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If you fail to plan, you are planning to fail!” – wise words from Benjamin Franklin, one of the founding fathers of the US. He’s right and it’s one of the reasons why an industry has grown up to support firms of all sizes wanting to plan for their future, Words by Adam Bernstein

But for smaller enterprises, where time and management bandwidth may be in short supply, the issue of strategic planning may be ignored. So where should a small business start when developing a strategy?

The business plan
Leanda Hickman, marketing and operations manager at the Forum of Private Business, thinks the starting point should be establishing where the business wants to be in fixed time-frame. “A business plan is one of the most important documents a business will ever own as it ties together ideas, targets and plans for the future as well as giving space to consider if those ideas are realistic and workable,” she says.
As part of the process, she explains, thought must be given to five key areas: ideas and research; business viability; the purpose of the business and how it communicates; predicting the future; and the development of a clear strategy with a plan for growth over time.
Salvador Amico, a partner at accountancy firm Menzies, thinks that the process also means planning for an exit: “Every business will have a different perspective on what they want to achieve, but most will be driven by the same goal which will focus on an exit strategy in the medium to long term future. This could mean selling the business to realise the value that has been created over time, selling the business to a management team or passing the business down to the next generation of family members.” Either way, Amico says the goal needs to be formally stated.
If the plan requires the acquisition of another business, Amico says it should be done with care, appropriate due diligence and “a very clear understanding of how the acquisition will impact on the existing business”. The hope will be that the acquisition will bring some synergies, for example, a client base that can be absorbed within the capacity of the original business with minimal investment in production equipment or people.
Whatever the goal, it’s important, says Hickman, that the plan is easy to read. “The objectives need to be clear. Part of this means being comprehensive and concise with predictions, but without any contradictions.” For example, she says that when displaying figures relating to expenditure and planning forecasts “check and check again as the figures in the plan must match those that appear in the financial forecasts – all too often they do not match, and the business plan will then lose its credibility.”

Be a PEST
Naturally, says Amico, predicting the future is incredibly difficult, but nevertheless, he says “all businesses should have a short- to medium-term view. This could take the form of a high-level three-to-five-year plan that is then broken down into an annual plan.” Short time-frames mean that owners can understand the impact that growth will have on the resources within the business. Logically, he says the two key resources that will have the greatest impact are cash and skilled people. “Without cash, it is hard to invest in equipment and technology that ensures a competitive edge. Without skilled people, the business will find itself unable to cope with growth over the longer term.”
And with this in mind it’s easy to see why Hickman suggests businesses draw up a PEST (political, economic, social and technological) analysis. She says that a PEST creates a framework for reviewing the business in the light of external factors that may affect it in the future. “Being continuously aware of trends and changes in the business environment gives a competitive edge. A business plan displaying a PEST analysis will demonstrate that the overall bigger, long-term picture has been taken into consideration.”
Adding another viewpoint to the process, Amico says to look further afield. His advice is to use industry bodies to obtain benchmark information as “a comparison of the business performance against its peer group can provide some valuable insights.”

The next step
Having good management processes in place right is central to making a business run more efficiently and smoothly. All elements of the business – marketing and sales, finance, recruitment and staffing, product development and product sourcing, legal compliance, and administration – need to be drawn in; each will have a bearing on how the performance of the business will be monitored and measured against objectives and targets. It’s equally fair to think how staff should be monitored too.
Amico believes that maintaining a disciplined approach to planning is essential. “Monthly reporting showing how the business is performing against the original plan is important. Also, business owners should ensure that the original plan remains realistic over time and takes into account any new information or knowledge that is acquired.”
As to who monitors the plan, Hickman says that realistically it can only ever be the controlling minds of the business. But she cautions firms to monitor new processes because “if it [the process] becomes unachievable or realistic you have to stop and move on otherwise it can end up using unnecessary funds.” Blithely following a failing plan can rapidly move a business from being cash positive into a debt position.
Practically, as Amico points out, “over time, planning will become more accurate as experience is gained and knowledge acquired about the underlying performance of the business.” He thinks that regular monitoring of business performance against the plan will quickly establish whether the original plan was realistic or not.

Keeping tabs on the plan
Businesses are profit-making entities, and so the financials are critical, and there’s a need for data on funding requirements, sources of finance, and actual expenditure.
Hickman explains that costings should note the capital expenditure required for the purchase of equipment and working capital requirements. She advises firms to “outline any personal monies that might be available to fund the strategy; create a cash flow forecast and estimate how much cash will be available in any particular month (with a profit and loss forecast); and also keep an up-to-date balance sheet that details the likely trading position of the business in the future to identify potential debts and likely future financial strength.”

If the plan is not working
It should be obvious that any manager worth their salt ought to regularly review their strategy. Says Hickman: “You’ve got to be SMART in your planning and realistic in your approach.”
SMART, for the record, is an acronym for an approach that has five elements: specific, measurable, attainable, relevant and time-bound.
Be ‘specific’ so the objective is clear and unambiguous and explain to the project team exactly what’s expected. The process has to be ‘measurable’ so that progress can be assessed in meaningful terms against the objective.
It must be ‘attainable’ in that the objective is reachable; this necessitates that it must be realistic. Just as important, the process must be ‘relevant’ – the objective has to matter to the firm. And lastly, the process must be ‘time-bound’ so that the objective provides a reasonable time-frame for expected achievement.

Communication is everything
Without the proper information, stakeholders – staff, banks, investors, suppliers and customers – can easily jump to conclusions. This is why Amico says a plan should be dealt with at a senior management level. He says, “In many SMEs, the owners and managers are the same people, but explaining the plan to the wider employee base can achieve greater buy-in if done correctly.”
According to Hickman a well written plan will be able to do many things.
She says “it can be used to obtain leads and referrals as well as names and details of investors that can be targeted; it can be used to pitch to an investor or bank; and it can be shared with a potential business partner if you are looking for a stakeholder in the business.”
Lastly, those wanting to strategise for the future needn’t think they’re on their own.
As Hickman notes, “there are many software packages that are available to help with business planning and processes.
Look at membership organisations like ourselves [the Forum of Private Business] who have resources available to help through the grey areas of running a business.”
Business plans can also be discussed at business hubs, networking events, and also in forums.