Southern Business Technologies: Planning for Growth in the SME Sector

This report examines the growth strategies for Small and Medium Enterprises (SMEs), focusing on Southern Business Technologies, a B2B telecom product and service provider in the UK. The report begins with an introduction highlighting the importance of growth planning for SMEs and then delves into key considerations for evaluating growth opportunities, using PESTEL analysis to assess the external environment and identify potential opportunities in the food and beverage industry. It then applies Ansoff's growth vector matrix to explore market penetration, market development, product development, and diversification strategies, with a particular emphasis on diversification into the health food or brewing sector. The report further analyzes potential funding sources, assessing their benefits and drawbacks, and outlines the design of a business plan for growth, including financial information and strategic objectives. Finally, it evaluates exit and succession options for SMEs, considering their respective advantages and disadvantages, and concludes by emphasizing the importance of making informed choices when selecting growth routes and understanding the associated risks and rewards.

PLANNING FOR GROWTH

CONTENTS
INTRODUCTION.........................................................................................................................................1
LO – 1............................................................................................................................................................1
P1 Key consideration for evaluating growth opportunities and justifying in the context of organization 1
P2 Opportunities for growth by applying Ansoff’s growth vector matrix.................................................3
LO – 2............................................................................................................................................................5
P3 Assessing the potential source of funding available to business with its benefits and drawbacks.......5
LO – 3............................................................................................................................................................7
P4 Designing a business plan for growth including financial information and strategic objectives for
scaling up a business..................................................................................................................................7
LO – 4..........................................................................................................................................................10
P5 Assessing the exit or succession options for SME with benefits and drawbacks...............................10
CONCLUSION............................................................................................................................................11
REFERENCES............................................................................................................................................12

INTRODUCTION
Throwing light in relation with the Small and Medium Enterprise (SMEs), it is quite
assorted group. They are generally found in a wide array of business activities that ranges from
artisan producing agricultural products to coffee shop and small sophisticated engineering firm
engage in selling automotive parts. These firms carry out their business in different markets such
as rural, urban, regional, national and international. For successful operations, they require
various levels of skills, growth orientation, capital and sophistication (Ha-Joon, 2001). Many
recent empirical studies have significantly depicted that SMEs has a contribution of around 55
percent of GDP and over 65 percent of the total employment in the high-income nations.
Pertaining to this, as junior Manager in an SME located in Thames Valley area in UK evaluation
will be undertaken on how these small and medium enterprises plans for growth. Concerning
this, the main aim of the research report is to evaluate how SMEs develop and growth. For this
project, Southern Business Technologies is being taken consideration. The firm is engaged in
supplying business to business telecom products and services for SME in southern England and
was founded in the year 1965. They deals in digital telephone lines and integrated services digital
networks, data services like internet access, leased lines, business telephone systems and
broadband. The report will focus on various techniques being adopted by Southern Business
Technologies to identify potential opportunities for growth. In addition to this, comprehension in
relation with the varied sources of investment finances and options available for the firm in
relation with exit and family business succession will be done. The final part of the report will
throw light on importance of making informed choices when selecting routes to growth and will
understand the potential risks and reward involved with growth.
LO – 1
P1 Key consideration for evaluating growth opportunities and justifying in the context of
organization
It is quite vital to evaluate the growth opportunities and finding ways to achieve them. It
is important on the part of Southern Business Technologies to plan carefully about the growth so
as to achieve success. Talking in references with growth, it involves risks, but if right strategy is
adopted than it can deliver stability, long term profits and security (Daron, 2003). For this, it is
necessary to assess the strength, weakness, opportunities and threats of the own company and
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various ways to handle them, the firm can move on to the next level i.e. developing a growth
strategy. Each and every business changes their focus when they are mover ahead of the start-up
phase (Badrinath and et.al., 1997). For ensuring sustainability, determining opportunities for
growth becomes a priority for SMEs such as Southern Business Technologies. The opportunities
for growth can be determined by using PESTEL analysis and is being defined underneath:
 Political – The business of Southern Business Technologies is being influenced by
numerous political factors such as trade tariffs, fiscal policy, tax policies and many more.
Political stability in UK is a great strength of the nation. In addition to this, there are
many acts being imposed by the government of UK such as Brexit, which has given birth
to uncertainties as well as debates related to politics. Other than this, taxation, import and
export costs, inflation and other health policies may influence the new business of
Southern Business Technologies. There is political stability in UK.
 Economic – Because of the weak economy of UK, both retailers and non-retailer of
Telecom industry is impacted a lot. Due to economic recession in the year 2008, the
economy was in great trouble. The purchasing power of the people also falls down during
this slowdown. In recent years, new trend has been witnessed in UK. In recent years i.e.
2017, the inflation rate rose to 3.1 percent. People are now paying more for the services
and products which helps them to relax and thus, it opens opportunity for Southern
Business Technologies in brewing or food sector. Other than this, change in the rate of
tax and decrease in the pound will influence the business of Southern Business
Technologies (Rafiq and Kennedy, 2002).
 Social – Social factor also play a significant role in influencing the operation and working
of the business concern. Focusing towards the UK, the standard of living of people is
increasing at a fast pace and thus, people are demanding high quality internet and other
telecommunication facility to cater with this modernized world irrespective of the high
price. This can prove a major advantage to Southern business technologies.
 Technological – Seeking help from this factor, the firm can achieve a competitive edge in
the market. More efficient technologies such as fiber wire builds, more compact devices
etc. can help the company to increase their profit margins. In addition to this, the recent
trend of mobile apps can augment the sale of the product (Surbhi, 2017).
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 Environmental – Nowadays, people are paying more attention towards protecting the
environment and thus, Southern business technologies is required to devise long term
strategy regarding that. Use of recyclable material can be used to safeguard the
environment from global warming. However, there are environmental protection laws
that should be considered for smooth functioning.
 Legal – There are numerous factors that need to be considered in this factor such as
import and export law, employment law, minimum wage act etc. These act should be
considered while appointing employees and in the daily functioning of the firm. All these
acts protects the people from any type of discrimination and at the same time, if the firm
comply with these acts and regulations, they can minimize the risk and pressure from the
regulatory bodies.
In addition to PESTEL analysis, competitor’s analysis, diffusion of innovation, GE
matrix and BCG matrix can also be considered in order to evaluate the growth opportunities for
Southern Business Technologies. From the above analysis it can be said that the current business
environment will offer many opportunities to Southern Business Technologies to achieve
success, which can be availed through overcoming the weaknesses of the firm and strengthening
the positive aspects in a better way. From the above evaluation of the external environment, it
was determined that most of the people in UK are now preferring to eat outside, as they are quite
busy in their working life. In addition to this, they are also looking for packed foods and favoring
ready to eat means. Consequently, there has been rise in the problem of obesity and other health
diseases. Considering these issues and scenario, it is vital for the firm to focus on health food
options for people of UK and should expand into health food or brewing industry.
P2 Opportunities for growth by applying Ansoff’s growth vector matrix
Before pursuing any type of growth strategies, it is quite vital to ensure that the current
business is running in an effective manner. Southern Business Technologies engage themselves
in developing the new business, but they are require to make sure that their core business is still
performing well. It is essential that the firm should not ignore their existing base of customers,
because this will underpin the growth of the firm. These customers will play an important role in
offering cash flow during this phase (Moore, 2013). Some of the opportunities of growth being
available for Southern Business Technologies by considering Ansoff matrix are follows:
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 Market penetration – Talking in relation with the market penetration element of Ansoff
growth matrix, it simply refers to the selling same products to the existing customers.
Here, it is important for the firm to determine new ways of increasing loyalty from the
customers and increase the lifetime values of the customers. The company can improve
their order process, extend business hours, making things available to the customers
easily etc. can help in improving the long term appeal of the business (Blanchard, Oncken
and Burrows, 2011).
 Market development – Here in this strategy, new customers are being approaches for
selling existing products and services. The new customers can be determined on the basis
of geography or new nation, region or a new demographic etc. The owner of the Southern
Business Technologies can make use of new campaign that utilizes various sales channels
to target new base of customers (Burns, 2011).
 Product development – The product development strategy states that new products and
services are being offered to the existing or present base of customers. This type of
strategy should be adopted by those businesses who want to have differentiated products
in order to remain competitive in the market.
 Diversification – This is the most risky strategy which involves selling of new products
and services in the entirely new market. It will work well, if the business of the firms
already has foundation in place. It is also vital to assess the risk being involved and steps
must be taken prior to mitigate the same (Williams, 2015).
From the above analysis being performed by making use of Ansoff matrix, it is clear that
there are many options being available to Southern Business Technologies for the expansion
purpose. Out of these, the best among them is diversification strategy. Southern Business
Technologies are presently operating in telecom industry. They should head towards entirely
different market of food and beverage industry and must target different people as well. This is
because of the fact being identified above that the food and beverage industry of United
Kingdom is growing at a fast pace and more and more people prefer to hang out with their loved
ones. People in UK are now preferring to eat outside, as they are quite busy in their working life.
In addition to this, they are also looking for packed foods and favoring ready to eat means.
Consequently, there has been rise in the problem of obesity and other health diseases.
Considering these issues and scenario, it is vital for the firm to focus on health food options for
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people of UK and should expand into health food or brewing industry. They already has a large
base of existing customers and good reputation in the market which can be used for further
expansion. Company wants to avail this opportunity and want to plunge in this sector to achieve
competitive advantage by offering healthy food and beverages to people.
Other Growth options
 Partnership and joint ventures – By adopting this type of growth strategies, Southern
Business Technologies can avail many sorts of benefits such as sharing of experience,
large base of customers, skills and abilities of different people, large number of
employees etc. Seeking help from partnership and joint ventures arrangement with a non-
competitive and complementary business, the firm will be in a position to open new
market and can improve the existing one as well.
 Mergers and acquisitions – This generally takes place, when one company merges with
the other firm or take over another firm. It is more viable for the firms which are
established in the market. The transactions take into consideration commercial lawyers
and legal work (Assess your options for growth, 2018).
LO – 2
P3 Assessing the potential source of funding available to business with its benefits and
drawbacks
For any type or kind of growth strategy, sound financial planning is very essential and
acts as a foundation. Firstly, it is quite important to establish three main things i.e. how much
investment is being needed to fund the venture, at what time it will be required and when it will
be made available. Other than this, it is also vital to forecast a detailed cash flow. This is
essential, as outgoings are almost certainly going to rise sooner or faster in comparison with the
revenues. Furthermore, there should be enough money available with the firm to run and operate
their core business smoothly and effectively. It is good if the firm is building some surplus too,
because many projects take long period of time to rap out fruits that it is predicted originally. In
addition to this, detailed forecasts in relation with the sales, sources of seed funding, working
capital and second round funding must be drawn up (Seven Types of Funding Sources for your
Startup, 2013). There are many sources of funding available to the Southern Business
Technologies and the details are being explained underneath:
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Source of fund Benefits Drawbacks
Bank loan – It is being
considered as a popular
source of funding for many
SMEs and startups. Prior
applying for the loan in bank,
it is crucial to make sure that
the person applying for the
same is educated in regards
with options being available
as well as rate of interest that
come along with different
options.
There are many benefits of taking loan
from bank such as variety of funding
options are available, funding process of
quick and control of business is in the
hands of the owner.
On the other hand, there are some
disadvantages as well. Lot number
of documentation is required,
money needs to be given back
irrespective of the success or
failure of the business and lastly,
there is a need of education in
regards with the various funding
options available otherwise, one
can involve in such type of deal
that will hurt the business sooner
or later.
Crowd funding – In this type
of source of funding,
business is funded by taking
small amount of capital from
a large number of people
through means of internet. In
crowd funding, vast
networks of friends, family,
peer group are being used
through varied social
platforms.
This is being done to get the word out of
business with a clear aim to attract new
investors. Further, advantage of crowd
funding is that business can be expanded
by raising fund from pool of investors
Realization of results requires lot
of dedication. Crowd funding is
very time consuming process and
does not suitable for the business
which requires immediate funding
Venture capital – Under this
type of funding, investors
invest considerable amount
of money in exchange for
equity in the business.
This source of fund has potentiality of
offering good amount of return on the
investment being made by the capitalists.
Through venture capital, Southern
Business Technologies can source their
the business is compelled to give
large chunk of business in lieu of
the large amount of funding
offered (Wall, Coday and
Mitchell, 2014)
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Returns are given to them
when the business is being
acquired by other company.
funds and gets mentorship and expertise
to develop their business as well.
Angel investors – These
investors are known as
wealthy individuals, who
offer funding to the business
and in return they want share
of equity in the business.
Angel investors may work in
group and screen deals
together prior offering funds.
On contrary, there are many
who work on their own.
The main benefit of this type of funding is
that they can offer valuable advice and
they also have flexible terms of business.
The main disadvantage of angel
investors is the business is forced
to give up the control of business
up to some extent (Moore, 2014).
Consequently, it can be well-attributed that different sources of financing are present
which can be utilized by Southern Business Technologies to meet out their financial needs of
new project. Pertaining to the present position of the firm, bank loan and owner’s fund are two
main sources through which funds can be arranged for the process of expansion. It is very easy to
avail fund from these methods and bank loan also safeguards the assets if there is any default
from payment by the owner. The business of the Southern Business technologies is achieving
success from many years and thus they will not face any difficulty regarding the repayment of
loan.
LO – 3
P4 Designing a business plan for growth
Description of the business idea
Southern Business Technologies wants to grow their business and thus, they decided to
expand their business into a diversified market by adopting a diversification strategy. Pertaining
to this, they stepped into a diversified market by opening a coffee bar. The bar is determined to
become a daily necessity for the locals who are addicted towards coffee and a place where one
can escape the daily stresses and be comfortable. In the current scenarios, there is a growing
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demand of the gourmet coffee and great service, thus the coffee bar will focus on offering their
best to their valuable customers. The firm will require around £150000 start-up funds which will
include spending related to payroll and other expense of the firm £124600, £143,800 and
£155,440 respectively (Barrow, Barrow and Brown, 2012).
Target market
The coffee bar will pay attention on its marketing activities in order to reach the people
working in offices, university students and faculties and sophisticated teenagers. The marketing
research being carried out the firm depicts that these are the group of customers who are likely to
purchase gourmet coffee products. The consumption of gourmet coffee is common across varied
income categories and thus, it is generally dependent on the level of higher education and the
nearness to the University campus will offer access to the targeted group of customers.
Products offering and pricing
The company will sell coffee, other beverages and snacks at a reasonable price. They will
be selling gourmet coffee. Customers who are likely to purchase gourmet coffee products have
varied income categories and thus, it is generally dependent on the level of higher education and
the nearness to the University campus will offer access to the targeted group of customers.
Ownership structure
Southern Business Technologies wants to start a coffee bar which needs to be located in
the Brick lane in London, UK. The company will sell coffee, other beverages and snacks. The
ownership structure of the firm is partnership as two or more owners are being involved. The
major investors are Arthur Garfield and James Polk who own around 70 percent of the firm.
They both are the owners of the firm. Total funding requirement of the firm is around £150000,
including all the start-up expenses and other equipments.
Mission of the firm
The main mission of the Southern Business Technologies is to give their best efforts in
creating a unique place where each and every customer can easily mingle with each other and
feel comfortable. Further, the firm will be in a business of helping the clients in relieving their
stress by offering piece of mind by friendly customer service, great ambience, good location and
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high quality food products. They will offer healthy food and drinks in their café considering the
current health issues in UK.
Vision of the firm
The main vision of the firm is to increase the market share with sustainable practices and
to improve the lives of guest.
Objective of the firm
 The main objective of the firm is to become a best coffee bar in the area
 To earn reasonable amount off profits
 Maintaining a 60 percent gross margin
Start-up cost
Start-up
Expense
Amount
Legal £$1,300
Consultants £3,000
Brochures £3,580
Rent £4,420
Insurance £2,400
Remodeling £10,800
Stationery £500
Total £26000
Start-up Asset Amount
Cash required £67000
Start-up inventory £12000
Long-term asset £45000
Other assets £0
Total £124000
Total £150000
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requirement
Sources of funding
There are two major sources from which the coffee bar has arranged their funds i.e.
owner’s investment and bank loan. There are two major owners, Arthur Garfield and James Polk;
both have contributed around £60000 and £20000 respectively. All other investment has
contributed around £30000 that together brings the total investment of around £110000. The
remaining £40000 needed to cover up the start-up expenses and assets was arranged from the
bank loan for five years. The loan being taken is secured.
Cash Flow Statement
CASH FLOW STATEMENT
CASH RECEIVED YEAR 1 YEAR 2 YEAR 3
Cash from operations
Sales £473,000 £522,400 £576,640
SUBTOTAL CASH FROM
OPERATIONS
£473,000 £522,400 £576,640
Additional cash received
Sales tax, borrowing, VAT, long term
liabilities
0 0 0
Sales of other current asset 0 0 0
New investment received £0 0 0
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