Small firms are losing out on profit by not having a business plan, according to new research.
Companies with a business plan are consistently more profitable than those without one, according to findings from business and finance software provider Exact.
The power of planning
Small enterprises with a plan are almost 20% more likely to increase profit margins and more than twice as likely to achieve their business goals.
Around 70% of small businesses that had a plan in place last year turned a profit, compared to 52% of businesses without a plan, says the research. Clearly, business plans are conducive to profitability.
Over a third of the UK’s 4.8 million small and medium-sized businesses (SMEs) are failing to reach their full profit potential.
The research set out to gain a better understanding of some of the challenges that SMEs face in achieving their business objectives. The top three goals for SMEs were:
- Increasing profits
- Increasing revenue growth
- Attracting new customers
Many people don’t see the need in having a business plan but it can help a company to reach its full potential. A business plan should:
- Set out long-term goals for you and your team
- Identify ways to achieve these goals
- Help to check your progress along the way
- Detail your sales and marketing strategy
- Outline financial forecasts
Your financial projections should include a sales forecast, cashflow forecast and a projected profit. Factor in your premises (rent or mortgage payments),electricity and gas usage, insurance for business, wages and all other essential items.
Cover all bases
You will also need to consider business continuity management. Identify the priorities within your business and analyse any risks involved. Create a plan to try and keep your business going if faced with a major incident. The planning process will provide your business with resilience if a major incident occurs.
While natural disasters are impossible to predict, if you run a business in an area at risk of flooding, you need to make a flood plan. Some firms reported several thousands of pounds worth of damage to stock and supplies due to the devastating winter storms, and were let unable to trade. Ensure you take practical steps to protect your business.
Review your plan
Ongoing business planning is essential. Small business needs can change and you need to adapt continuously. Reviewing your plan will help to keep projects on schedule, and identify if deadlines need to be more flexible. You can also check with a business insurance advisor to make sure you are covered if your needs change.