Small business owners operating without plan have a case to answer

 

Investors may be plotting their own downfall by ignoring the business plan. PHOTO | FILE 

By MUMBI WAWERU

Small businesses, it is safe to say, are the backbone of Kenyan economy, but it is sad that nearly half are losing out on profits. Because they lack a conceptualised business framework.

A business plan provides a blueprint for achieving goals and indicates your progress on success journey and yet majority of small business enterprises (SMEs) don’t have one.

Are you surprised? Next time you’re in a circle of business owners, try and find out if they have one. A plan contains your industry analysis, strategy, management, operations and financial plan details.

In terms of profit, budgeting and financial planning are critical for they are the key ingredients in telling you the real profit you are making. What follows is developing of targets using different tools or ratios by maximising on your resources.

Goals associated with many SMEs include increasing profits, increasing revenue growth and acquiring new clients.

But would you achieve these goals without any sense of direction? It is one thing for an individual to say this is how to tackle a challenge and it’s another when you have it written down.

A plan is the guide and it’s used to put all organisational functions together to flow in a systematic manner.

It is interesting that whenever I interact with small business owners and enquire on the simple book-keeping records on sales and clients, no one ever seems to have answers or there is no record to show.

Over half of SMEs have no clear plans or direction and operate on the mentality “who are we going to target today or we can make money from that order today.” Are we running businesses on a “survival kit” or do we have a well sustainable concept for our businesses?

I believe the bigger question is, ‘Why did you start the business?’

Majority of SMEs still lack a pulley in their businesses. A pulley signifies a full organisational structure with different functions that result in creating the value chain.

Small business owners seem to operate on the mentality “I am still making money” citing why they don’t see the reason of having a business plan.

But, the truth is they are probably missing out on the added value a business plan can offer.

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Management decisions are greatly affected by a company’s performance. This includes financials and operations in business and without the understanding you may find yourself filing for bankruptcy.