SMEs lack commitment to put up business plan
At Bizsphere, we often get requests from SMEs to develop their brand strategy. During our facts finding phase, the first document we will request is their annual business plan. In many occasions, the top three responses that we get are we don’t have one, we do have but the content is only sales target or yes, we have but it’s all in the boss’s mind.
In my years of consulting SMEs, I can confidently say that eight out of 10 SMEs do not have a business plan. Hence, is it that important to have a business plan? Let’s have a brief review based on their 3 responses above.
NO, WE DON’T HAVE A BUSINESS PLAN
The above statement is most often made by middle management team. SME business owners will constantly insist that they have one. What went wrong? Malaysian SMEs are mostly family businesses. The company’s direction, allocation of budget and expansion plans may have been consolidated into a business plan but not shared with their managers. Many SME business owners still have the mindset that strategic planning should only be limited to family members. Outsiders – non-family members in the company – should not know too much as they might leave the company and share the plans with their new bosses. Employees just need to execute as what have been told or instructed.
Some SMEs will be lucky that the middle management will develop their own division/ department/unit plans. Yet, very likely these plans are not integrated and synergised to maximise growth opportunities.
Business owners with such management practices may still be able to do well but it could be very tiring for themselves. Their team members will only respond but not initiate. Firefighting on arising issues may be top management’s daily routine as they are the only “thinker”, the rest of the team are just “Doer”, thus growth, if there is, will be low.
YES, WE HAVE BUSINESS PLAN BUT THE CONTENT IS ONLY SALES TARGET
Most Malaysian SMEs still can’t differentiate between a business plan and a sales plan. To them it is the same. The company’s primary objective is to generate higher sales or profit, thus they plan only for the sales growth.
These are sales oriented companies and they make up the majority of SMEs. They will have great market expansion plans, detail strategies and tactics to secure sales, and will invest heavily to support sales effort but, many of them neglect the importance to get the other operations ready to support the sales growth.
The most common scenario is when there is a sudden surge in sales, increase in demand and contracts are sealed, the management finds raw materials are insufficient, machineries and manpower do not have the capacity and certification is not obtained to export the products. All these happen when other operation divisions are will neglected in their planning. There are no capacity and capabilities building in place. In the end, these SMEs either lose their contract with penalty payment or tarnish their reputation in the industry.
YES, WE HAVE BUT ALL IN THE BOSS’S MIND
I’m always amused when I get such response. SME owners always complain that his / her team is not performing and not working hard enough to achieve what has been planned. On the other hand, team members always complain that their boss’s plan changes nearly every day.
Business owners often call for meetings where they share ideas, opportunities, suggestions on ways to improve and feedback. Motivation is up and all are passionate in moving forward. However, team members interpret the ideas from their own perspective and execute it. A month later, there will be another meeting with new ideas and strategies and the cycle repeats. Team members are then left in quandary whether to continue with the previous meeting’s plans or adopt new ones.
These SMEs have a lot of ideas or plans but most often they are not documented or aligned with the different divisions and departments. There are no reference points for both sides. SME business owners always expect all ideas to be executed without proper planning of resources and whether it’s viable or not. It is always a guessing job.
SME owners need to ensure that employees have a clear idea on the company’s direction, how it’s going there and the preparation needed to go on that journey. It is just like leading a convoy of cars to a destination. All need to know the end point and why they are going there.
It is not just about having a business plan but having one that is most relevant and value adds to your business. I will be sharing a simple way to formulate a business plan for SMEs in the next article.
By Keng Teck Yap, Managing Consultant of Bizsphere Brand and Marketing Group.
Written for Business Today Magazine, Issue December 2019.