Shocking statistics have been revealed that suggest a whopping 1 in 4 SMEs in the UK don’t bother to use a business plan, leaving them in danger of losing direction and having no plan to get their business to the next stage of growth.
Developing a business plan is a vital tool for any business, yet new research from Barclays reveals that one in four small businesses (23%) don’t have any strategy in place to support their business growth.
Less than half (47%) of the UK’s small businesses have a formal business plan in place that is written down or recorded, while the remaining 25% have an informal, verbal plan. Furthermore, only one in two (49%) UK small businesses have a succession plan in place.
Rebecca McNeil, MD for Business Lending and Enterprise at Barclays, commented, “Having a business plan is fundamental for a small business. It defines exactly what you want to achieve, how you plan to achieve it across a set time period, and is a sure fire way to ensure that growth targets and plans are being met. Business plans are dynamic documents – meaning they should be revisited and adjusted as the business develops. In addition, a strong plan can help applications for finance from a business loan to alternative forms of finance and investment.”
She continued; “Importantly, when a business is in trouble, having a solid plan can help to steer it back to good health. A lack of succession plan can put the future success of a business at risk, so this needs to be considered far earlier and more formally than the results show. What’s important is that small businesses feel confident about their future and have the necessary tools in place for growth.”
Factors helping SME growth
Barclays also asked small businesses on the factors that helped them to achieve substantial revenue growth. Enhancing or improving an existing product or service, and entering a new market were voted the most impactful (both 26%), in a list of top ten responses. This was followed by launching a new product or service (24%), and hiring new staff (20%). Other responses attributing revenue growth included purchasing new equipment (13%), new suppliers, a new website and new premises (all 12%). Finance was also an important factor with debt reduction (10%) and new funding (10%) voted as useful tools that helped them to grow.
The top 10 impacts on small business revenue growth
Thinking of your strongest growth years, which of the following do you believe had a significant impact on your company’s growth in revenue?
1. Enhanced or improved existing products or services – 26%
2. Entered a new market – 26%
3. Launched a new product or service – 24%
4. Hired new staff – 20%
5. Bought new/ improved equipment – 13%
6. Found new suppliers – 12%
7. Opened new premises (office or retail space) – 12%
8. Launched new website – 12%
9. Reduced the cost of debt – 10%
10. Obtained new funding 10%
(Source: Barclays, November 2014)
Rebecca McNeil commented, “While growth can often be unexpected or accidental, we’ve seen small businesses adapt and survive during a difficult time for the UK economy and SME income has now risen back to pre-recession levels. Taking advantage of improved economic conditions can be one way to achieve growth, however for businesses that have made proactive steps such as improving their current model, exploring a new market, or adding a new product or service, the results can really pay off on the bottom line, as our research shows. A strategy or plan can help to focus these ideas and solutions and identify what support or finance may be needed.”
The research went on to find that business plans seem to be less popular with the younger generation of business owners. The older the business, the more likely it is to have a formal plan; two thirds (66%) of businesses established 35+ years ago have a business plan, compared to just 35% of businesses aged between six and ten years, and 44% of businesses aged five years and younger.
Businesses in the South and the East are most likely to have a formal business plan (52%), while those in the Midlands are the least likely (38%).
Top tips for a small business plan
- Define your business – establish on paper what your business will do; what products and services will it offer.
- Know your customers – are they young or old; what do they do for a living; what are their lifestyles like?
- Understand the competition – don’t disparage your competitors but be prepared to name them and know what makes you different from them.
- Be realistic – setting achievable deadlines and targets will keep your business on track for growth. For more information visit the Barclays business page for writing a business plan.