18 Jan 2016 02:00pm

Poor planning could cost SMEs £25bn

Failure to plan could cost Britain’s small business £25bn in 2016, according to new research

Over a quarter of SMEs in Britain (26%) are putting their financial survival on the line by failing to follow a business plan, research by the Centre for Economics and Business Research (CEBR) revealed.

Without a business plan, these firms have entered 2016 without any objectives, revenue targets or a plan to manage cash flow.

Implementing a business plan can have an extremely positive effect on revenue and growth.

The research, commissioned by npower Business, found that over half (51%) of the UK’s best performing SMEs are working to a detailed business plan.

The majority of SMEs with a detailed business plan anticipate an increase in their expected 2016 revenue growth as a direct result of developing and implementing their current business plan.

Effective business planners also expect to see revenue growth of 8.2% in 2016, according to CEBR. This is 1.6% higher than revenue growth expected by the average SME in 2016, which equates to a potential increase in revenue of £25bn 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, added, “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."

He continued, “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.”

More worrying research revealed last week that one in five small business owners still rely on pen and paper to run their business.

The research found that many small business owners are struggling to plan for the new year because they do not have the time or the tools to monitor company finances or make accurate business projections.

Sinead Moore


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