One in ten British small businesses are putting their financial survival on the line – by failing to follow even the simplest business plan, according to new research.
The study by One Poll, commissioned by npower Business, reveals that many SMEs rely on just a few scribbled lines as their only form of long-term financial planning.
These ad hoc business projections are often jotted down at the time the company is formed when seeking initial finance, then never looked at nor added to again.
Hospitality on the hoof
This kind of planning, concludes the study, is the favoured option of a third of all hospitality and events companies, with thousands of fast food outlets, cafes, bars and nightclubs reliant on planning on the hoof. A quarter of all transport and logistics SMEs also rely on improvised plans.
Some 15 per cent of retailers on Britain’s high streets also jot their plans down, while 88 per cent of Britain’s retailers think it is useful for a company to have a business plan in place to support growth, just half have created one to support their company as it evolves.
These alarming statistics come at a time when many small firms are struggling to achieve significant growth – finding it increasingly hard to secure new funding from traditional high street lenders.
Last year saw a record 581,000 businesses start up, according to Companies House with over a third of small business owners (36 per cent) realising that running a company was harder than expected within the first month of operating. Managing cash flow and accurate forecasting were the areas of most concern.
Phil Scholes, Head of npower Business said: “Our aim is to raise awareness of just how important having a proper business plan in place and working to it actually is. Clearly it has to be flexible, but there has to be some properly thought-through structure.”
Laying foundations for success
Judy Naake, founder of St Tropez Tanning was able to grow her business from nothing to a £30m empire and puts much of her success down to good planning.
She told the researchers: “It’s easy for businesses not to plan. But those businesses which don’t plan properly could be leaving themselves open to difficulties.
“Some business owners even forget to think about the financial value of their own time. And so, as their new venture grows, they suddenly find themselves in a position in which they can’t find someone to work for nothing, as they did when they first started out.”