This is the third installment of our survey of 160 small businesses, where we delved deep into startup business challenges, as well as the financial management challenges existing businesses face.
Here, we’re focused on those same up-and-running businesses and seeking to understand
what happens outside of the numbers:
- Wouldn’t ongoing business owners also benefit from an active and updated snapshot of their operational plan?
- How do those owners track and represent changes in their business as they apply strategies driven by actual results?
Enter the “Living Business Plan” — a dynamic, ever-evolving roadmap for your company.
Survey key takeaways
🔄 Importance of Ongoing Planning: A majority of surveyed businesses (88%) underscored the need for a “living business plan,” especially important given volatility in the market.
🕳️ Gaps in Planning: Despite the recognized need for planning, 11% of businesses are operating without any business plan.
💰 Financial Struggles: Financial components like sales and expense budgeting pose significant challenges for many businesses. 42% don’t have a budget or forecast.
📈 Budgeting Equals Confidence & Clarity: Businesses that budget and forecast are more confident (67% vs. 39%) in their growth trajectory and have a clearer understanding of their finances.
🛠️ Tech Adoption Gap: Less than half of the surveyed businesses use accounting software, highlighting a divide in technological adoption. 30% are using LivePlan to plan and manage their business.
🌱 Post-Pandemic Landscape: Data shows businesses prioritizing ongoing planning and adaptability grow 30% faster than businesses that don’t.
The data here support the idea that businesses taking time to plan are better positioned for success. Two striking examples were marked (2-4X) increases in confidence about the accuracy of their cash flows and funding needs.
🤝 Team and Culture: Budgeting appears to foster better team alignment and organizational culture.
Living business plans
The survey responses reinforce what we’re seeing across the broader economy, in light of trends like rising interest rights and tightening credit conditions: a growing need for resilient business planning.
Current state of business planning
- 88% of respondents align with a “living business plan” ethos, viewing planning as an evolving rather than a one-time process.
- Over 65% of existing businesses surveyed have an active plan in progress
- 11% lack a plan entirely
The responses revealed a contradiction: Despite widespread recognition of the importance of planning, about 1 in 3 business owners don’t have an active plan in progress.
This finding is similar to what we found in our previous report, where 90% said ongoing budgeting and forecasting are essential for sound business operations, but less than 60% actually maintained a working forecast.
The benefits of business plans
So, what are the benefits as an up-and-running business of having a living business plan? Here are a few that entrepreneurs who responded to our survey mentioned:
Increased clarity and direction: Having a plan brings clarity to business strategy, goals, and next steps. As one respondent stated, it “helps me know where my business is going.”
Enhanced focus: Planning focuses efforts and helps prioritize key actions. One respondent said it allowed them to “make the most informed decisions.”
Financial insights: Business plans provide greater visibility into finances and profitability. Entrepreneurs mentioned understanding projections and goals and making them feel “real” regarding their businesses.
Reinforced persistence: Having a plan renews enthusiasm and motivation to see the vision through. It provides validation during tough times.
Strategic benefits: A plan allows for strategy correction, contingency planning, and understanding scenarios. As one person said, it helps them “correct business strategy.”
Practical execution: A plan guides day-to-day execution and provides milestones. It aids in “following and executing the plan.”
Confidence: Planning instills confidence in the business model and goals. One respondent said the plan helped them “believe in the business.”
Business plans for existing businesses — What’s the hard part?
Understanding financials posed the biggest struggle — especially projections, break-even analysis, and sourcing capital. The need to rely on forecasts that are uncertain by design (it’s impossible to predict the future) contributes to the difficulty.
Strategy formulation and execution posed concerns, as even robust plans struggle with macro challenges like inflation and supply chain disruptions SMBs have faced recently.
Staying motivated throughout and maintaining updated plans were hurdles as well. The effort required for robust planning is daunting without proper tools.
Additional challenges like securing contracts, protecting IP, and managing legal needs also arose. The multifaceted, intricate nature of planning presents many potential pitfalls.
While pre-revenue companies struggle more with market fundamentals and operational readiness, post-revenue businesses encounter challenges in maintaining planning momentum amid real-world complexities.
Self-reported current small business challenges in 2023
Entrepreneurs face daily challenges across key areas like finances, operations, strategy, and team management. This was reflected in the survey responses when participants were asked about their biggest current challenge.
Financially, recurring themes included difficulties with cash flow management, budgeting, securing funding, and balancing pricing and profitability. Many cited building the financial skills needed to optimize budgets, capital, and pricing as key hurdles.
One entrepreneur described the challenge as trying to understand “how to get positive cash flows from the business.”
Driving sales through brand building and marketing was another commonly expressed pain point. Ensuring marketing dollars are allocated effectively is difficult for business owners of all experience levels. One respondent stated their main challenge simply: “Marketing.”
Operationally, many respondents cited challenges around inventory management, replacing equipment, and organizational needs. Just managing the logistical nuts and bolts of the business is a full-time job. As one interviewee stated, their primary concern was “paperwork, finances, marketing, expenses.”
Building teams, fostering trust, and maintaining discipline also emerged as people-focused challenges. Aligning personnel with company culture is crucial but difficult. Responses like “hiring a team” and “dealing with employees not showing up to work” underscored those personnel issues.
To budget or not to budget
Nine in 10 small businesses surveyed believe financial forecasting is more important now because of inflation and rising interest rates. Comparing businesses who actively budget (“Yes-Budget”) against those who don’t (“No-Budget”) reveals striking differences.
Yes-Budget companies show far greater confidence in growth, with 67% willing to expand teams and investments versus only 39% of No-Budget peers. The gap strongly hints that budgeting paves a clearer path for business expansion.
Yes-Budget companies also benefit from greater financial clarity.
Over half understand their cash runways, and say they’re ready to enact long-term strategies to stay afloat. Their understanding extends beyond cash flow into marketing spend and owner compensation.
That knowledge isn’t limited to numbers.
63% of Yes-Budget companies said they have aligned teams, compared to just 42% of No-Budget peers. So budgeting also fosters transparency, shared goals, and vision.
Bridging the accounting software adoption gap
Only 46% of the businesses we surveyed have accounting software.
Accounting software is useful for businesses graduating beyond basic transactions because it gives business owners quick access to historical financial data, which feeds ongoing forecasting. Without those actuals, data-driven predictions suffer because there’s nothing to compare to the forecast.
The near-even split among survey respondents highlights a gap between those leveraging accounting software and those relying on manual tracking. While the latter may suffice for basic operations, the former is critical for scaling businesses.
The most popular accounting software used:
How this survey was implemented
We surveyed two groups:
- Pre-revenue entrepreneurs still developing their ideas and in the process of starting up
- Post-revenue entrepreneurs operating existing businesses
Our aim was to benchmark confidence across important startup activities like business planning, financial planning, forecasting, pricing, funding needs, and more. The survey provides a snapshot of the challenges entrepreneurs face in different stages of the startup journey.
Here’s a high-level summary and sampling of the business categories:
- Service (27%): Consulting, training, wellness services, car washes, etc.
- Brick & Mortar Retail (20%): Clothing, apparel, accessories, gift shops
- Manufacturing/Production (16%): Food, beverages, snacks
- eCommerce (11%): Clothing, apparel, accessories, gift shops
- Other (26%): Photography, community development, transportation, etc.
30% of respondents were current customers of LivePlan, our business planning and management software. We thank everyone for taking the time to contribute to the findings and wish everyone much success in their ongoing business endeavors.