Business Planning for Success
Why Every Company Should Have a Business Plan from Day One
Good business planning can mean the difference between failure and success for an SME. Find out how a solid business plan can help you achieve your business goals.
Many people dream of turning an idea, skill or passion into a successful and prosperous company. Over the past 20 years, the number of small businesses and entrepreneurs has grown by 75% to 23 million, which means that many would-be entrepreneurs are turning their dreams into reality.
Why Are SMEs Failing?
However, despite these promising figures, a recent survey carried out by the National Federation of Independent Business’ Education reveals that half of all new businesses fail within the first five years.
A significant reason for this is that, although many business owners are skilled in their specific trade or profession, they are not particularly knowledgeable when it comes to effectively managing and growing their business.
According to Simon Harvey, director of leading business consultancy Business Lab, one thing that many business owners neglect is business planning:
"Many new business owners tend to take the DIY approach and try to do everything themselves," explains Simon. "This means that they often get so consumed by the day-to-day running of their company that they are unable to take a step back and plan for the future.
However, it is very important for business owners to take the time to plan for their businesses. It is incredibly easy to become lost and overwhelmed if the future of an organisation is not planned for."
It's All about the Growth!
Chris Bass, joint director at Business Lab, believes that there are three areas that should be focused on when planning for your business. The first of these areas is growth:
"As far as growth is concerned, driving factors such as the number of customers, the number of times a customer makes a purchase, the amount that the customer spends on each purchase and the efficiency margin (profitability) should be recorded," says Chris. "Once you have this information you can pinpoint the opportunities to improve and work through them."
What or Who Is Your Exit Strategy?
The second area is succession planning. This is particularly relevant at the moment, as many Baby Boomers are coming up to retirement and wanting to create a business that can stand alone without them. According to Chris, business owners should be planning for succession at least two years before they intend to leave the business.
When you have established where your business needs to go and how you are going to get there, all goals and objectives should be documented in a physical written business plan. The business plan should be a simple living document that is written and kept updated by the owner of the business. This written business plan will enable you to keep track of your progress as well as providing a valuable resource for when a potential buyer comes knocking.
It is also important that the creation of this business plan involves as many employees as possible. Gone are the days when the CEO would bang out a business plan on his computer without consulting anybody else.
The importance of planning should never be overlooked. By taking an objective look at your business you can identify areas of weakness and strength, spot problems and solve them before they escalate, and establish plans to meet your business goals. Finally, the written business plan provides the information needed to communicate with others such as financiers and prospective owners. Making time for planning could mean the difference between becoming a successful business and becoming one of the statistics that doesn’t quite make it.
