Ray Cox explains that the absence of a clear and wisely funded business strategy can lead to decreased efficiency and lower profits.
I know it’s something of a cliché, but failing to plan in business will often mean you are planning to fail.
With start-up businesses in the UK this is certainly the case.
Fewer than 30% have any sort of written plan, and 90% (yes 90%) fail within the first five years (Forbes/CB Insights). While it is less easy to quantify, established businesses that fail to recognise the value of a clear and disciplined business strategy can very quickly go under. In short, running a business and running it well has to mean you have procedures in place that ensure you have your finger on the button and you consistently monitor performance.
Of course, nothing guarantees success but failing to plan is always a costly mistake. No exceptions.
Plan to succeed
Having a plan is one thing, but implementing it is quite another. As financial brokers and having worked exclusively with and for the health professions for decades, the experience we have gained underlines the importance of validating the financial viability of any business plan from the start. Here are some points I always suggest are taken into account:
1. Seek experience
The reality is that many people with entrepreneurial aspirations, particularly in the health professions, have little or no training in business and or commerce. And even if they do, an academic tutoring is no substitute for the real thing. So involve your accountant and financial broker early on in your planning so they can input their experience, and time isn’t wasted pursuing ideas and objectives that are unlikely to succeed.
2. Key financial issues
There are four key financial issues that have to be considered as your plan evolves:
- Particularly in start up situations, under capitalisation can be a major contributor to ultimate failure. Ensure you have funding while avoiding undue risk. Discuss short-term needs and long-term investments with your broker who will have the contacts to secure reliable funding sources.
- Within your plan include the disciplines required for monitoring cashflow. A well-run practice shouldn’t have too many problems with this if monthly management accounts are produced and reviewed. So build this essential protocol into your plan as it will provide clear evidence of a well-run business when seeking funding
- Recognise that you will need to replace and/or add to your equipment on a regular basis. Discuss this with your accountant and financial broker to be sure that you understand the relevant tax benefits and the funding methods best suited to your circumstances
- Regularly review your investment programme with your financial team. Keep in mind circumstances change and you may need to change with them.
3. Individual circumstances
It is important to recognise that the way practice projects and initiatives are best funded can vary and if the terms and conditions are inappropriate the impact on profit will be significant. At an early stage discuss this with your broker.
Efficiency, effectiveness and ease
Planning offers a lot more than simply helping you avoid bankruptcy. It allows you to run your business with greater efficiency, effectiveness, and ease. We have seen many spectacular practice successes but, sadly, a good few equally spectacular failures. Failures were seldom due to the principal’s incompetence.
More frequently, the procedures and financial disciplines necessary for running a business were not taken into account. To this end, we have developed a series of business plan templates that we believe will be invaluable to Practices at any stage of their development ie…
- Existing practices
- Start up
- Practice purchase.
Do please contact us (details below) and let us know if you would like a template and if so which one meets your requirements. There is absolutely no commitment or cost involved and we will email the relevant template to you by return.
I know it can be argued that, with so much economic uncertainty, there may be little point in planning; but from experience I would argue there is every point. If you have no real destination point for your business, every road takes you there.
Changing direction is easier with a clear destination and the necessary funding in place.
If you have any financial needs or would like one of our business templates, please contact Ray Cox at 07785 757782 or [email protected].
This article is sponsored by Medifinance.
