Economic turbulence dictates business planning cycles amongst privately held businesses

Latest research from the annual Grant Thornton International Business Report offers new insight about how far into the future privately held businesses (PHBs) plan. The most common planning period is 1-3 years, favoured by 49% of PHBs globally. However, PHBs in mainland China are the longest term planners with 44% of businesses planning more than three years ahead. Of PHBs following a 1-3 year planning cycle, the highest proportions were in Denmark (64%), followed by New Zealand and the United Kingdom (both 60%) and India and Greece (both 59%).

Short term planning is favoured by 21% of PHBs globally and is especially common in Latin America, with 73% of PHBs in Mexico, 71% in Argentina and 43% in Chile using a planning cycle of less than 12 months. Brazil, with 30% of PHBs adopting this approach, is also well above the global average of 21%.

Hector Perez, from Grant Thornton Mexico, explains, "Latin American business plans are shorter term as a result of the political and economic instability that has affected the region for many years. Now businesses in other regions are shortening their planning time horizon to seek flexibility as the economic downturn continues. In this unprecedented and challenging marketplace, PHBs may be tempted to ditch the business plan altogether. But we believe that short term survival and longer term revival go hand in hand. When you are thinking about the short term, you may lose the vision of what's going to happen in the future. You need a balance to enable you to react to short term issues as well as being able to focus on what's going to happen in the longer term."

"There's no better time than now to take a hard look at your business and make changes to the short and medium term strategy, wherever required," agrees Monish Chatrath from Grant Thornton India. "Organisations, processes and supply chains that became bloated with inefficiencies that were ignored whilst profits continued to come in, will now have to be made more productive, more efficient and fundamentally more lean. While actions are needed to protect the business in the short term, a new economic environment will eventually emerge and well managed businesses with clear strategies will prosper in the long term."
Grant Thornton has the following advice for businesses wanting to plan ahead:

• stress test your plan by trying out different scenarios to assess the potential impact of changing market conditions on your business
• analyse worst case scenarios by modelling potential impacts on profit and loss, balance sheets and cash flows
• develop contingency plans to enable flexibility if circumstances change
• examine competitors strengths and think carefully about how to exploit weaknesses
• communicate the plan and tie in employee remuneration and incentives to successfully achieve your objectives.

Further information about business planning for PHBs is available in "Business planning: navigating the global downturn", a report based on the findings of this year's IBR survey and available at www.internationalbusinessreport.com

The Grant Thornton International Business Report is an annual survey of the views of senior executives in privately held businesses all over the world. Launched in 1992 in nine European countries the report now surveys over 7,200 PHBs in 36 economies providing territory, regional and global trend data on the economic and commercial issues affecting a sector often described as the 'engine' of the world's economy. Data for eight key industry sectors will be available for the first time in 2009. The research is conducted by Experian Business Strategies Ltd. Grant Thornton International donates US$5 to UNICEF for every completed IBR questionnaire, a donation of over US$39,000 in 2008.

For further information please contact:
Christine Hobart
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