It’s that time of year where plenty of people who vowed last month to give up red meat, alcohol and fun for the months or year ahead and pledge themselves to regimes of abstinence, fitness routines and cultural enrichment – are already seeing that new ‘New Year, new me’ commitment waiver.
If that all sounds a touch cynical, well it may be. But the reality is that many of us over-reach with our New Year resolutions, partly in a reaction to the excessive indulgences of the festive period. We start off trying to stick to plans that are too restrictive and look too far into the future, then decide to tweak them as we go – so alcohol-free becomes drinking at the weekends only, or daily exercise reduces to the gym twice a week – only to be disappointed if and when we fail. That’s not to say that planning isn’t a wise and productive process – just that trying to adhere rigidly to the wrong type of plans, then tinkering once we realise we might have been over-ambitious or impractical, can be more harmful than helpful.
There are certainly some similarities when it comes to business. The Inside the Minds of Business Leaders report, published by Price Bailey, found a clear divide between the way high-growth and low-growth businesses plan.
The report draws on the survey responses of 400 lead decision-makers at owner-managed firms across London and East Anglia, all with reported sales above £1 million; it also looks separately at the feedback and actions of those businesses with growth of more than 10% in the past year, compared to the rest. It identified three main areas of planning where high and low-growth businesses differed significantly – how formal and focused their plans were, how far ahead they planned, and how often they revisited them.
It was Benjamin Franklin who supposedly said: “If you fail to plan, you are planning to fail.” That message seems to have got through to most modern businesses – but there’s a big difference between having a formal, written business plan which can be shared with others and used to benchmark progress, and an informal, unwritten jumble of ideas kept in an owner-manager’s head!
The vast majority (87%) of those who responded to the survey had a formal, written business plan, and for high-growth businesses, the result was even more emphatic (100%). What was perhaps most striking is that more than a quarter (27%) of lower-growth firms only have an informal plan, which would suggest that just having a plan is not necessarily a route to success – it needs to be structured, recorded and referenceable.
The planning ‘sweet spot’
The results of the report also suggest that planning timescales really matter. As well as the more formal approach, 89% of high-growth businesses had a business plan that covered a timescale of only one to two years, compared with just 57% for lower-growth firms. Firms with more modest growth are more likely to have a mid to long-term business plan than businesses with higher growth (27% versus 10%).
The findings would suggest that two-year business plans correlate to faster growth. It could be that in today’s fast-evolving business environment, in which economic, political and technological change can all be both significant and difficult to anticipate, a three or five-year plan is now too long.
A time frame of around two years looks very much like the sweet spot for a realistic plan that a management team can execute, while also taking account of the existing competitive landscape; a longer planning horizon may well prevent owner-managers from focusing on achieving more realistic, nearer-term goals.
Resist the urge to tinker
Once you have a plan that is formal, focused and set out over a manageable time period, resist the urge to change it too frequently. Overall, lower-growth firms are more likely to have an informal plan covering a longer time horizon, yet seem more apt to tinker with it; 43% revisit their plans every few months, compared with only six per cent of high-growth businesses, potentially because lower-growth firms have greater anxiety and less confidence in their ability to execute.
By contrast, 82% of high-growth firms review their business plans no more than annually, compared with 44% of lower-growth ones, suggesting they approach their business plan with confidence, and as a result, are more likely to achieve their aims.
New Year, new approach, plan properly
So just as many of us view the New Year as a time to reconsider goals, re-evaluate our progress, and maybe make some lifestyle adjustments, so now is a good time to look at your business progress and consider your business plan for the next year or two. But the key to successful planning is the same as the secret to making and keeping those New Year’s resolutions; make sure they are formal and focused, don’t over-reach – either in ambition or timescale – and once you have worked out what it is you want to achieve, stick to the plan to get you there. Get it right, and it could be a very good 12 months ahead on both a personal and business level.
This post was written by Price Bailey Partner, Chand Chudasama. If you need further information on any of the above please feel free to get in touch with Chand using the contact form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.