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BUSINESS PLAN
Is Business Planning relevant for SMEs?
A
2015 report by Barclays Bank
revealed that about 25% of UK
SMEs admitted to not having any
business plan or any strategy in place to
support their business growth. On the
other hand, less than half of the UK’s small
businesses had a formal business plan in
place that was written down or recorded,
while the remaining 25% had an informal,
verbal plan. Furthermore, only one in two
UK small businesses had a succession
plan in place.
CHRIS MEILAK
CHRIS MEILAK IS A CPA,
ECONOMIST AND ASSOCIATE
PARTNER AT EY MALTA, LEADING
THE VALUATION, BUSINESS
MODELLING AND ECONOMIC
ADVISORY PRACTICE.
These statistics are shocking, to say the least. As
individuals, we are taught to plan ahead in most life
situations – choosing a career, planning a holiday or
event (think of a wedding and all the trouble a couple
goes through), ensuring we maximise our study time
before an important exam, or making sure our finances
enable us to afford a new car or home mortgage. We plan
our day and week, listing down things to do and priority
tasks, and time needed. So one would expect individuals
to transfer these skills to their workplace – but it seems
this is not always the case.
Developing a business plan is a vital tool for any business,
of any size. Large corporates plan to reorganize or
streamline their enterprise, plan for growth, to be able
to tap new opportunities (from internal expansion to
foreign markets), raising finance for new projects, or
identifying exit strategies such as IPOs.
And SMEs? Actually, one could argue that such a plan is
of greater value in smaller businesses, because they are
exposed to higher risks, which could significantly impact on
the owner of the entity. SMEs often face limited resources,
with few individuals covering more than one function or
role. Hence, there is a need to prioritise on time, in order
to sustain the business, but also the individual. In other
words, time management is key, if the owner of an SME
wants to achieve an acceptable work-life balance.
SMEs might fall in the trap of preparing a business
plan just because it was requested externally (e.g. for
government or EU grants; bank financing), but the actual
truth is that benefits are primarily internal. The plan
formalises the strategy of the owner to try to tap market
opportunities with resources at hand, but also with
resources that need to be acquired, a business plan is in
this respect helpful because it helps to identify such gaps.
Besides there is no such thing as an “internal” plan and an
“external” plan to present to third parties – if there was
such a thing, eventually only the external plan would end
up being executed.
A business plan helps entities to stay on the right
track during its growth and it assists the entity when
approaching investors for funding. A business plan is
what keeps companies focused on their goals and what
moves them through hurdles. Hence it is fundamental
for a small business. It defines what the company wants
to achieve, how it plans to achieve it across a set time
period and is a tool that monitors growth targets and
execution of plans. Plans can make small businesses feel
more confident about their future and ensure they have
the necessary tools in place for growth.
Business plans can be developed internally, but there
is always the option to ask for professional external
expertise. In this regard the Government, through the
Malta Enterprise or other funds administered by the local
EU Managing Authority, offers grant incentives related
to business plans/ feasibility studies. Independently of
who prepares the business plan, it ultimately needs to
be “owned” by the SME Management/ owners – as it
outlines the entity’s strategy, so one would expect the
owners to address any questions on the strategy, not
an external consultant. This is especially the case, since
business plans should be viewed as a dynamic document,
hence they should be revisited and adjusted as the
business develops.
26 Spring 2018