Growth Strategies for SMEs: Planning, Funding, and Exit Options

This report provides a comprehensive analysis of growth planning for Small and Medium Enterprises (SMEs). It begins by examining key considerations for evaluating growth opportunities, justifying these within an organizational context, and applying Ansoff’s growth vector matrix. The report discusses options for growth using analytical frameworks to demonstrate understanding of competitive advantage, critically evaluating specific options and pathways for growth while considering and mitigating associated risks. Furthermore, it assesses various methods for organizations to access funding, discussing the benefits and drawbacks of each source and justifying the adoption of appropriate funding for a given organizational context. The report then details the development of a business plan, including financial information and strategic objectives for scaling up a business. Finally, it assesses various exit or succession options for small business owners, explaining the benefits and drawbacks of each option, comparing and contrasting the options, and providing justified recommendations for implementation.

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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