Small Business Succession Planning Options

This assignment delves into the various succession options for a small business, with a focus on selling to third parties and liquidation. It discusses advantages and disadvantages of each method, providing insights to help businesses make informed decisions.

UNIT 42 PLANNING FOR
GROWTH

INTRODUCTION
SME's are important part of the country's growth. The organisation aspires to become
profitable and effective has to perform well in the market so that it may be able to expand in the
market effectively. The enclosed report deals with Gurnard's Head organisation which is SME in
hospitality sector (Keough, 2015). For its effective growth, it has to perform good in the market
which is possible only when well structured strategies are formulated by it. The competitors must
be outreached by the company, this will provide huge profits and more market share to it. In
return, customers will be satisfied and growth can be made by the company in the most
proficient manner. Business plan should be formulated in effectual manner.

TASK 1
(P1) Provide considerations for evaluating growth opportunities with justification and impact on
digital technology
The considerations for evaluating growth opportunities are numerous for the organisation
which is planning for growth. The organisation is very much enhanced by the impact of digital
technology. This also applies to Gurnard's Head organisation which is a Small and Medium
Enterprise (SME) in the hotel industry. Digital technology has ample benefits for the
organisation as through this, they can plan for future growth and this helps a lot to organisation.
The various considerations are as follows:
1. Competitive advantage:
The competitive advantage is very important for the organisation so that it can grow in
the market by satisfying customers at large. For this, digital technology has paved the way for the
business in effectual manner. The organisation can gain competitive advantage by exploring
digital technology (Ying, Chaolin and Xiaojiang, 2014). Through this, cost of overall operations
of the business is reduced up to great extent. This is helpful for the organisation so that it can
plan for growth as costs are minimised and savings are made. Digital technology allows
Gurnard's Head organisation to access data of the potential customers as such, security is
maintained as outsiders are not allowed to access it. It is possible because of cloud computing.
Digital technology help organisation to attain competitive advantage as costs are reduced and
more of customers data can be accessed within short span of time.
2. New products and services:
Innovation is made by the company too much extent. This is because through digital
technology, new products and services may be made which provides business a competitive
advantage and innovation is achieved as well (Chaston, 2015). The SME is benefited as through
usage of digital technology, they can plan for future growth and expansion. Gurnard's Head may
be able to provide enhanced services to guests which ultimately imparts delightful experience to
customers at large. It may be able to provide more comfort to customers by innovating services.

New products can be easily developed so that business may flourish by expanding product
portfolio.
3. Growth options:
The growth options for the organisation are numerous. Facebook is one of it. Gurnard's
Head may use Facebook posts to lure customers by giving attractive advertisements such as
discount on advance booking and also provide new schemes. This automatically lures customers
and they are ready to avail those benefits. By earning huge profits by applying digital platforms,
organisation may be able to forecast for future growth and as such, digital technology is helpful
to it. Another digital platform like Instagram also provides ample benefits to SME for its
operations and growth with much ease.
4. Collaboration:
The growth of Gurnard's Head may be achieved by merging with another hotel or by
collaborating with another hotel. This will help it to be efficient enough as business will be
expanded and employees will be doubled. Collaborating with other hotel is useful for the
organisation if it has not enough of the funds for growth and expansion. Hence, growth is
achieved by it through collaborating another hotel and as such, it is beneficial for the
organisation. Merging with other hotel is also useful option available to business to expand with
much ease (van Assche, Lo and Beunen, 2013). Collaborating with other organisation will
provide more strength to Gurnard's Head organisation and as such, employees will be doubled as
well.
These considerations are helpful for the hotel to expand its reach and satisfy customers
with the help of using digital technology. Moreover, it may be able to garner profits and
eventually may grow with much ease.
(M1) Outline options for growth using a range of analytical frameworks to demonstrate the
understanding of competitive advantage
1. SWOT Analysis -
SWOT represents strengths, weaknesses, opportunities and threats which is analysed so
that business may be expanded and as such, it may foster growth in the most proficient way. It

should be carefully analysed so that no shortcomings may be there for Gurnard's Head in its
growth (Deakin, 2013).
2. PESTLE Analysis -
PESTLE analysis are political, economical, social, technological, legal and
environmental factors which affects business and it should be analysed by organisation so that it
may achieve objectives effectively and no hindrance might be there in the growth of SME.
(P2) Assessing Ansoff’s growth vector matrix for organisation
The growth is required by the organisation so that it may be able to earn more profits by
satisfying customers. However, growth should be analysed by seeking competitors strategies so
that growth may be achieved by the organisation. Gurnard's Head should be able to analyse
competitors' and must innovate services so that it may be expanded easily. Ansoff's growth
vector matrix is helpful in this regard. It is described below:
1. Market Penetration -
Illustration 1: Source : tutor2u.net

Market penetration is selling existing products to existing markets only. It is done with
the objectives to increase the market share of current product or services to customers. Gurnard's
Head effectively uses market penetration so that it may be able to satisfy customers who are
already loyal to hotel. The SME mainly focus on existing market so that it may satisfy potential
customers and as a result, organisation is able to penetrate market by supplying effective services
to guests. Consequently, it is able to earn more profits by expanding market share. This is
achieved by organisation through sales promotion and advertising which helps hotel to dominant
the market (Moseley, 2013).
2. Market Development -
This strategy is focused on selling company's existing products and services into new
markets. This is very useful strategy as it helps Gurnard's Head to expand its reach to new
markets seeking for more customers so that it may initiate expansion and satisfy more consumers
effectively with much ease. The geographical markets may be discovered by it for expansion.
Moreover, new markets may be useful for targeting customers by implementing different pricing
policies. As such, Gurnard's Head may expand and initiate market development by applying
Ansoff's matrix. This will provide with more customers and in return maximum profits may be
earned by it with much ease.
3. Product Development -
Product development is related to sell new products into existing markets. Gurnard's
Head will be able to innovate its services which is helpful for it so that new services may be
provided to them and as such, it will help to initiate innovation. Customers like different
products or service as they have various preferences. This has to be fulfilled by the organisation
so that it may be able to satisfy customers and earn profits with much ease. Thus, new services
should be provided to customers otherwise, they will be driven to rivals. Thus, it will deteriorate
profits and market share will be consecutively reduced (Stanilov, 2013).
4. Diversification -
Diversification is different from strategies which are discussed above. In this,
organisation diversifies the business apart from its existing business. The organisation sells
completely new products to new markets. It is riskier business as organisation has little or no

experience. This should be dealt with careful analysis by Gurnard's Head otherwise, it may be
dangerous for existence in the market. It is used by the organisation when it has successfully
achieved its business goals effectively in existing business. The firm then diversifies the business
to earn more profits. It results into growth and expansion.
TASK 2
(P3) Evaluate sources of funding available to businesses and discuss benefits and drawbacks
The sources of funding available to business and their benefits and drawbacks are as
follows:
1. Debt financing -
It is the source for company to raise working capital. Debt financing occurs when
company raises money for working capital which is required in day to day operations of the
organisation for its functioning. With this, company sells its bonds, debentures to investors so
that it may be able to function well (Gatukui and Katuse, 2014).
Advantages -
1. It is useful source of funding which initiates growth for aggressive growth strategy. It
helps company to pay for equipments and other assets which are used in the hotel.
2. It is helpful as debt can be paid in easy instalments by the company which is better as
compared to equity financing (Sharifi, and et.al, 2014).
Disadvantages -
1. The debt loan is easily available but organisation has to pay interest amount together
with the principal amount. This limits company to use it.
2. Excessive use of debt limits cash flow and reduces growth.
2. Equity financing -
In search of funds, company reaches to seek help from the stakeholders of the company.
Stakeholders represents the owners of the company as equity is owner's capital. It is really
helpful for the company for raising funds to meet requirements of daily operations.
Advantages -

1. The main benefit of equity financing is that it does not required to be repaid.
2. Maintaining low debt equity ratio is also beneficial for the company and as a result, it
helps company to be in better position in the future when equity financing is needed by it.
Disadvantages -
1. Equity financing raises issue regarding partial ownership of investors in the business.
Also, some sort of decision-making is bound to be provided to them which impacts business as
portion of earning is shared with them.
2. In the future, distribution of profits is exceeded then it would have repaid on a loan if
debt financing was adopted by the company (Li, Mobin and Keyser, 2016).
3. Angel investors-
These are the individuals who made investment in the business as to help them in
expansion, in operational activities as well. It is useful for Gurnard's Head as angel investors
works in consideration of convertible debts and equity of firm.
Advantages -
1. Angel investing is much cheaper form of financing as compared to debt financing.
2. It more suitable for start up businesses as it is cheap source of financing (Rudolf,
Kienast and Hersperger, 2017).
Disadvantages -
1. This is giving up a share of the business which is not liked by organisation.
2. It is difficult to find a suitable angel investors.
4. Retained Earnings -
It refers to the revenue generated by the organisation from the shareholder's investments
which remains even after making the payments of dividends. The retained earnings may be
utilised by organisation in its future operations.
Advantages -
1. Future funding is available to organisation and is useful in future operations.

2. Earnings are retained and as a result, company need to borrow loans.
Disadvantages -
1. Shareholders are dissatisfied as dividends are not paid by the company.
2. Taxes are levied which is more as funds are retained by the organisation.
(M2) Sources of funding and justification of them for the organisation
The sources of funding such as debt financing and retained earnings are helpful source of
raising funds. Debt financing is useful and is justified as it initiates aggressive growth to firm and
as a result, it is beneficial for raising funds required for daily operations (Unkelbach and et.al,
2014). Whereas, retained earnings are also useful as business can retain its profits which is
necessary as loan is not taken by the organisation and it saves interest which is payable to
lenders. Thus, it is justified that both the sources are good for the company to raise funds.
TASK 3
(P4) Draft a business plan for growth of the organisation
Business plan of Gurnard's Head is as follows:

Business plan
Mission and Vision-
The mission and vision of Gurnard's Head organisation is to provide quality food to
customers with lower prices. To provide quality services to customers to enhance their
satisfaction.
Aim-
 To provide better services to customers
 To provide quality food and accommodation facility
 To provide adequate level of satisfaction to customers.
Illustration 2: Cash flow statement

Business Description
The business is in the hospitality sector carrying as SME to satisfy customers by
providing quality services to them and in turn earning good profits in the most proficient way.
The organisation will be able to provide ample of services so that guests may be delighted in the
best possible way (Mosher and et.al, 2017).
Market Strategies
Market strategies be related to attracting customers so that they may not be driven by
competitors. As such, marketing mix functions be achieved in a manner which must be profitable
to organisation. Market segment be formed by organisation so that particular market can be
captured and as such, marketing strategies may be achieved in the best possible manner.
Competitive Analysis
Competencies are required to be completely recognised by the companuy so that it may
drive away customers at large. For this, competitive analysis is required. Rivals must be
outreached by organisation by formulating strategies such as providing low prices of rooms to
customers. Moreover, providing ancillary services to them. This helps customers to remain loyal
to the organisation and as a result, company may be able to beat rivals.
Design and development plan
The design and development plan is required by investors so that they may analyse
soundness of the company at large. It should have design of the services whoich will be provided
by the company and as a result, design be ouitlined in the business plan. It also focuses on
development plan which lists down the budget that will be required by Gurnard's Head
organisation to reach its goals. This contains sales budget that how much sales will be
accomplished by it (Elements of a Business Plan).
Operations and Management plan
The operational plan will highlight logistics of the hospitality that will carry on to achieve
daily activities. The tasks that will be performed by management and employees on daily basis
are figured out so that duplication of work may be avoided too much extent. It should al;so
highlight working capital expenditures to be incurred on day to day operations.

Financial Factors
The financial factors should be analysed by company. The expenditures such as
maintenance of rooms, food expenses should be laid down by the organisation. The management
should formulate cash flow statement and other financial statements that will provide clarity to
the business. Cash flow will give clarity that in which activities, cash will be used and will be
generated (Scott, and et.al, 2014). Thus, financial factors are vital for the organisation to flourish
in the market by controlling expenditures in the most proficient way.
(M3) Draft business plan for growth and securing investment, setting out strategic objectives,
strategies
Business plan should be formulated carefully and it should describe goals effectively. A
business plan should lay down strategic objectives in the manner which is beneficial for the
company. The financial, operational and marketing viewpoints should be laid down by the
business. The competitor's analysis must be also formulated so that rivals may be outreach by the
company in effective way. Moreover, marketing mix should also be laid down by Gurnard's
Head so that it may attract more customers in the market. Without formulating marketing mix,
business plan may fail. Strategies to beat competitors should be implemented so that growth may
be achieved effectively.
TASK 4
(P5) Outline succession options for the small business and merits and demerits of each of them
The business may be closed by the owner in many ways. This is descrivbed below:
1. Liquidation -
Business is wind up if it is earning not adequately or is unable to earn propfitsd and costs
exceed profits. In this scenario, business is liquidated by ther owner. When organisation is
liquidated, it has to pay various dues to creditors from teh realisation of assets.
Advantages -
1. It is a simple process as everything comes to end by liquidation.
2. No worries about transfer of control.
Disadvantages -

1. When business is liquidated, assets are realised which are less than the market value.
As such, business suffers loss (Wear, 2016).
2. The sudden liquidation might destroy reputations and business relationships which are
utmost valuable.
2. Selling to a Friendly Buyer -
The business may be sold to friends or family on the decided rate. It means owner passes
his business to friends who will preserve legacy. Other than friends, other buyers may be
customers and employees. This is the best method of selling business with much ease.
Advantages -
1. Less diligence is required as owner knows his friends completely. As such,
transparency is observed.
2. If employee buys the business, he is committed to hard work.
Disadvantages -
1. Selling to near and dear ones, tear apart company with jealousies which is not suitable
to business.
2. Business market value may be more but because of emotional attachment, value might
be less received.
3. Acquisition -
The acquisition is used as an exit strategy by the business, when it buys another
businesses. Small enterprises when not able to perform well sells its business to large
organisations in an acquisition at some point in the future.
Advantages -
1. The main advantage of acquisition is that it result in a high valuation of a company
which in turn results in more selling price as large company whopping amount to small
enterprises.
2. If competitors' buys the enterprise, then it is preferable to company because acquisition
allow owners to negotiate the selling price as high as possible.

Disadvantages -
1. It is not suitable for a business as another company restructure the acquired business
which adversely affects welfare of the employee at the organisation which is acquired.
2. As other company restructures entire company, existing name and identity of
organisation is lost.
4. Selling to a Third Party -
The third party buyers are financial and strategic buyers. Financial buyers just look for
more returns on investments. They strongly rely on financial statements of the closing company.
Strategic buyers looks to diversify product lines (van Gool, Stuart-Street and Tille, 2016).
Advantages -
1. The benefit is that the party which is buying the business has everything ready on its
behalf and can run the enterprise.
2. It is cost effective as business need not to be restructured.
Disadvantages -
1. This will require due diligence as buyer's lack the expertise.
2. It incurs higher leverage and as a result, cash will be adversely affected and growth
will be hampered.
5. Selling to Employees Stock Option Scheme (ESOPs) -
This is another method of selling the small business or exiting it. ESOP is an excellent
tool for succession planning. In this business is sold to employees which have acquired stock of
the company.
Advantages -
1. It imparts employees ownership rights and as a result, they feel committed.
2. Company offers attractive packages which are cost effective.
Disadvantages -

1. This exit strategy is difficult to value by the company.
2. Tax is more applicable which limits to use this exit strategy.
(M4) Explain succession options for a small business comparing and contrasting the options and
recommendations
The succession options such as selling business to third party and liquidation is most used
by organisation (Warmerdam and et.al, 2017). It is recommended that company should use any
of these methods as these are beneficial for the company. Selling business to third party is
always useful for business as it gets good amount on selling business which might not be earned
when sold to family and friends. Moreover, liquidation is another succession option which
should be used by company as it is a simple method and no worries in transferring the control.
CONCLUSION
Hereby it can be concluded that organisation is required to perform well in the market so
that it may plan for growth and expansion in the most effective way. Planning for growth is not
an easy task, it requires lot of hard work by the management so that no lag is found in the
business plan. The strategies should be formulated in the way which provides company to be
effective in its operations. Business plan is required to be formulated in the most proficient way
which must highlight the goals and objectives so that business plan may be profitable for the
organisation. Moreover, growth considerations should be made by company so that it may be
able to beat competitors at large. The growth considerations such as innovative services and
collaboration should be used by company to have a healthy growth. This will provide effective
growth to company and may be able to flourish in the market.