9. The importance of planning and forecasting

You wouldn’t embark on a journey without first planning your destination and how to get there, and the same principles apply in business – as the old cliché goes ‘If you fail to plan, plan to fail’.

Planning makes perfect

It doesn’t matter how large or small your company is No matter the size of your business, taking the time to put a robust business plan in place is one of the most important tasks you can undertake as a business owner. In the same way that you wouldn’t set off unprepared on a journey into the unknown, neither should you set off on a new project without putting a plan in place first.

Although many business owners are reluctant to spend time planning as it can eat into their time spent generating revenue, the benefits of doing so far outweigh the temporary loss of earnings that may occur, and will go a long way in ensuring revenue continues to grow in the long term.

There are a number of key elements to a good business plan; the executive summary; outlining the top level goals and objectives, the strategy; how are the goals and objectives actually going to be delivered, and what we call FiMO; how the 3 key pillars of the business, Finance, Marketing and Operations fit together to make things happen.

Forecasting is not just for the Met Office

A plan is only as good as the work that goes into making sure it is realistic and achievable, and this is where forecasting plays an important part in the process.

By identifying a small number of future ‘what if’ scenarios, you will be able to run a sensitivity analysis in respect of the projected performance of your business. You can evaluate what impact different events will have on the trajectory of your business and put risk mitigation contingencies in place in advance. Our Tectona QUAD² cash sensitivity model offers an insight into how different scenarios would impact your business. Using modelling tools such as this can be the perfect complement to your own knowledge and experience.

Understanding the financial impact that certain events will have on your business, perhaps with the support of an experienced finance professional, is a key part of effective forecasting, and minimising financial disruption will ensure that your cash flow, profitability and return on investment will remain on track.

With over 365,000 businesses having launched this year to date, adding to the millions of private enterprises already in operation, the environment for SMEs in the UK is becoming more challenging by the day.

For those business owners looking to gain competitive advantage over their market rivals, taking the time to build a robust plan, and forecast how the business is likely to perform over the coming year and beyond, is absolutely imperative to maximising the chance of future success.

If you would like to discuss how your business could benefit from effective planning and forecasting, or would like to discuss any of the topics covered above, please contact us through the Tectona website or call Mark Nicholls on 07818 407061 or Ronnie Epstein on 07543 275902.

Tectona Partnership is dedicated to improving the financial management of owner-managed businesses

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