Planning ahead: The importance of having a business plan
Small businesses in the UK could be missing out on almost 20% in extra profits due to the lack of a proper business plan, according to new research.
Experts have suggested that companies who plan ahead are almost one fifth more likely to increase their profit margins, while also being twice as likely to reach their business goals.
The research suggested that more than a third of the UK’s 4.8 million small and medium-sized enterprises are failing to reach their full potential.
SMEs with a plan in place were more profitable in 70% of cases than those who did not have one, suggesting a number of businesses are missing out on considerable funds.
Of the 453 SMEs included in the survey, the average annual profit equated to £2.8 million, suggesting those without plans could be missing out on thousands of pounds every year.
In terms of business goals, the companies concerned listed increasing profits, increasing revenue growth and attracting new customers as key goals.
Achieving business goals
These goals were achieved in 69% of cases where a business plan was active, meaning such measures more than doubled the chances of success.
Despite this, 34% revealed that they did not have a clearly defined business plan in place and 68% of that number said they ‘didn’t see the need for one’.
Business plans can provide guidance and a clear direction for the company to head in, providing something that individuals within it can strive for.
While this can represent problems should something go wrong, as changing direction could then prove difficult, extra profits should negate any potential threats relating to administration or corporate insolvency.
Financial advisors can also provide advice in such situations, so that short-term plans could also be developed with more long-term goals in mind.
Fundamentally, a plan should take very little time to implement, and it should be relatively simple in order to achieve this.
If done correctly, plans can lead to profit growth and business expansion, while additional funds can then be poured into other aspects such as marketing and advertising to grow a customer base further.
By Phil Smith