Many SMEs exist without a formal Business Plan in place, believing that they don’t need one unless they’re applying for finance or seeking investment. Certainly in the early days it is easy to get away without one, but as a business grows and employee numbers increase, having a Business Plan is a valuable tool to align focus and maintain a competitive advantage. Those businesses with a Plan in place are more likely to reach their full potential and weather any storms and problems far better than those without.
A typical Business Plan sets out the business’s strategic direction, its goals and objectives, and maps out how it will go about achieving those objectives. It should be a dynamic, living document, that is reviewed and revised regularly, and in response to changes in the business landscape and company strategy.
Having a Business Plan in place enables SMEs to ensure they develop suitable strategies to meet their performance objectives, and spot problems and opportunities that arise early enough to be able to handle them effectively. The plan creates a clear path for management to follow and those SMEs with one in place are better able to avoid the sense of overwhelm and being slightly ‘out of control’ that is often characteristic of a small, growing business.
What’s inside?
There are 8 main sections to a typical Business Plan:
- Executive Summary. This provides a summary view of what the business does, what its strategy is, and how it will achieve the goals it has set out to achieve. This section should be fairly succinct, while the rest of the plan should be as detailed as possible.
- Company Description. What your business does, and how it meets the needs of your target market – what makes it different to, and stand out from the competition, and what’s its competitive advantage and Unique Selling Proposition (USP). You can include some background on your company history here – how it reached the point it is now at.
- Market analysis. This section requires you to have completed extensive market research in order to detail the size of your market, expected growth forecasts, distribution patterns, buying patterns, who your key competitors are, and how they are performing within the market. Carrying out the research necessary for this section is in itself a huge benefit of creating a Business Plan, arming you with powerful insights which will inform your strategy.
- Organisation and Management. In this section you need to provide detail on the legal structure of your organisation, and how it is governed and staffed. This section includes information on the Management Team (including any skills or personnel gaps you’ve identified along with your plans on how you will fill them), an organisation chart, your Board of Directors and your ongoing Personnel Plan.
- Service / Product Line. This section covers the products or services you produce along with detail on any Intellectual Property the business holds, such as Trademarks, Patents etc. Research and development activities and plans should also be included in this section.
- Marketing and Sales. Details of your marketing and sales strategies, along with pricing strategy and sales forecasts. Here you will include information on the costs of marketing and sales, support services etc too.
- Financial Projections. A key section that any potential investor will read carefully. These projections need to cover at least three to five years and include cash flow forecasts, break-even analysis and full details of the business’s key financial indicators.
- Funding Request. If you are seeking investment, this section will outline what type of funding is sought, how much you are asking for (both now and in the future), and what you intend to use it for. You should also specify what terms you would like.
As you can see, putting together a Business Plan is a challenging task and involves a huge amount of work, both in terms of high-level strategic thought and in actual man-hours to capture and collate all of the necessary information. It’s highly unlikely that a CEO or MD of a busy SME has the time necessary to do this job properly, but it’s crucial that it’s done to the right standard, or the Plan won’t be helpful and will end up being filed away and forgotten. This is where a Financial Director, whether full time SLT member, or part time FD brought in to handle this task specifically, can really be of help.
The role of the Finance Director
Your FD is ideally placed to take on the responsibility of building the Business Plan and then communicating and implementing it within the business.
In a fast-growing SME things can change quickly; the Business Plan needs to be kept up to date and reflect these changes in strategy and direction. It’s extremely valuable for MDs and CEOs to have a senior finance person on their Senior Leadership Team to ask the ‘right’ questions, challenge assumptions and bounce ideas off, and ensure the business keeps on the right strategic track without being thrown off in response to challenges and fluctuations. Having the firm hand of the FD on the rudder to help steer the business will allow the MD to get on with growing and building the business.
Having a well-constructed Business Plan in place can instil a sense of confidence and control in the management team, and provide a clear framework for decision-making and performance measurement. Building one without the help of an experienced FD is a difficult and onerous task, and probably inadvisable for most SMEs. However, if you find yourself in this position, there are basic templates and examples available on the Gov.uk site that may be a useful starting point.
