Citadele Bank

Citadele Index: Majority of Latvian business owners work with a business plan - mostly “in their head” rather than on paper

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The latest Citadele Index research in Latvia has revealed that 54% of business owners have a business plan for 2016; these plans are in written form for only 19% of business, while 35% are “in their head.” Furthermore, 46% do not have a business plan for 2016. Business plans are most commonly developed by manufacturing businesses and most rarely by builders.

The latest Citadele Index research in Latvia suggests that manufacturing businesses are the most likely to base their activities on a business plan; 65% of business owners in this sector admit to it, including 27% from this sector who use a written business plan. Meanwhile, builders are the least likely to create a business plan. Only 12% of this sector’s business uses a written business plan; 23% have one “in their head,” and 66% do not have one at all.

Citadele economist Mārtiņš Āboliņš is of the opinion that “both manufacturers and builders are in need of careful business planning. Business owners must know the market, plan their acquisition of raw materials, and attract employees. For manufacturers, predicting manufacturing costs and their potential manufacturing capacity can significantly improve a business’s cash flow and financial results. On the other hand, construction is influenced by many external factors that make planning for the year ahead complicated. In the Latvian construction sector, in addition to the private sector, state and municipal orders play a large role. This is in turn connected with the availability of European Union funding. The lack of stability in attracting financing also prevents business owners from working out an objectively-based business plan from which to plan development.”

“A business plan is important for development. A larger bank loan is not available without a precise business plan which is important for builders and manufactures completing major projects. Smaller businesses who are in need of a smaller loan can obtain one without a business plan and security. For this type of loan, the bank uses actual turnover rather than a business plan,” explains M. Āboliņš.

Citadele Index confirms that the larger the business, the more likely it is that they have a business plan. Businesses with over 250 employees almost always have a business plan - only 3% of these businesses do not. 12% of business with between 50 and 249 employees and 23% of businesses with between 10 and 49 employees have no business plan. On the other hand, 49% of businesses with between 1 and 9 employees have no business plan.

Businesses which export have a comparatively higher rate of business plans - 66%, but only 51% of businesses focussed on the local market have a business plan.

About Citadele Index
The main task of the Citadele Index survey is to obtain a reliable overview of the economic situation in the country and a prognosis for the next six months from the source - business leaders and owners. The index is calculated in each country by interviewing 750 owners and leaders from different sectors and business sizes with questions about the general level of economic activity in the country and in their sector, the level of competition within the sector, and several indicators of business activity. The survey is done quarterly by the marketing and public research centre SKDS. The most recent survey was completed in March 2016.


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