Growth Plans for Small-Sized Companies

This document provides a detailed analysis of growth plans and exit options for small-sized companies (SMEs). It examines three strategies: Initial Public Offering (IPO), Full Sale, and Partial Buy-Out. The assignment discusses the merits and demerits of each strategy and concludes that IPO is the most favorable option for SMEs like David & Co Limited.

PLANNING FOR GROWTH

PLANNING FOR GROWTH
TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Analysis of key considerations for evaluating growth opportunities....................................3
P2. Evaluation of the opportunities for growth by applying Ansoff’s growth vector matrix......3
M1 Options for growth by using a range of analytical framework..............................................6
D1 Critical evaluation of all specific options and growth pathways...........................................7
TASK 2............................................................................................................................................9
P3. Assessment of the potential sources of funding available to businesses and discussion of
benefits and drawbacks of each source........................................................................................9
M2 and D2 Evaluation of potential funding sources with justification of the chosen funding
option.........................................................................................................................................11
TASK 3..........................................................................................................................................11
P4. Designing of a business plan for growth.............................................................................11
M3 Strategies and appropriate frameworks to attain objectives................................................15
D3 Knowledge and understanding of how to formulate, apply and achieve business objectives
successfully................................................................................................................................15
TASK 4..........................................................................................................................................15
P5. Assessment of exit or succession options for the purpose explaining the benefits and
drawbacks of each option...........................................................................................................15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................19
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INTRODUCTION
Planning for growth is one of the vital tasks that is performed by every organisation to
attain success and maintain viability in the market. However, for Small Medium Enterprise the
growth plans determine their ultimate organizational goal. In the understated assignment deals
with the diverse growth options considerations, planning etc. In addition to this the influence of
digital technology on these growth plans has also been depicted effectively. The selected SME
for the study is the A David & Co Limited (Storey, 2016)
TASK 1
P1. Analysis of key considerations for evaluating growth opportunities
A David & Co Limited is one of the small medium sized enterprises of United Kingdom.
The organisation operates under the sector Consumer Discretionary, industry Commercial
services and sub industry Food services. The firm of David & Company Ltd. is recognized to
provide production and distribution of fruit in the local regions of the United Kingdom. With 10-
25 employees and a turnover of less than £25m the enterprise with sheer determination and
rigorous hard work tends to attain a viable position in the food service industry of the nation. For
doing so the concerned SME needs to upgrade its operation system by the adaption of digital
technology that has played a vital role in the growth and development of a range of small sized
enterprises. In this 21st century, the greatest revolution that has been observed in the business
world is the digital transformation or more specifically the digital technology revolution. The
digital technology itself provided the firm to make its online presence through its official
website. However, there are other growth opportunities that the digital technologies could
provide to David & Co Limited but it all depends on the manner in which the company analysis
them and acquires them in their business functions (Schaper and et. al., 2014).
P2. Evaluation of the opportunities for growth by applying Ansoff’s growth vector matrix
In order to critically assess the opportunities of growth, the Ansoff’s growth vector
matrix are one of the most significant tools. With the application of the tool would help to
comprehend the growth of the recognizes small and medium enterprise of United Kingdom that
is David & Co Limited. The matrix is as follows:
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Existing products New products
Existing
market
Market penetration:
● For a small enterprise like
David & Co Limited it
would be able to make
successful penetration at
the initial stage of
adaptation to digital
technologies in form of
social media attraction
(Goodman et al. 2016)
● The company could attract
more number of customers
by establishing effective
communication through
the sites
Market development:
● By the help of digital technologies
and strategies the recognised SME
could expand both its market and
products by improved use of
certain Supply chain software’s
that would help the firm in easy
supply and distribution process
● The company could move to new
markets for their fruit distribution
process by the use of the
technology
New market New product development:
● By the use of Artificial
intelligence and digital
technologies the company
could bring innovation in
its product development
strategies that would
ultimately help in the
growth
● This would thereby
increase the production rate
that are regaled to be the
ultimate growth of the
Diversification:
● With the help of innovative
production strategies, the company
could move into new markets.
however, it holds a greater risk
● Therefore, the company at the
initial stage must comprehend its
situation and then undertake
effective decisions
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concerned SME
There are diverse ways by which the determined growth options stated in the above
section could attain. However, by following those pathways, strategies or method could develop
certain potential risks to the firm. With effective risk management techniques, the risks could be
mitigated effectively.
For Improved administration the recognize SME enterprise could utilize Cloud
computing like technologies that helps the firm in effective incorporation, storage and sharing of
information. This would. However, this computing service could cause security issues to David
& Co limited, which could be mitigated by data security soft ware’s (DeYoung, et al. 2015).
For increased production, the company could use big data analytical or artificial
intelligence for innovation and growth of products. The major risk associated to big data analysis
is that the implementing company has modify its entire data flowing approach. However, the risk
is moderate in nature since there are no such large amount of data needs to be modified therefore
it could be adjusted by big data analytical.
In order to establish effective communication with the customers the use of social media
platforms like YouTube, Face book are the most effective. However, by the use of these sites the
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other companies are able to track the strategies that are being currently adapted by the firm.
Therefore, this may cause a fall in gaining competitive advantage. In order to mitigate this, issue
the company could secure its sites by user specific passwords and protect its data (Stankovska, et
al.2016)
M1 Options for growth by using a range of analytical framework
Some of the major growth options that digital technology provides to the recognized SME
enterprise are as follows:
Speed and time
The recognized small business could compete with large business and can easily respond to
changes faster in comparison to the larger firms. This would save time of the firm and help it in
taking decisions at a faster rate.
Automation
The company for some of its business functions that used to hire employee would be able to
automate its operations by the use of digital technology.
Effective administration
The use of diverse soft wares would help the firm in conduction of effective administration that
would ultimately help in the growth of the company.
Storage and distribution
Integrating system would help David & Co Limited would help in the development of the
business structures (Goss, 2015).
Communication
Marketing through the social media platform would upgrade the marketing techniques of the
company and help it to attain great competitive advantage.
Production
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Use of certain analytical technologies would upgrade the productive rate of the small enterprise
that would help in attain greater market advantage.
D1 Critical evaluation of all specific options and growth pathways
For growth and development, David & Co Limited needs to gain a competitive advantage
over other companies of the Food industry. This could only be possible if the firm is able to
strategically use its operations and resources in an effective manner. In addition to this the
company’s effort in using digital technology is also one of the key considerations that needs to
be undertake by the firm to achieve growth status. The VRIO analysis would help in
comprehending the competitive advantage of the firm by the implementation of the growth
options stated above. The analysis is as follows:
Resources/Capabilities Valuabl
e
Rar
e
Inimitabl
e
Organise
d
Impact on
Competitive
Advantage
Automation Yes Yes Yes Yes Highly
Favours
Competitive
advantage
Use of administration
related technological
software’s
Yes Yes Yes Yes Moderately
Favours
Competitive
advantage
Use of social media
platforms
Yes No Yes Yes Highly
Favours
Competitive
advantage
Use of effective SCM
software’s for distribution
Yes Yes No Yes Highly
Favours
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Competitive
advantage
Use of integrating systems Yes Yes No Yes Moderately
Favours
Competitive
advantage
It is therefore on analyzing the above referred alternatives, it has been found that there
exist certain risky aspects of each of the chosen options for growth along with their mitigation
procedures, as demonstrated below-
 Automation- The risk of automation may lead to reduce the load of work on the workers
by together declining their efforts to a great extent. This may in turn led to increase the
chances of boredom at the workplace and the employees may find it difficult to operate in
such type of environment. This is apparent to result in increasing the costs related to
maintenance. This necessitates the cited firm to mitigate the risks associated with an
accepted system of automation that can be done by having a clear set of goals and
communicating the same to the workers. Apart from this, the entire system should not be
chosen to automate with certain manual practices to avoid instability in work procedures. Using technical software’s for administration- The risks associated with this particular
option is constricted deadlines with undefined scope of the project and inadequate
resources to meet out the continual changes required in the system. In order to mitigate
this risk, it is important for the quoted entity to adopt a planned way for its further
execution in a proper manner. Using social media platforms- This together indicates several number of risks involving
human errors, malicious apps, privacy settings as well as phishing scams, etc. In order to
mitigate such type of risks, it is important for David & Co Limited to create some
specific policies to be used for managing the social media accounts by together training
the employees regarding it.
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TASK 2
P3. Assessment of the potential sources of funding available to businesses and discussion of
benefits and drawbacks of each source
David & Co Limited being a small enterprise limited itself claims that the organization
needs financial support to improve its growth and developmental status and attain a
recommendable position in the existing food service industry of UK. For this, it has to adapt to
different digital technologies in its business operation, as they are major growth options for the
firm. Therefore, for this adaptation the small medium sized company has to have financial
support which could be acquired from different sources. Some which are discussed below:
Retained Profits
This is the financial source of help that could be obtained from the cash generated by the
business when it trades profitability (Ackermann and Audretsch, 2013)
Advantages
With the use of retained profits of the company itself David & Co Limited liabilities would
decrease to a great extent and it would favor the growth of the company
Disadvantages
However, with the use of retained profit the company would face a decrease in the reserves of
the company
Share Capital
The entrepreneur could also get the finances by using a part of its capital that comes from the
issue of shares
Advantages
With this the company’s operational efficiency increases and its advantages are covered in the
section on business stricture
Disadvantages
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However, this increases the debt burden of the company which thereby limits the development of
the small sized enterprises.
Bank loan
It is a loner term kind of financial support that small sized entrepreneurs get through the bank
loan. The loan is provided over a specific period, rate of interests and the timing and repayments
amounts
Advantages
The funding source option is always available and helps in easy cash flow
Disadvantages
Liability of the firm increases the company faces the challenges of high interest’s rates, making
stipulated payments at specified timings after which fines are imposed (Lee and Brown, 2016)
Business Angels
The rich investors that keen on making investments in the firm that has the potentiality to show
growth and development in return for a share in the ownership of the business
Advantages
The business angles try to make of all the possible efforts that help the business grow
Disadvantages
The funding options are not easy to get as the business angles are not always ready to invest in
the business. In addition to this the small sized company’s entrepreneur might lose control over
their own Enterprise
Venture Capital
These are funds that are provided by professional investors. It is a specific kind of investments
for SME’s
Advantages
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It helps in the expansion of the business that is not possible in bank loans and other options
Disadvantages
The entrepreneur gets minority owner ship in the business
M2 and D2 Evaluation of potential funding sources with justification of the chosen funding
option
The most effective source of funding that would meet up all the organizational needs of
the David & Co Limited and help it to flourish in the existing market is the adaptation of the
retained profits. It is one of the safest and best-suited funding option fir David & Co Limited
since it being a small sized organization. The company from its trading profit could use a share
of it for its digital technologies and adaptation and mark the beginning of growth and
improvement. Although the company would, decreases its reserve but it would not be burden
from any kind of debt or would not lose its ownership from its company (Staniewski et al. 2016).
On further evaluating retained profits as one of the most favorable sources of business finance, it
is referred to be one of the most cost effective measure for David & Co Ltd. It together assists to
adopt a flexible approach with full control of the management to consider the aspect of
reinvestment. Also, it does not lead to the dilution of company’s ownership and is thus referred
to be an effective source of funding.
TASK 3
P4. Designing of a business plan for growth
For effective growth and development in David & Co Limited the company requires a well-
developed business plan depending upon which the company could attain growth and
development in all terms. The plan is as follows:
 Nature of the business
David & Co Limited is a food service company that operates in production and distribution
of fruit. The company has a full range of fresh fruit, vegetables, exotic produce and delivers
on a regular basis to the hotels, restaurants, contract caterers, schools, nursing homes etc.
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 Development of strategic objectives
The major strategic objectives of the company are to adapt digital technology in its
business operation to make a greater market expansion by implementing these technologies
and increasing its production and delivery rate to a rate higher than the existing one
 Development of effective marketing strategies for analyzing the current market and
specifying the major target market
Under a section the recognized SME needs to evaluate, its market so that it is equipped
all the information of the market it is operation under. After this analysis, the company would
be able to formulate its own marketing strategies that would favor the stated strategic
objectives of the company. In addition to this the marketing strategies would be developed in
way that it targets its determined specific market segment so that the productivity and
distribution rate are increased (Schaper et al. 2014)
 Formulation of the Design and developmental plan
Under this section a plan or rather a strategic plan in which the improved technologically
advanced production design, description of production rate in context to production. Marketing
and the company itself are represented in front of the investors
 Designing of the operational and management plan
Under this the various responsibilities of each department would described and designed. Along
with the task delegations, capital and expense requirement related to the operations of the
business of the said SME would be depicted
 Financial plan
Budget
Particulars 1st quarter 2nd quarter
Opening cash balance £ 131,000.00 £
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85,555.00
Receipts
Cash from consumers £
31,900.00
£
34,200.00
Total receipts (A) £ 162,900.00 £ 119,755.00
Payments
Cost of materials £
40,725.00
£
29,938.75
Salaries £
6,600.00
£
5,400.00
Selling expenses £
1,040.00
£ 600.00
Insurance on vehicle £ 640.00 £ 540.00
Advertisement £ 450.00 £ 450.00
New equipment £ £
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3,800.00 -
Office expenses £ 300.00 £ 300.00
Loan repayments £
1,500.00
£
3,000.00
Drawings £
6,000.00
£
6,000.00
GST payments £
16,290.00
£
11,975.50
Total payments £
77,345.00
£
58,204.25
Closing cash balance £
85,555.00
£
61,550.75
M3 Strategies and appropriate frameworks to attain objectives
This is on referring to the above formulated plan for the attainment of business
objectives, David & Co Ltd is hereby required to undertake some effective strategies. It is with a
special consideration of their formulated business objectives that is a successful adaption of
digital technologies. For this purpose, they are hereby required to define a clear vision with
strong strategies as the basis to achieve the goal. They are together required to deal with legacy
skills with a clear understanding of the requisite digital abilities to make smart investments in
hiring efficient and talented people.
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D3 Knowledge and understanding of how to formulate, apply and achieve business objectives
successfully
It is on considering the undertaken goals of David & Co Ltd by together referring to the
aforesaid strategies that can be applied with assistance of cloud technology as a responsive and
flexible platform. Other than this, adopting effective mobile technologies is also referred to
accelerate the agility as well as the responsiveness of the enterprise to a great extent.
TASK 4
P5. Assessment of exit or succession options for the purpose explaining the benefits and
drawbacks of each option
Exit options
David & Co Limited owner could exit the business by the help of a number exit options
available. Therefore, in order to comprehend the implications of each of the option on the firm a
detailed evaluative study in relation to all the options are provided in the understated segments:
Passing the business to a successor- Under this exit strategy, the SME or the entrepreneur could
pass their business to a concerned successor or a manager of the company. In this case, the
successor could be a family member of the owner of the concerned company (Kalra and Gupta,
2014).
Transferring the owner ship through management or employee buyout- Under this strategy a
portion or section of the company are acquired by the management team or a group of employees
Sale of the business to a third party- There are ranges of business options under this strategy of
sale of business to a third party. They are as follows:
Initial Public Offering: In this, a part of the company is floated on the stock market with public
sharing trading. The company continues to operate as it had been operating in the past (Khan,
2016)
Full or partial company sale: Under this, either full business or a minority or a majority stake in
a business is offered.
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M4
This is on evaluating the first alternative of passing the business to a successor, there is a
reduction in the involvement of a third or external party. Also, there is a probability to the owner
to maintain involvement and influence in business. However, it is together known to have several
number of drawbacks where difficulty arises in identifying the correct successor and even in
training the successor. As well as, there are probable chances of development of conflict at work
or in family depending on who the successor is.
Another alternative of transferring the owner ship through management or employee buyout
states both benefits and drawbacks with advantages stating it to be one of the best option for the
ones that do not have an ideal candidate for successor. Beside this, for their long term support in
the business a reward management is established. Lastly, business independence is maintained
along with maintenance of legacy. However, there together exists several number of
shortcomings where the price and terms are influenced as the management teams have little
access to the capital of the company. Sometimes, the vendor takes back likely and the business
performance and morale are affected by the failed purchase attempt.
Lastly, there exists another effective alternative of selling the business to third party, this
option is further divided into 2 vital parts namely initial public offering and full or partial sale of
the company. Both of these measures are composed of some vital benefits and drawbacks that
are as stated below-
Advantages of Initial public offering-
 The shareholders or the investor could make a straight forward exit.
 Capital injection for the company.
Disadvantages of Initial public offering-
 Additional regulations on public companies can be prohibitive in nature.
Advantages of full or partial sale if the company-
 A significant amount of cash is acquired that could be used in retirement, staring a new
business etc.
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 With partial selling allows exit from running a business.
Disadvantages of full or partial sale if the company-
 Full sale causes loss of control on business.
 While partial buy prevents competitors to buy and this thereby leads to making the
business un sellable.
D4 Appropriate course of action with justified recommendations to support implementation
All of three strategies are favorable exit options for a SME. However, in concern to David &
Co Limited if its uses the ant three of the exit options it would get favored at some point or the
other. On complete evaluation of each of the strategies merits and demerits the one that would
favor the company, the most would be the Initial Public offering. Under this exit strategy, the
company would be able to operate as it had been operating in the past. While in all the other exit
options the company would not be able to enjoy this benefit, it would have to undergo certain
changes or the other due to loss of control or involvement of third party (Quinton et al.2017).
CONCLUSION
On drawing conclusions, it could be stated that growth plans for a small sized company
involves a range of considerations and implication. On proper follow up of these considerations
and planning, a SME would attain the growth and development that is required. However, in this
growth and development strategies the role of digital technology has been huge. Since in current
times the use of technologies has become an essential part of the business operations. It has
influenced the company in a positive manner.
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REFERENCES
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challenge (Vol. 11). Springer Science & Business Media.
DeYoung, R., Gron, A., Torna, G. and Winton, A., 2015. Risk overhang and loan portfolio
decisions: small business loan supply before and during the financial crisis. The Journal of
Finance. 70(6). pp.2451-2488.
Goodman, E., Bamford, J. and Saynor, P. eds., 2016. Small firms and industrial districts in Italy.
Routledge.
Goss, D., 2015. Small Business and Society (Routledge Revivals). Routledge.
Kalra, M.N. and Gupta, S., 2014. Succession planning in smes: An empirical
analysis. International Journal of Research in Management and Social Science. 2(2). pp.124-
166.
Khan, A.A., 2016. EFFECTIVE EXIT PLANNING IN REGIONAL SMALL BUSINESSES-A
BORROW FROM THE'SPECIALISED CLUSTERS'APPROACH. Australasian Journal of
Regional Studies. 22(3). pp.375.
Lee, N. and Brown, R., 2016. Innovation, SMEs and the liability of distance: the demand and
supply of bank funding in UK peripheral regions. Journal of Economic Geography. 17(1).
pp.233-260.
Quinton, S., Canhoto, A., Molinillo, S., Pera, R. and Budhathoki, T., 2017. Conceptualising a
digital orientation: antecedents of supporting SME performance in the digital
economy. Journal of Strategic Marketing. pp.1-13.
Schaper, M.T., Volery, T., Weber, P.C. and Gibson, B., 2014. Entrepreneurship and small
business.
Staniewski, M.W., Szopiński, T. and Awruk, K., 2016. Setting up a business and funding
sources. Journal of Business Research. 69(6). pp.2108-2112.
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Stankovska, I., Josimovski, S. and Edwards, C., 2016. Digital channels diminish SME barriers:
the case of the UK. Economic Research-Ekonomska Istraživanja. 29(1). pp.217-232.
Storey, D.J., 2016. Understanding the small business sector. Routledge.
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