Partner Article

One in Ten SMEs Fail To Plan

One in ten British small businesses are putting their financial survival on the line – by failing to follow even the simplest business plan.

New independent research from One Poll commissioned by npower Business reveals that many small and medium-sized companies (SMEs) rely on just a few lines scribbled onto a Post-it® note 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.

“Post-it note planning” 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% of retailers on Britain’s high streets also jot their plans down on a Post-it. While 88% 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.

While post-it planning companies are the most disorganised and favoured by just 9% of British companies, three other categories of business planning emerged from the research: “Mini-planners” who prefer to draft bite-sized plans on smartphones and tablets (24%) ; “Detail addicts”, 50%, who see the value in producing a detailed, full-scale plan drilling down through the costings. Finally there are a further 17% of “Presentation planners” who only feel secure when they have drawn up a formal, visually pleasing presentation before they start trading.

npower Business, one of the UK’s leading suppliers of gas and electricity to small and medium-sized businesses, is looking to give the country’s smaller businesses a boost – helping them to realise the value of proper financial planning. Many new businesses don’t know that fuel costs will make up a large part of their outlay, and fail to include the price of heating and lighting their premises in their costings.

Last year saw a record 581,000 businesses start up, according to Companies House with over a third of small business owners (36%) 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.

‘We want to encourage small businesses to factor in accurate energy costs when they are tackling their business planning. From fixed tariffs to free-of-charge smart meters to advice from our own energy experts, there are a number of options available which eliminate the need to guess-timate predicted energy outlay. Small businesses are the lifeblood of this country and assistance with better and more accurate planning can only benefit the wider economy.’

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 said: ‘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.

‘It’s also easy to overlook regular costs like heating, gas and electricity. It’s important that when business owners cost up their business that they factor in the cost of energy into their planning and where possible get advice on how to bring these costs down. Then you can focus on growing your business.’

Business planning types

Post-it planners: Confident with self-belief which has often paid dividends in past ventures. Spontaneous and likes making quick decisions, often going with a good “gut feeling” rather than any more definite in terms of future prospects of success. Doesn’t like thinking about things for too long and can’t standing sitting down to fill in columns of figures, preferring to pop a few key phrases of motivation down on a post-it or scrap of paper.

Mini-planners: Modern, young innovator who doesn’t use paper for anything these days. Everything is typed in bite-sized chunks on the go during the day, stored on mobile devices for quick access. Constantly updating the plan is key to the mind of the mini-planner, and the ability to utilise every moment of the day usefully to develop ideas is essential.

Detail addicts: No detail, no matter how small can be overlooked for the detail addict planner. Every possibility has to be drilled down to its lowest level, and every contingency planned for. Cautious to a fault, decisions are made only when every possible outcome has been considered, and spreadsheets are the detail addict’s best friend.

Presentation planners: Only feels secure when a formal presentation of the business plan has been created and shown to financial backers and as many experts as possible. Giving a formal presentation helps to make the final decision about whether or not to go ahead with the new business venture. This presentation is updated on a monthly basis, and backers are brought in to be kept up to date.

Note to editors

All figures, unless otherwise stated are from One Poll. Total sample size was 1,000 SME senior decision makers in the UK. Fieldwork was undertaken between 2nd- 25th September 2015. The survey was carried out online.

About npower

npower Business is one of the leading energy suppliers to the UK business market, serving gas and electricity to approximately 250,000 small-to-medium sized businesses (SMEs). Dedicated to helping UK SMEs, by helping our customers better understand and manage energy, we help them to reduce their energy costs and in turn improve their bottom line.

We’re in touch with more than 1500 SMEs and through them, we hear what business owners really want from their energy company and the issues they face when running a business.

npower – part of RWE Group – employs approximately 7,000 staff across the UK, with npower Business based out of offices in Solihull in the West Midlands, Scarcroft in Leeds and in Hull.

Follow the conversation via tweets using the #mybizplan hashtag @npowerBusiness

Find us on Linkedin, or for more details about our range of free and paid-for products and services, go to http://www.npower.com/business/

This was posted in Bdaily's Members' News section by Michaela Gray .