In today’s post, we will examine how vital it is for SMEs to create a detailed and practical business plan for their small business. SMEs, or “Small and Medium Sized Enterprises”, are a fundamental classification within Canada’s business ecosystem, primarily delineated by the number of paid employees they encompass. Generally speaking, small businesses are said to have less than 99 employees, medium sized businesses boast employee numbers between 100 and 499, and large businesses tend to employ 500 or more individuals.
Diving deeper into this classification, it’s essential to explore ten compelling aspects that underline the significance of SMEs in the context of Canada’s economic landscape The following items illustrate the importance of SMEs in our economy:
- A Flourishing Presence: As of December 2020, Canada boasted a thriving community of over one million SMEs, underscoring their pivotal role in the nation’s economic ecosystem.
- Export Powerhouses: SMEs are the driving force behind Canadian exports. In 2020, an impressive 97.5% of the 48,325 Canadian establishments engaged in exporting were SMEs, contributing a substantial 43% of the total value of Canadian exports.
- Engines of Employment: SMEs are crucial contributors to Canada’s labor market, offering employment opportunities to approximately 10 million Canadians. They play a significant role by employing a remarkable 88.3% of the private labor force in the country.
- The Prevalence of Micro-Enterprises: Surprisingly, over half of Canadian businesses, accounting for approximately 55.3%, are categorized as micro-enterprises, characterized by their minimal employee count, typically fewer than four. Even more remarkable is that 73.9% of these businesses have fewer than 10 employees.
- Dominance in Knowledge and Skills: Within Canada, the sector with the highest concentration of SMEs is the professional, scientific, and technical services sector, boasting an impressive 151,407 enterprises. What sets this sector apart is the fact that more than 99% of its businesses maintain a workforce of fewer than 500 employees, signifying the dominance of SMEs in an industry that demands a high degree of expertise and specialized training.
- The Equal Ownership Advantage: When examining survival rates, businesses co-owned by both men and women stand out, with an impressive 10-year survival rate of 68.6%. Comparatively, businesses primarily owned by women exhibit a slightly lower survival rate at 57.5%, while majority male-owned businesses maintain a rate of 61.9%.
- SMEs and the Pandemic: In the tumultuous year of 2020, marked by the COVID-19 pandemic, SMEs bore the brunt of employment shrinkages, accounting for a significant 92.1% of the net employment change in the private sector between 2019 and 2020. This becomes even more pronounced when the total net employment change was -878,700, emphasizing the vulnerability of small and medium-sized businesses during times of economic adversity.
- Concentration of High-Growth Firms: High-growth firms, characterized by having at least 10 employees and an average annualized employee or revenue growth exceeding 20% over three consecutive years, exhibit marked concentration in specific sectors. Notably, these sectors encompass Information and cultural industries, Mining, quarrying, and oil and gas extraction, as well as Administrative and support, waste management, and remediation services.
- Surviving the Test of Time: Contrary to the perception that new businesses face high risks of closure, it’s heartening to note that more than two-thirds (67.9%) of new businesses in Canada successfully navigate the challenges and mark their fifth year of operations.
- Goods-Producers vs. Services-Producers: Notably, the survival rates vary between goods-producing and services-producing businesses. Approximately 49.6% of goods-producing businesses remain operational ten years after their establishment, while the survival rate for services-producing businesses stands at 44.6% over the same timeframe.
To summarize, SMEs constitute the backbone of Canada’s economic landscape, so it is imperative that these SMEs are equipped with detailed business plans including financial forecasting. Business plans are considered to be an essential ingredient to the success of a SME, and they should not be ignored.
Here are five compelling reasons why it is crucial for a small to medium sized enterprise to feature a strong and detailed business plan:
Business Navigation Tool:
Think of a business plan as your entrepreneurial GPS. It provides you with a roadmap to guide you through the stages of launching and managing your business. Much like a GPS offers step-by-step directions, a well-structured business plan helps you think through and articulate the key elements that will govern your business’s operation.
Simplicity in Structure:
Contrary to common misconceptions, creating a business plan need not be a daunting task. It is essentially a written document that projects your business’s trajectory over the next 3-5 years, outlining how it intends to generate revenue and grow. View it as a dynamic blueprint for your business rather than a static, one-time report. You can break it down into smaller, manageable sections, such as those dedicated to sales and marketing, pricing, operations, and more.
A well-thought-out business plan encourages you to take a step back and objectively evaluate the fundamental aspects of your business. This introspective process informs your decision-making as you move forward, whether you’re seeking a business loan or not. Keep in mind that your plan doesn’t need to be encyclopedic; it’s about setting the direction, not having all the answers.
Attracting Funding and Partnerships:
Business plans serve as a persuasive tool for securing funding or enticing new business partners. Having a well-structured plan in place can instill confidence in investors, assuring them that their investment will yield returns. In essence, your business plan is the medium through which you can demonstrate that collaborating with you or investing in your venture is a wise choice.
Flexibility in Approach:
There is no fixed formula for crafting a business plan, and this is one of its strengths. You have the liberty to choose a format that suits your needs. What matters most is that your business plan aligns with your objectives and requirements.
For those seeking a more hands-on approach, Aspire Business Planning Services can help develop a professional business plan with detailed financial projections. For more information, contact us today.