A strong business plan is crucial for SME resilience and recovery
By Damian Hanson, Co-Founder & Director of CircleLoop
Running an SME is never easy. Right now, as inflation and interest rates rise, the challenge is even greater. Recently, the UK’s Federation of Small Businesses revealed that a record 92% of small firms say costs in Q1 this year were higher than in the same quarter last year. Although the FSB states that small business confidence has ‘recovered strongly’, it states that there remain ‘plenty of dark clouds on the horizon’.
In these tense economic circumstances, SMEs are on the hunt for new ways to bolster resilience and fuel recovery. One overlooked way they can do this is through their business plan.
The importance of a business plan
Amidst soaring costs and persistent economic uncertainty, a business plan can be an SME’s lifeline. A study in the New England Journal of Entrepreneurship found that entrepreneurs with a business plan are more successful than those without one. Having a well-crafted business plan can assist in goal setting, identifying potential roadblocks and the ability to navigate complex business issues as and when required.
They provide SMEs with a clear roadmap to achieve their goals and objectives and is an invaluable strategic tool. It helps them to identify their strengths, weaknesses, opportunities, and threats (SWOT), a common strategic planning technique to help assess key factors that might affect your business.
In some cases, businesses will often require a business plan before they consider reaching out to investors or even receiving a loan and so it can help SMEs secure funding by demonstrating their potential for growth and profitability – something that many are struggling with in the current climate. The benefits of having a well-versed business plan speak volumes to investors and stakeholders alike and can distinguish the business from its competition.
Writing a plan to fuel growth
So what does a strong business plan look like? Here’s what SMEs need to consider when writing one.
First, it’s critical to clearly establish your purpose and business goals. The foundation of a solid strategy depends on answering the ‘why’ and ‘what’ of your business. Why does your business exist? What is its purpose? Establishing this gives your business a guiding light through challenging times and benchmark to measure all business decisions against. Similarly, objectives explain what it is your business wants to achieve. Again, establishing your main objectives in your business plan helps to give further guidance for important decision making.
The next step is market research. After deciding your business goals, you must conduct thorough market research to identify the target audience, competitors, and industry trends. This information will help SMEs understand their market position, customer needs, and how they can differentiate themselves from competitors.
Then, take all this information to develop your communications strategy. Your marketing strategy will help you reach your target audience in the most direct and impactful way possible. You’ll need to identify the best channels to use and the appropriate methods of communications for each. Your goal might be to raise general awareness of your brand, build credibility and reputation or simply drive sales – the strategy will lay out how you’re going to achieve this.
Financial plans and choosing the right technology
One of the most pored over parts of your business plan will be your financial strategy. Though current economic circumstances may make predictions difficult, being vague here will only do you a disservice. Plus, all businesses will be facing uncertainty. Your financial plan should include projections for revenue, expenses, and profits, as well as an analysis of the funding required to start and grow the business and how you intend to raise it. This part is of particular interest to investors, so the more detail the better.
Smart SMEs will additionally plan what tools and technology they intend to use to drive their business. The technology that will be of high importance to the day-to-day running of your business will be critical to establish early on, not only from a cost perspective but for their impact on security and compliance, for example. From customer relationship management tools, to a cloud-based business phone system for internal and external calls, finding the best tools for the job and defining the processes around them will become invaluable as your business grows. Choosing the right resources will allow SMEs to be cost-effective through the cost-of-living era.
Finally, it’s important to note that a business plan will evolve with your business so will need to be updated as you grow.
SMEs may not be able to control inflation or the cost of the things they need. But they can control the way they approach these challenges. A strong business plan is crucial in making data-backed decisions, securing investment for future growth, smartly guiding resource allocation and adapting to shifting demands and expectations. It’s these abilities that will build SME resilience and power their recovery.