Business Plans For Small Business - Are They Different?

Business plans for small business are a favourite topic of mine so I was pleased to see that Business Link, the UK business support agency, recently published a new template and guidance branded ‘Prepare a business plan’. As you would expect they have provided a thorough but not too complex business planning template. Of course business plans for small business and business start-ups are essential yet they often miss the mark because a critical factor that usually gets ignored is time management – what I refer to at ‘the art of the possible’. This is important in all businesses but often critical in small service based businesses where the owners generate all the fee income.

For several years now I have worked at creating simple spreadsheets and tools to help small business owners, especially those that charge fees by the hour or day, understand what they can and cannot achieve in their business. This often comes down to how they manage their time and the rate at which they charge out their time. Both have a direct impact on their capacity and need to be looked at as part of the business planning process.

If you are a sole operator or a small team of two or three people you will have a clear limit in terms of the number of hours or days that you are able to bill for, yet you may not have looked at or understood where your capacity limit is.

In developing business plans for small business I believe it is essential to go a step further than doing a profit and loss forecast and a monthly cash flow forecast. Business plans for small business need to focus on having an activity plan that clearly identifies all the regular activities that must to be undertaken by the business owner(s) splitting them down into:

­ billed hours/days per service type
­ prospecting hours per service type
­ lead generation activities
­ other business and administrative activities

This will help to provide a reality check on what you can really achieve and different scenarios can be tested out in term of levels of fees charged and activity/time inputs per service or client. This helps to draw out what the split is between billed and unbilled activities, what additional support you might need and whether the additional support is affordable. Once created an activity plan provides a simple forecasting and monitoring tool that is far more meaningful than a standard cash flow forecast.

It is often a sobering moment when unpaid prospecting hours and billed hours per client are added together and divided by the fees earned per client or service, to discover the real hourly rate that you are earning.

Good business plans for small business will have involved lots of background work and should always have included some scenario testing in terms of profit and loss forecasts. I always recommend the creation of a simple spreadsheet tool that automatically recalculates annual profit and loss figures, based on different price levels and sales forecasts per service – such a tool can easily be created and once compiled provides an excellent management tool.

Many early stage business owners think they are doing OK but expect to do better next year, yet are struggling to fit in everything that needs to be done at the current level of income. If this is you, you may find that you actually do not have a clear idea what your capacity limit is, so the first task is to get that clear so that you can decide whether they are satisfied with your potential. If you are not satisfied now is the time to investigate growth strategies that will produce the income levels you desire.

Business plans for small business, especially those where the owners(s) are directly engaged in delivering fee based services such as designers, architects, trades people, therapist and many more, are different in that they need to be simple yet also ruthlessly address issues of capacity and pricing. These aspects of a small business are quite easy to draw out so it makes sense to create business planning and monitoring tools that focus on these critical factors to support the business plan and owners from the word go.

Join my free workshop and get more information on business plans for small business here