Small businesses shun strategic planning

Only 16% of small to medium sized enterprises (SMEs) are adopting a growth strategy based on new product development and a nearly a quarter are failing to develop a strategic plan for their business, according to Strategies for Growth, a report launched by PKF accountants and business advisors.

The survey of almost 600 owners, directors and employees of small and medium businesses found that 21% of SMEs do not have a strategic plan – the worst offenders being founder-owners who account for 41% of respondents lacking a plan. London is the region SMEs are least likely to have a strategy with clear, measurable, objectives and a clear time frame (22% of those without a plan come from London), followed by the North where 15% of respondents do not have a plan. The regions most likely to plan are Scotland and East Anglia where 98% and 97% respectively have a plan.

The low percentage of respondents willing to invest in new product development to develop their businesses suggests that they lack the confidence or investment to adopt these more risky strategies. The majority (60%) of respondents prefer to focus on developing new markets for their existing products or services.

The most innovative region is London which accounted for 19% of those adopting the 'new products to new markets' growth strategy. The North came a close second accounting for 17% of SMEs adopting this strategy while East Anglia and the rest of the South East are apparently the least innovative regions, accounting for only 3% each.

Growing businesses rely on two main factors to deliver their company growth – people and innovative products or services. Good staff and management are the crucial factor for 45% of respondents, particularly in the service sector. Nearly two thirds of those aiming to sell existing products into new markets are relying on their people to deliver this growth.

Toby Stephenson, partner at PKF, said, "SMEs who fail to plan are doing themselves no favours. Without a clear plan, companies are forced on the defensive, or to adopt strategies which are price driven (based on cost rather than value). 44% of those without a plan used a low cost base to underpin a price-driven position and, while this may provide market growth in the short term, it is a tenuous basis for continuous competitive advantage."