A recent National Australia Bank Business Planning Survey has revealed that SMEs are becoming complacent about planning for the future, with a frightening 40 per cent failing to complete a business plan.

Despite being faced with an uncertain economic future, a third of the survey’s respondents are under the illusion that they are too small for a business plan; one in five said they lack the time to write one (big mistake), and 15 per cent believe they don’t need one (even bigger mistake). While regional locations are irrelevant to this sad tale of management misconception, it is nevertheless astounding that small to medium operators in Victoria have become the most complacent, with an astounding 80 per cent of small business owners failing to plan for the future of their business.

According to regional general manager of Business Banking at the NAB, Geoff Greer, it has never been more important for Australian businesses to plan for the future, and if they fail adequately to protect their business they will obviously run the gauntlet of finding themselves struggling.

“Australian businesses are taking a big risk if they face the coming years without an up to date business plan. As business conditions plummet and belts tighten, small businesses need to plan for unsteady times ahead,” is his clarion call.

The Greer governance contains a series of well analysed suggestions and priorities. It starts with guidelines which the smaller business proprietor should follow even before starting to build a business plan.

Item 1: review trading cycles, costs and expected cash-flow;

Item 2: undertake a SWOT analysis of the business and examine the idiosyncrasies of the market being considered;

Item 3: seek support and advice from business peers;

Item 4: work to a budget.

The first rule of preparing a business plan is that it doesn’t matter what it looks like but it must be believable and accurate. The more ambitious the plans, the more specific detail and level of analysis it needs. The typical business plan is prepared in four stages:

1) Collecting information

Identify the product or service the business will produce and what special features it will have. Assess the market for it and its competition. Record factors from the general economic climate which will have an impact on the business and how you will operate it. Note any personal factors and whether you (and your co-owners) have any limitations on the effort you will devote to the business.

2) The SWOT Analysis

This is a brainstorming exercise. Begin by simply listing the Strengths, Weaknesses, Opportunities and Threats (SWOT) of the business. There is no magic in the SWOT or the analysis, it simply enables the manager to be objective about the business, and provides an organised way of thinking about the business.

3) Planning

The tasks ahead need to be compartmentalised into five components:

• Mission or vision. This is an external communication of your company’s value. “Who are we and what are we doing here”. (Keep it simple!).
• Business objectives. Communicate what needs to be done, by when, and how (what are your resources?) It is specific, quantifiable, and includes the entire company. It is not merely a sales goal.
• Sales and marketing plan (how you will go about selling your product or service, marketing it, promotion and selling).
• Operational plan, ie. how you will acquire and use necessary supplies, equipment and resources, including personnel), and
• Financial plan – the management of outgoings, sales forecasts, budgets, cash flow management and profit performance.

4) Put it in writing

Bringing all the earlier stages of the plan together into one document needs a language and style with which you are comfortable. The business plan could have some or all of these components:

• an executive summary which condenses, in a few short paragraphs, the main points, background about the business, business structure and the profitability and the risk;
• mission and/or vision statement/s;
• the business objectives;
• a list of the strengths, weaknesses, opportunities and strengths;
• the sales and marketing plan – what strategies will be implemented;
• the operational plan (strategies and implementation for production, environment and human resources);
• the financial plan (strategies and implementation) and financial projections.

Budgeting and cash flow
Budget preparation is the second stage in an ongoing business cycle. A business can operate without budgets, but it is clearly good business practice to have one. With budgets a business will be more likely to achieve its objectives; management will make more reasoned decisions and have better control of cash flow.

For any period, the cash flow statement will include:

• The cash and credit sales (or accounts receivable) expected to be received during the period;
• The anticipated cash payments (expenses for purchases, salaries, utility charges, taxes, office expenses etc);
• A description of other incoming and outgoing cash, with a calculation of the overall cash balance.

Bypassing the crystal balls
The preparation and regular updating of the business plan, therefore, is the primary platform for the future success of a business. However, the way to a clear understanding of what the future holds for a business needs to bypass crystal balls which, according to the NAB’s Geoff Greer, are unlikely to be much use in predicting the future. There is, however, a more reliable source of information on upcoming business trends that will impact a business directly, he believes.

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