Why a Business Plan is important for your small business.
Today’s small business owners find themselves navigating unprecedented and unchartered business waters. The Global Covid Pandemic (“GCP”) caught most businesses by surprise and created unplanned business, economic and political conditions. A search for a precedent business case study to use as a reliable roadmap forward may be futile. Some businesses and “essential” industries fared well by following their current business models and have enjoyed high demand for their products and services. However, far too many others found their historical business models were no longer viable and functional and their products and services were no longer in demand or accessible in the marketplace. As it became clear that the GCP would not be short-term in its duration, business leaders were faced with the need to reimagine or pivot their businesses in order to survive. Those businesses that regularly operated with a formal annual Business Plan and a deep knowledge of and relationships with their customer base were best positioned to Pivot or Change.
It is estimated that only 33% of Small Businesses have a formal Business Plan. An even smaller percentage of those businesses also have Contingency Plans ready for use to offset unforeseen threats to their businesses. The best Contingency Plans might be helpful for 6-12 months but are more about weathering a storm and less likely to be long-term solutions. The GCP created extended and highly disruptive conditions challenging business owners to pivot and adapt to a new environment that altered “normal” and we are still not settled as to what the “new normal” will look like.
Small Businesses, (less than or equal to 500 employees) account for 99.7% of all businesses in the US. A full 89% of small businesses have 20 or fewer employees. They are the bedrock of our society both economically and socially. It is imperative to our collective futures that small businesses are supported, continue to facilitate the American dream, and succeed. They are often founder or owner-driven with loyal customer and supplier relationships developed through years of hard work and commitment. The history and leadership of these businesses is often characterized by grit and persistence and perhaps even some long-term goals.
While small businesses lack the financial and human resources of larger corporations, they often have the advantage of being more nimble and community focused leading to better actual customer engagement. At the same time, small businesses are often far less able to withstand severe economic swings as they lack the financial resources and staying power. Small business owners are “driving” their businesses and in order to succeed they require as clear a view of the road ahead, as is possible. They need heightened instincts and predictability inside their businesses as well as at the customer level. This can be accomplished through a solid and formal Business Plan each year supported by a clear vision, goals, employee roles, communication, and constant review. Additionally, small businesses need to have ready a Contingency Plan or Plan B that can be acted upon when conditions develop which materially alter their original Business Plan. This will serve to both weather a storm and also provide critical time to reimagine or prepare a Pivot or Change strategy for your business. In summary, small businesses that Plan and Organize as a regular practice and habit will have higher internal expectations and rates of success.
For more information on how Beacon Business Advisors can help you, see our services.November 2021