Unit 42: Planning for Growth - A Comprehensive Guide for SMEs

This unit explores the key considerations for SMEs seeking growth, including evaluating opportunities, accessing funding, developing business plans, and planning for exit or succession. It delves into frameworks like Ansoff's growth vector matrix and provides practical insights for navigating the challenges of scaling up a business.

Unit 42:Planning for Growth
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Contents
Introduction................................................................................................................................3
LO1 Analyse the key considerations SMEs should consider when evaluating growth
opportunities...............................................................................................................................4
P1 Analyse key considerations for evaluating growth opportunities and justify these
considerations within an organisational context.....................................................................4
P2 Evaluate the opportunities for growth applying Ansoff’s growth vector matrix..............6
M1. Discuss the options for growth using a range of analytical frameworks to demonstrate
the understanding of competitive advantage within an organisational context......................7
D1 Critically evaluate specific options and pathways for growth, taking into account the
risks of each option and how they can be mitigated...............................................................8
LO2 Assess the various methods through which organisations access funding and when to
use different types of funding....................................................................................................9
P3 Assess the potential sources of funding available to businesses and discuss benefits and
drawbacks of each source.......................................................................................................9
M2 Evaluate potential sources of funding and justification for the adoption of an
appropriate source of funding for a given organisational context........................................10
D2 Critically evaluates potential sources of funding with justified argument for the
adoption of a particular source or combination of sources, based on organisational needs.11
LO3. Develop a business plan (including financials) and communicate how you intend
scaling up a business................................................................................................................12
P4 Design a business plan for growth that includes financial information and strategic
objectives for scaling up a business......................................................................................12
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M3 Develop an appropriate and detailed business plan for growth and securing investment,
setting out strategic objectives, strategies and appropriate frameworks for achieving
objectives..............................................................................................................................13
D3 Present a coherent and detailed business plan that demonstrates knowledge and
understanding of how to formulate apply and achieve business objectives successfully.. . .14
LO4 Assess the various ways a small business owner can exit the business and the
implications of each option......................................................................................................15
P5 Assess exit or succession options for a small business explaining the benefits and
drawbacks of each option.....................................................................................................15
M4 Evaluate exit or succession options for a small business comparing and contrasting the
options and making valid recommendations........................................................................16
D4 Provide critical evaluation of the exit or succession options for a small business and
decide an appropriate course of action with justified recommendations to support
implementation.....................................................................................................................17
Conclusion................................................................................................................................18
References................................................................................................................................19
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Introduction
The evolvement of SME in the current market has been discussed in the given report. As per
that the basic needs and the requirements have been seen in order to see the overall scenario
that has to be seen to cover all the respective needs to run the business successfully. Apart
from that the financial and operational resources and different parts have been discussed to
see the different options that have to be kept in the backup to see that will be used at the time
of need in the business. The discussion about the exit and the succession strategy has been
discussed in order to see the effective way in which the business can be exited and the
appropriate way in which the right organization and candidate can be selected in order to
carry out the business process. At the same time, all the measures have been discussed to see
the effective measures to take to run the business smoothly being an SME.
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LO1 Analyse the key considerations SMEs should consider when evaluating growth
opportunities
P1 Analyse key considerations for evaluating growth opportunities and justify these
considerations within an organizational context.
The business opportunity in case of any new organization or SME moving towards middle
and high scale business it is required to see all the factors that help it grow well in the market
and make it a good market decision and good financial decision, thus to do that it can be said
that there are below-mentioned points that help in attaining the growth opportunity-
 Potential growth- The potential of the market along with the effective way to place
the product in order to see the feasibility of the product and service in the market
(Majama and Israel, 2017).
 Infrastructure- The infrastructure that is needed to display and fulfill the needs of
the market and put a good image in the view of investors and other people. This may
vary from godowns, retail outlets, basic furniture and facilities to the people.
 The market for goods and services- The need and demand of the market may range
from the effect of the cultural and social needs and policies that influences the
demands of the same in that particular market.
 Rewarding the investors- All the investors should be rewarded in terms of good
market response and achieving the sales target and at the same time helping them with
different types of the overall process and other facilities and discount and
miscellaneous facilities.
 Price and cost- The price of the product should be according to the purchasing power
of the people. At the same time the cost inclusive in the attainment of the cost needs.
 Competition strategy- The competition knowledge and the sales and other market
numbers should be well versed with the full achievement of the similar position in the
market.
 Incentives- There should be an incentive for the employees and the internal and
external stakeholders (Majama and Israel, 2017).
 Legal consideration- The adherence to the legal and political values and rules will
help in keeping the sustainability in the long run of the company.
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 Financial feasibility- The business plan should be feasible as per the budget and the
future needs of the whole system.
 Training and development- There should be training and development of personal
and professional level to improve constantly.
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P2 Evaluate the opportunities for growth applying Ansoff’s growth vector matrix
The Ansoff’s matrix is used by the professionals in order to see the present knowledge of the
whole system and in order to see the effective measures that can be used in order to see the
place where there is improvement needed.
Market penetration- In market penetration, the entrepreneurs are needed to sell the product
of same range to the existing customers. This helps in the development of the market strategy
and understanding the market feedbacks and make it futuristic. This helps in the long-term
development of the business in the current scenario. This develops the customer network if
the existing system and helps in developing the same consecutively (Majama and Israel,
2017).
Market development- In this step, the owners attract new customers towards their existing
products. This strategy helps in the development of the overall structure in a long way. Helps
in the development of the market and increasing the customer base. This strategy is needed as
per the new areas in terms of climate and market development of the products. The
demographics of the place have been helping in the achievement of the goals. The target
should be achieved by developing new sales strategy and new ways to work on them
consecutively.
Product development- In this, the companies develop new products and sell them to their
existing customers. This strategy is very famous in the field of FMCG and food where there
are always new flavors and variants being introduced into the system. They are very effective
as in this the customer base is already developed and just a few things have been used in
order to see the effective growth in the sales and proper introduction of the product to the
market.
Diversification- This is considered to be the most risk-oriented strategy as in this strategy the
same can be said as introducing new products to new customers. This mostly happens when
either the place is new or the demographics are new. This can work well only if the market
and the customer base has already been developed in the system. This can help in developing
string supply chain management (Majama and Israel, 2017).
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M1. Discuss the options for growth using a range of analytical frameworks to
demonstrate the understanding of competitive advantage within an organizational
context.
In order to understand the growth of the organization, the planners do a little analytical study
to see the feasibility of the business and effective application of the same in the growth and
development of the business in the market. There are 4 phases to analyze the same.
 Basic financial planning- The companies do basic financial planning in order to
understand the budget and the effective utilization of the resources with the estimation
of cost and demands of them. The performance is studied to know the budgetary
targets.
 Forecasting the finances- In this there is procurement done in order to see the
effective use of the resources and the basic needs that have to be seen in the system.
The study of political, economic and social features helps in the development of the
overall work system. Analyst use trend analysis and regression models in the study of
the same (Verbano and Venturini, 2013).
 External based planning- This strategy is used to see the external forces and the
features that have been affecting the smooth functioning of the business. The change
in the tax prices, legal practices or any climatic or demographic changes that have
been affecting the needs and demands of the people. At the same time, it helps in the
development of future plans.
 Strategic management- This is done in order to place a large number of products in
the system and at the same time developing the strategies to meet the rapidly changing
market needs and demands (Verbano and Venturini, 2013).
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D1 Critically evaluate specific options and pathways for growth, taking into account the
risks of each option and how they can be mitigated
The different pathways for growth can be said as those points that help in the development
and working of the new business development so that they can be worked upon in order to
grow in the market consecutively-
 Use internal resources in the system in order to use the same in the development of
the resources in the company; this can be helpful in using the resources and saving the
cost. But at the same time reduces the options to see other things and options in the
process (Verbano and Venturini, 2013).
 Borrow from external stakeholders can help in developing the resources and other
features from the overall development of the company. This will develop the work
Liaoning and can be used in future for the development of the resources. This at the
same time reduces the overall development and growth of the company and makes it
more vulnerable to external threats.
 Share resources from other companies help in understanding the policies and market
handling strategy of the other companies and at the same time develops the policies
and procedures to be followed in the future.
 Acquire other companies can be one of the ways to increase the market in the world
and at the same time helps in gaining the market position and move to market
leadership. This develops the market strength and the leadership will follow in the
same consecutively (Verbano and Venturini, 2013).
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LO2 Assess the various methods through which organizations access funding and when
to use different types of funding
P3 Assess the potential sources of funding available to businesses and discuss benefits
and drawbacks of each source.
In order to have the business grow in the field the same can be done by the analysis of the
finances and the respective options in the system. The finances that can be used in order to
see the various options they are explained below-
Personal savings – The personal savings are the capital and the assets that have been already
there in the business. This gives a backbone and a support to the company in order to see the
overall business development of the business. The major drawback is that if these assets are
taken it will affect the overall development of the business, this may make the individual go
bankrupt and there will be no financial security with the individual and they may have to bear
legal consequences also (Burns, 2016).
Investors- The investors are the ones that help in the creation and development of the
business at first level. They provide legal and financial resources to the organization and
helps in buying the resources and trading with different stakeholders. This financial
investment gives a sort of control to them and that can be fatal at some time, thus it is advised
to keep the accounts and transactions clean with them.
Bank loans- Bank loans from private banks gives security to the personnel resources and
develop the process in order to have financial transactions and authenticity. This will save the
personnel assets by declaring bankruptcy and can be used to help in future. At the same time,
the disadvantage is that there will be consecutive interest that has to be paid on the loan
which increases the amount.
Government loans and grants- The government sometimes runs certain aids and
programmes in order to help the start-ups and the SME to grow in the market. This can be in
the name of free money, but this is not available to all as they have certain criteria to give
money to the selected people and businesses and cannot be seen by all. They are supportive
in the starting but at the same time the amount is given as a loan and has to be paid back even
if the business is not working well and the need still persists (Burns, 2016).
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M2 Evaluate potential sources of funding and justification for the adoption of an
appropriate source of funding for a given organizational context
The source of funding depicts the kind of business venture the work is going on and the funds
required for the same. In order to have a successful business following fund sources should
be considered in order to work-
Equity funds- Equity funds are those in which some sort of ownership is being shared with
the investors and thus that allows the investors to share the profit margin and other related
features of the business. They are not supposed to be paid back at any time. They are just
partners in the firm equally. The investments are done in the form of stockholder ship that
can be in the form of common stockholders and preferred stockholders. The right to preferred
stockholders is more than common ones (Amoak, 2016).
Debt funds- In debt financing the funds are borrowed from the creditors and they are
consecutively paid to the creditors along with the relative interests as discussed in the
process. This can be secured and unsecured, in secured form the debt is collateral while in
unsecured they are unsecured and thus affects at the time of repayment in the system.
Lease funds- The lease can be said as the right to use the asset of any external entity, in this,
there is some amount that has to be paid to the company in order to use the assets. The assets
are mostly tangible assets such as building and assets. This helps in the permanent blocking
of the money in buying the assets and the value degrades eventually (Amoak, 2016).
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D2 Critically evaluates potential sources of funding with a justified argument for the
adoption of a particular source or combination of sources, based on organizational
needs.
As per the discussion above in the various forms, there have been certain forms of funding
used in the development of an ambitious SME project. Thus in order to do the same, there
have been certain funds discussed they were equity funds, in that there is ownership shared
with the investors thus it can be a plus point as the outcomes are not to be bearded by self.
Apart from that, there is a debt fund that is mostly used to see external resources that have
been applying in the business. This is a risky decision as sometimes the investments become
risky and unsafe. The investors may not be as trustworthy as earlier at all the time
(Ghobakhloo, et. al., 2012).
The last one is the lease form of the investment in that mostly the tangible assets like
building, equipment, stationery etc are taken on lease from other companies for a very short
time. This is a good way to keep the money from blocking in buying the equipment
(Ghobakhloo, et. al., 2012). This is at the same time a circulating process as the same will be
done every time the lease is to be renewed. In the end, the most preferable funding option is
the equity funds as the investors are known and safe as well. This is helpful in giving the
rights and liberty to every shareholder and sharing the results with all.
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LO3. Develop a business plan (including financials) and communicate how you intend
scaling up a business.
P4 Design a business plan for growth that includes financial information and strategic
objectives for scaling up a business.
The appropriate business plan that has been designed in order to see the effective utilization
of the knowledge and design the plan as per the needs of the business:
 Aims and objectives- The aims and objectives of the company should be shared
effectively with the team and all the internal and external stakeholders in order to
have a common platform to work upon. The aim of the SME is to make a good market
position and learn all the effective ways to grow the business.
 Financial resources- All the financial needs should be learned and the allocation of
the product with the respective needs is to be explained by the all related people. The
effective resources should be searched and all the needs should be defined to them.
The procurement of the same should also be seen and discussed with the team and
measures should be taken in advance (Klacmer, et. al., 2014).
 Operation resource allocation- the entire relative works and needs of the business
should be listed and the external and internal resources should be seen consecutively.
The resources could be human resources, marketing resources, sales target etc. all
should be well defined to the team and the management. All the resources are to be
reviewed and the suppliers to be increased to grow the company.
 Allocation of responsibilities- All the respective team that are the finance, the
service, the marketing, the sales, the human resource team, all should be well
informed of the current situation of the company the respective features of the
company and the objectives in the growth. This may need some sort of meetings and
training that have to be given to the team in order to see the quality of the same in the
same. These responsibilities go consecutively up and down the hierarchy to develop a
proper work network (Klacmer, et. al., 2014).
 Review and recommendation- There should be periodic review and testing of the
growth of the SME should be done. This helps in the development of the policies in
the same, that helps in the overall development and improvement of the business plan
and grow the business.
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M3 Develop an appropriate and detailed business plan for growth and securing
investment, setting out strategic objectives, strategies and appropriate frameworks for
achieving objectives
The detailed analysis of the business plan is to be done in order to make sure that all the
factors are being covered and all the features are being seen thoroughly and work upon
respectively-
 Goals and objectives- The Company should make proper guidelines and set of rules
and regulations that have been seen in order to achieve the effective and good market
position in the current business. These objectives are to be discussed with respective
teams and keeping their views and feedback in mind all the other rules and the
respective process should be made in the system.
 Resources needed- There should be a proper study to know the resources that are
needed along with the future needs and demands of the same should be procured and
effective measures should be taken in advance to meet the future demands with the
current policies and resources. If needed external resources should be hired to have
more talent and expertise in the market (Klacmer, et. al., 2014).
 Financial analysis- This analysis is done it see the funds needed in each step to grow
the business. The external of internal resources needed for the meeting of the financial
needs.
 Duty allocation- The respective team heads and the people should be assigned the
duty respectively and then make the goals and duties clear to the team and the
stakeholders that are being followed respectively. They should make sure the aim is
being achieved and all the respective measures are being taken respectively.
 Review and improvement – The whole process should be reviewed and the
countermeasures to be taken in order to see the changes that are needed and what can
be done to remove the issues in the future.
 Implementation- The effective changes should be effectively applied in the
successful growth and working of the company.
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D3 Present a coherent and detailed business plan that demonstrates knowledge and
understanding of how to formulate apply and achieve business objectives successfully.
The business plan should be according to the effective applicability of the business needs and
demands in the system. The initial step is to set the goals and objectives clearly and make
sure they are developed in order to achieve good market position and financial and revenue of
the business. This will be developed in the form a proper process that can be helpful in
determining the respective needs of the system and the appropriate measures that should be
taken in order to resolve all the issues that come along properly. All this has to be done by
keeping the financial aspects in the consideration so as to keep the process perfectly in the
budget and use the same cost in all the other actors that need it to move forward.
The business may need external resources in order to maintain the position and make the
position strong in the market. The external resources could be the transporters and the
distributors that can be maintained in order to use them as and when required in the future
business movement and transactions in the SME (Jonkers and Zacharewicz, 2016).
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LO4 Assess the various ways a small business owner can exit the business and the
implications of each option
P5 Assess exit or succession options for a small business explaining the benefits and
drawbacks of each option.
If the business is needed to be exited or the succession is to be given there are a few things
that the SME in charge take into consideration to apply the effective steps in the same-
 Lifestyle entrepreneur- This strategy is not exactly an exit strategy rather this
strategy in which the business is either changed or shrunken as per the needs and
demands of the market and as to initiate new features in the system so as to see the
effective usage of the same.
 Passing business to the family member- In this feature, the business is being
succeeded to the deserving family member and the owner works on that superficially
in the same, the ownership is also passed in the same (Rossi, 2014).
 Passing to the acquirer- Sometimes the business is passed to the external acquirer in
the market so as to maintain the quality and effective growth in the market.
 Passing to the existing managers- Sometimes if the family of the external acquirer
does not deserve the same is being passed to the existing managers as they already
know the whole business structure and can handle the business well.
 Selling to the investors or partners- Sometimes due to lack of interest or funds or
any external factor the business is sold to the existing partners and the present
investors if they want to run the business successfully.
 Sell to public offerings- There can be a public offering of the business, even if the
business is running fine the business can be sold to the public offering in order to run
the business by the public.
 Liquidate the business – In this process, the whole business is being liquidated as
per the assets and all the tangible and intangible assets are being sold and the
remaining profit can be earned from that.
 Bankruptcy – Declaring bankruptcy can save the personal assets but can raise serious
financial and legal issue (Rossi, 2014).
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M4 Evaluate exit or succession options for a small business comparing and contrasting
the options and making valid recommendations
The need to exit and to succeed the business and the ownership arises when the business is
either running in loss, the owner is having health issues, there might be a loss in the business
and at the same time they are not able to handle the business properly and has been affecting
the business. Sometimes there might age issue or any legal or personnel issue that can affect
the overall working of the policy and features of the business (Söderblom and Samuelsson,
2014). The owner can either be an entrepreneur for a lifetime and can be there with the
business and make constant updating and changes in the system. They can shut down a few
transactions and can help with the launching of new things in the SME and at the same time
sideline themselves from the whole scenario. Apart from that, there can be a situation in
which the business is either merged or acquired by the external force either with choice or
with force may be due to failing to meet the overall scenario and not meeting the defined
goals of the company. This can be understood and merger or accusation.
Apart from that, the business can be succeeded to the family member, in this the ownership
transfers within the family and the family is responsible to take forward the legacy in the
system. If the owner does not feel like transferring the legacy within the family the same can
be transferred to the external workplace as per the requirement. There can be investors or
external parties that might be interested in doing the work and but the business and run it as
per their needs (Söderblom and Samuelsson, 2014). The same can be done with the existing
managers that might be able to know the full process and policies of the business and can be
good at running the business effectively. Apart from that the business can be sent to the
public offerings if the owner feels that the same can be in the good interest of all if the
business in under public dealings. In the end, the announcement of bankruptcy can help in
saving the personnel assets but does not help in saving the business (Mason and Botelho,
2016).
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D4 Provide critical evaluation of the exit or succession options for a small business and
decide an appropriate course of action with justified recommendations to support the
implementation
In order to run a successful SME, it is required to have all the needs and demands of the
business to be clear in order to have market growth failing to do so may result in the loss and
exit from the business. Thus it is required to see that the successor is well trained and aware
of the business transactions. The company should have appropriate financial backups and
secondary resources in order to use the same in the time of need. Keeping the external
resources and effective utilization of the same can be used to meet the demands effectively
whenever the business is low or they are in loss (Lyon and Baldock, 2014).
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Conclusion
The report has been discussing the various aspects of SME in the current business world and
based upon that their policies and procedures have been designed and discussed. The report
discussed the growth features and opportunities in the SME. Various funds and finances
have also been discussed in order to help the business financially and develop the overall
structure for the same. The various features that were kept in mind at the exit and succession
of the SME business have been discussed in the above report along with the respective
measures that could have been taken to run it successfully. There were various options
available to understand the need to exit and then they are being seen to see the effective
successor that could have been selected to run the business successfully.
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