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Small Businesses yet to embrace Strategic Planning and KPIs

Latest results show startling differences in performance management frameworks by size of business in Australia.

The Australian Bureau of Statistics found one third of all small businesses indicated no KPIs were monitored during the financial year ended 30 June 2016.  This rose to a whopping 57.6% for micro businesses.  In short the smaller the business the less likely they are to use KPIs and if they did use them then they use a fewer number.

Usage of a strategic plan unfortunately was no better with over half of small businesses and two thirds of micro businesses having no written plan to drive their business forward.  Just 6.1 per cent of micro businesses had a written strategic plan and 12.9 per cent for small businesses.

It is readily understood that small business operators are time poor which partially accounts for the above trend.  The nature of small business means that many do not have access to the same level of resources as larger companies.  Additionally the owner is often responsible for doing the work, balancing the books, managing staff and meeting all the regulatory obligations which leads them to be extremely time poor working very long hours each week.

However it is worth noting that the Sunshine State's business survival rate is the lowest in Australia and that the usage of KPI’s and strategic plans can dramatically improve their success.  This gives rise though to a good question  ...... is low usage of KPIs and strategic planning entirely because small business operators are time poor or are they even aware of the advantages and competent in the implementation and usage of KPIs and strategic plans?

The State Government last year released the ‘Advancing Small Business Queensland Strategy 2016-20’ to enable and empower small businesses. Among key initiatives under the strategy were targeted programs to provide support and tools to help new businesses start, grow and employ. Businesses are assisted through mentoring, workshops and webinars to increase business skills and improve business processes and planning.  A key section of their website is devoted to assisting small business in their planning.

It will be fascinating to see whether the Strategy has an influence on the fact that so many small business do not use KPIs and strategic plans to drive their growth.  The importance of this practice is extensively documented and this data should serve as a catalyst for small business operators investing in strategic planning and KPI frameworks.  However at the same time the Queensland Office of Small Business should double down on their great work to promote the importance of planning and performance measurement.

Definitions:

  • Key Performance Indicators included financial measures such as profit, sales, market share and return on investment as well as production targets, inventory amounts, delivery time, energy consumption and quality measures.
  • A strategic plan or policy is a plan implemented by a business to achieve its goals. It may include specific goals and decision-making on investment, allocation of resources and revenue generation.

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