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UK SMEs losing out on nearly 20% extra profit by not having business plan

London, April 10, 2014 - The importance of having a business plan was highlighted today with new research showing that over a third of the UK’s 4.8 million small and medium-sized businesses (SMEs) are failing to reach their full profit potential.

Independent research, commissioned by business and finance software provider Exact, shows SMEs that had a business plan in place last year were consistently more profitable (70%) than those that did not (52%). Put into the context of the £2.8 million1 average annual profit made by the 450 SMEs who took part in the survey, this shortfall equates to a significant amount of extra funds many are potentially missing out on.

The research set out to provide a better understanding of some of the challenges SMEs face in achieving their business goals, with ‘increasing profits’, ‘increasing revenue growth’ and ‘attracting new customers’ cited as the top three goals.  The results also showed that those who had a business plan in place were more than twice as successful in achieving these goals than those who did not (achieving a 69% success rate versus 31%).

Despite these compelling statistics, 34% of SMEs said they do not have a business plan in place, with 68% of those saying the reason they didn’t was ‘I don’t see the need to have one’ and a further 10% saying ‘I didn’t know I needed one’. 

Lucy Fox, General Manager UK Cloud Solutions for Exact, said: “The findings clearly show there are many SMEs who are missing out on the added value a business plan can offer, the consequence being that many may be failing to reach their full growth and business potential as a result.

“While the results should serve as a bit of a wake-up call, they also highlight that more needs to be done to address some of the misconceptions over what is involved in the planning process. Many don’t seem to realize that with the help of a trusted financial advisor, like an accountant, creating a plan can be done easily and the benefits can be enormous.” 

The research revealed that among those who did not have a business plan, many believed it would take up too much of their time to do one (‘I’m too busy’ 23%). Others appeared unaware that there were people available to help them create one, with 8% saying, 'I don't have anyone to help me' and 5% saying they did not do one because, 'I'm not comfortable with numbers'. 

Howard Jackson, Managing Director of FD Solutions, one of the UK’s leading providers of interim and part time Finance Directors, said: “A business plan helps identify long-term objectives; provides a blueprint of how you go about achieving those goals and provides metrics to help with checking your progress on that journey. 

“A business plan joins up the dots between sales, HR and finance and provides a holistic analysis of a company as well as its market place. The fact that so many SMEs do not appear to have a plan is worrying, not least in light of the fact that much of the UK economy depends on their success, representing over 99% of all private sector businesses,” added Jackson. 

 “As the green shoots of recovery grow, there are real opportunities for SMEs to be at the forefront of that trend and to benefit from that growth. Having a business plan in place to address opportunities, as well as some of the challenges, is a great place to start. I would advise any SME to bear in mind the old adage from Benjamin Franklin ‘if you fail to plan, you plan to fail’". 

 1Metrics used: The average annual profit before tax was at least £2,804,988. This figure took into account only the lowest figure of each profit bracket option given to participants in the survey, so did not for example include the 162 SMEs who made a profit of between 0-£49,999 that year (marked as ‘0’).

 


About Exact.

Exact is a global supplier of business software. Since the beginning in 1984 the focus has shifted from supporting financial processes to developing a complete ERP offering for small and medium-sized businesses. Innovative solutions like Exact Globe Next, Exact Synergy Enterprise and Exact Online support over 100,000 local and international companies with the daily management of their business.

Exact develops cloud and on-premises solutions for various sectors, including accountancy, manufacturing, wholesale & distribution and professional services. Exact has its headquarters in Delft, the Netherlands. The company has been listed on the NYSE Euronext Amsterdam since June 1999. In 2013, it had a turnover of € 213 million.

About FD Solutions: 

Established in 1991 and based in Fenchurch Street, London, FD Solutions is the longest-established provider of finance director solutions to companies throughout the UK. Our FDs work for a variety of clients, seeking to add value quickly and continually to businesses. We are not an agency. Our FDs are employed and managed by us full time to look after a portfolio of part-time roles.

The research:

The online survey was carried out by independent research company Atomik Research during the first week of March 2014. A total of 453 SME businesses took part in the survey, from various sectors. Atomik Research employs researchers certified by the Market Research Society (MRS). 

 

 

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