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Has Your SME Business Got Practical Business Plans?

June 9, 2016

business plans

There’s two words that crop up in businesses of all shapes and sizes on a regular basis…..Business Plans! And I’d be worried if they didn’t.  My involvement in Business Plans has been broad and full of different experiences.

As a young management consultant I was involved in British Rail’s enormous planning process with Government. That enormity was sort of repeated at Yorkshire Water with a mix of annual planning and 5 year regulatory planning.  Whilst at Green Flag the planning cycle was very annual focused, sort of in keeping with the annual cycle of insurance policies.

Having worked with a large number of SME Business Owners, I would certainly say the process of putting together Business Plans is far more pragmatic compared to those corporates.

A recent survey suggests that 1 in 4 SMEs don’t have Business Plans or strategies to support their business growth.  Also just under 50% have a formal written Business Plan and another 25% have informal verbal Business Plans.

 

Why Don’t SME’s Have Business Plans?

I have heard a host of reasons why SMEs shy away from Business Plans including:

  • Don’t have the time – they’re too busy dealing with the day to day tasks;
  • They only do one when they need additional finance or the bank asks for one;
  • It’s for corporates not SME’s;
  • They did one once – it sat on the shelf and did nothing;
  • The management accounts steers them and shows what they have to do;
  • The marketplace is so changeable that a plan would be out of date before they finished it.
  • Business Plans get in the way of their flexibility and adaptability.

Now I’m an Accountant so I am probably biased and I like structure and discipline in doing things. However I’m pragmatic and recognise that Business Plans as documents are nothing if the plans aren’t practical.  So here’s my advice to every Business Owner of an SME, with some reasoning if necessary.

 

6 Tips When Writing Business Plans

 

  1. Have some form of strategic outcome. That might simply be a trade sale or handover to the next generation at some point in the future. Regardless of which ultimate end point you want, you will need to make the business an attractive, sustainable operation that doesn’t need you to be working in it;
  1. The strategic “hows” to get to that strategic outcome could be many and varied. I would always encourage you to concentrate on exploiting the business’s strengths.  Obviously you need to be clear on what those strengths are. What about weaknesses? I hear you say. Treat internal operating weaknesses as opportunities to get better rather than constant reminders of why the business isn’t good enough. Remember most of the time your business does a good job in serving its customers. So focus on how you can improve what works well!
  1. Turning those strategic “hows” into more detailed actions with names, measures and dates should where possible be as inclusive a process as possible – I don’t expect you to involve all of your staff however I would encourage you to involve all your direct reports and possibly the next level of management or supervision. Remember it’s those people you expect to make most of the planned actions happen.  There are several inclusive planning techniques I have used including World Café and Open Space. They do work, and for a boss looking to increase staff participation and responsibility, these inclusive approaches can be very satisfying.
  1. Many people look at preparing Business Plans as a chore to get to the end product – that ‘document’.  I would strongly urge any Business Owner to look at the process of preparing the plan as a critical activity that when done properly will increase the chances of success dramatically. And I mean that! A correctly structured planning process will 1) bring out new ideas and opportunities, 2) reaffirm what the strengths of the business really are, 3) work out priorities and areas of focus that are agreed, 4) bring the management team together with a clearer focus on what is important.  So it’s not just the end point that’s important, it’s the journey.
  1. The traditional Business Plan format that a Google search will throw at you has numerous templates for producing what I would call traditional Business Plans.  A multi-page document set out in several sections with financial forecasts tucked in at the back. In my experience these documents are essential for getting funding from any finance provider, including a corporate parent. In an SME these documents are useless – too many words, not enough names and actions and of course so few people get to read them that the chances of the plan coming to fruition are low.  Here’s the solution: Keep everything to one page! It may be an A3 size but it’s definitely not some 20-30 page document.  The benefits of keeping to one page Business Plans are that it increases the need to focus and prioritise. It is also capable of a standard format that other parts of the business can use for their more detailed action plans.  Finally, a key benefit is that single page plans can be used as posters to share across the business. Increasing the chances that everybody is literally reading off the same page.
  1. Of course once the Business Plans are in place there needs to be some action and review. Many businesses use their monthly or quarterly accounting cycles to assess how they are doing against a plan or budget. That form of review on its own is not enough.  Most businesses have faster cycles than monthly. In fact, I would say from my experience that the default heartbeat of a business is probably daily. That means the cycle for operational planning and checking should be daily.  Which gets me into a different subject for another blog for another day…..daily management!

If this advice is not convincing you of the need to get planning then imagine this analogy from Mike Rother, a researcher into business improvement based on the work of Toyota…..

Think of planning as standing at the entrance of a dark alley where you have little idea of what is ahead. Charging head-first at full speed into this alley is obviously unwise. Moving very slowly and shifting your focus based on every bump you hit or noise you hear is equally unlikely to yield very good results. The right approach to planning is like turning on a flashlight. It will begin to show you what’s ahead so you can move at a faster pace. This doesn’t mean that you again start charging headlong down the alley or that you take one quick glance and turn the flashlight off again.

Happy planning!