the first month of operating. Managing cash flow and accurate forecasting were the areas of most concern.
‘Our aim is to raise awareness of just how important having a proper business plan in place and working to it actually is. Clearly it has to be flexible, but there has to be some properly thought-through structure.
Phil Scholes, Head of SME Sales & Marketing at npower Business explains the reason for the campaign:
‘We want to encourage small businesses to factor in accurate energy costs when they are tackling their business planning. From fixed tariffs to free-of-charge smart meters to advice from our own energy experts, there are a number of options available which eliminate the need to guess-timate predicted energy outlay. Small businesses are the lifeblood of this country and assistance with better and more accurate planning can only benefit the wider economy.’
Business planning types
Post-it planners: Confident with self-belief which has often paid dividends in past ventures. Spontaneous and likes making quick decisions, often going with a good “gut feeling” rather than any more definite in terms of future prospects of success. Doesn’t like thinking about things for too long and can’t standing sitting down to fill in columns of figures, preferring to pop a few key phrases of motivation down on a post-it or scrap of paper.
Mini-planners: Modern, young innovator who doesn’t use paper for anything these days. Everything is typed in bite-sized chunks on the go during the day, stored on mobile devices for quick access. Constantly updating the plan is key to the mind of the mini-planner, and the ability to utilise every moment of the day usefully to develop ideas is essential.
Detail addicts: No detail, no matter how small can be overlooked for the detail addict planner. Every possibility has to be drilled down to its lowest level, and every contingency planned for. Cautious to a fault, decisions are made only when every possible outcome has been considered, and spreadsheets are the detail addict’s best friend.
Presentation planners: Only feels secure when a formal presentation of the business plan has been created and shown to financial backers and as many experts as possible. Giving a formal presentation helps to make the final decision about whether or not to go ahead with the new business venture. This presentation is updated on a monthly basis, and backers are brought in to be kept up to date.
Follow @npowerBusiness and get involved with the conversation using #mybizplan