Member Article

Poor planning puts £25b ‘black hole’ in economy

Ineffective planning could mean Britain’s small businesses will lose out on £25 billion in extra revenue in 2016, according to new research.

More than a quarter (26%) of UK SMEs surveyed say they do not have a business plan in place and are therefore likely to be operating without basic objectives, revenue targets or a plan to manage cash flow.

However, research by the Centre for Economics and Business Research (Cebr), commissioned by npower Business, reveals that over half (51%) of the UK’s best performing SMEs are working to a detailed business plan.

Among all SMEs with a detailed plan, 70% anticipate an increase in their expected 2016 revenue growth as a direct result of developing and implementing their current business plan.

Cebr’s analysis finds that SMEs which are effective business planners also expect to see revenue growth of 8.2% in 2016.

This is 1.6% higher than revenue growth expected by the average SME in 2016 – which equates to a potential increase in revenue of £25 billion above what is currently expected.

Even for the smallest businesses, the increase in revenue from more effective business planning could equate to thousands of pounds per year, but for bigger SMEs that increase has the potential to run into the millions.

Laura Holdgate, senior economist at Cebr, said: “The research suggests that more effective business planning among the UK’s SMEs is directly linked to better business performance. SMEs have the potential to experience higher turnover growth as a result of more effective business planning, in turn boosting UK plc.”

Phil Scholes, head of npower Business, said: “Effective planning is essential for small businesses who are the backbone of the UK economy. Being in better control of their finances and the risks and opportunities facing their business enables them to make better, more effective decisions.

“npower works with a quarter of a million small businesses across the UK and we want to help with this planning by making energy a fixed cost within their businesses or by helping them save energy and gain greater insights into their energy use via free smart meters.”

Judy Naake, who launched St Tropez Tanning in the UK and Europe, is one small business owner who has been able to grow her business from nothing to a multi-million pound empire, which she sold for more than £70m in 2006. Judy puts much of her success down to good planning. She said: “It’s not enough to set up a business and hope for the best. Running a small business is tough and businesses who don’t plan properly aren’t giving themselves a chance of succeeding.

“It’s so easy to overlook regular costs like heating, gas and electricity. Business owners need to get on top of those costs and do whatever they can to bring them down. Once the fixed and predictable costs are accounted for, they can get on with the exciting job of growing their business.”

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