Monitoring your plan

In Chapter 1, I counselled against the use of business planning as a managerial tool for SMEs. This is fine in large organisations – ones that are prepared to devote the required resources to researching and analysing markets, customers, competitors, resources, financial model assumptions, risk and sensitivity, and so on for a month or so each year. It is not so fine when resources are limited, as in the typical SME.

Nevertheless, if you have invested in writing an SME business plan for a specific purpose, typically to obtain backing, whether from your board, a bank or an investor, it will then be worth your while monitoring it. You will have spent many hours drawing up the plan – the least you can then do is see to what extent things turn out as envisaged.

And your backer will almost certainly demand that of you.

As described in Chapter 11, you have chosen KPIs and have set milestones to make the monitoring of the plan relevant and useful.

After a year or so, however, this monitoring will, to some extent, be usurped by the budget process. Once the new budget is in place, results over the following year will tend to be assessed more in relation to the budget than to the old business plan, which will come over time to be regarded as a document past its sell-by date.

By the third year, the business plan may have become something of a historical curiosity. Monitoring against it runs the risk of becoming a superfluous exercise. To guard against this, milestones need to be updated carefully in line with market developments and business outturn. This may entail you having to redo some aspects of the market and competitive research you undertook for the business plan.