Small companies losing out on profit by not having business plan

Small enterprises that had a business plan in place last year were consistently more profitable than those that did not, research finds.


Small enterprises that had a business plan in place last year were consistently more profitable than those that did not, research finds.

Some 70 per cent of companies with a plan turned a profit, compared to 52 per cent of businesses without a plan, according to research by business and finance software provider Exact.

The research set out to provide a better understanding of some of the challenges SMEs face in achieving their business goals, with ‘increasing profits’, ‘increasing revenue growth’ and ‘attracting new customers’ cited as the top three goals. 

More than a third (34 per cent) of SMEs say they do not have a business plan in place, with 68 per cent of those citing the reason as ‘I don’t see the need’ with a further 10 per cent saying ‘I didn’t know I required one’.

Lucy Fox, general manager of UK cloud solutions for Exact says, ‘The findings clearly show there are many SMEs that are missing out on the added value a business plan can offer, the consequence being that many may be failing to reach their full growth and business potential as a result.

‘While the results should serve as a bit of a wake-up call, they also highlight that more needs to be done to address some of the misconceptions over what is involved in the planning process. Many don’t seem to realize that with the help of a trusted financial advisor, like an accountant, creating a plan can be done easily and the benefits can be enormous.’

Among those owners who do not have a business plan, many believe it would take up too much of their time to do one (‘I’m too busy’ 23 per cent). Others appear unaware that there is help available to help them create one, with 8 per cent saying, ‘I don’t have anyone to help me’ and 5 per cent saying they did not do one because, ‘I’m not comfortable with numbers’.

Howard Jackson, managing director of FD Solutions, a provider of interim and part time finance directors, says that a business plan helps identify long-term objective, provides a blueprint of how you go about achieving those goals and provides metrics to help with checking your progress on that journey.

‘A business plan joins up the dots between sales, HR and finance and provides a holistic analysis of a company as well as its market place,’ he adds.

‘The fact that so many SMEs do not appear to have a plan is worrying, not least in light of the fact that much of the UK economy depends on their success, representing over 99 per cent of all private sector businesses.’

Further reading on business planning

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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