chapter 2 - 1 richbell et al

http://isb.sagepub.comInternational Small Business Journal

DOI: 10.1177/0266242606067275 2006; 24; 496 International Small Business Journal

Suzanne M. Richbell, H. Doug Watts and Perry Wardle Owner-managers and Business Planning in the Small Firm

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Owner-managers and BusinessPlanning in the Small Firm

S U Z A N N E M . R I C H B E L LSheffield University Management School, UK

H . D O U G WAT T SUniversity of Sheffield, UK

P E R RY WA R D L EStaffordshire Moorlands District Council, UK

This article explores the ways in which the characteristics of the owner-managers of small firms influence whether or not those firms have abusiness plan. The focus is primarily on antecedent influences on owner-managers such as education and prior experience. Data are drawnfrom a survey of the owner-managers of small metalworking firms inSheffield, UK. Around half the sample of owner-managers possess a businessplan. Antecedent influences on owner-managers showing a significantassociation with the possession of a business plan include an above averagelevel of education, previous work experience in a large firm immediatelybefore setting up their firm and running firms in sectors outside theirprevious experience. Not surprisingly, possession of a business plan showeda positive association with those owner-managers with a growth orientation.It is concluded that owner-manager characteristics can be important inexplaining the presence/absence of a business plan within the small firm.

KEYWORDS : business plans; owner-managers; small firms

Introduction

The original contribution of this article is to explore the ways in which certaincharacteristics of economic actors in this case owner-managers of small manu-facturing businesses generate a tendency to prepare a business plan. Owner-manager characteristics can be divided into two groups. One group is made upof psychological characteristics and the other group consists of variables arisingfrom the owner-managers background. Burns (2001: 25) identifies the former aspersonal character traits and the latter as antecedent influences. Our focus is

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International Small Business JournalCopyright 2006 SAGE Publications

(London, Thousand Oaks and New Delhi)http://isb.sagepub.com

[DOI: 10.1177/0266242606067275]Vol 24(5): 496514

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primarily upon the antecedent influences such as education and prior experiencerather than those characteristics derived from personal character traits (Chell,1985; Chell et al., 1991). We do not dismiss the potential role of personal charac-ter traits upon an owner-managers propensity to prepare a business plan butsuch traits lie outside the scope of this enquiry.

The article is in five parts. The first section considers the nature of businessplanning in the small firm and factors that might influence the presence orabsence of business planning activities. The second section provides a briefoutline of the sampled firms and the research methodology. The third section ofthe article describes the frequency with which business planning is found in smallfirms and the characteristics of the owner-managers of those firms. The fourthexplores the role of the owner-managers and their business development strat-egies on the presence/absence of business planning, with particular emphasisupon the impact of antecedent influences on owner-manager behaviour. The fifthand final section considers the implications of the findings for agencies seekingto encourage more small firms to prepare business plans and considers ways inwhich this research can be taken forward.

Business Planning and the Owner-manager

Business planning can take a variety of forms from the informal to formalizedand carefully prepared plans. In this study, we are interested in the presence orabsence of formal written plans (hereafter business plans) rather than plans heldin the head of an owner-manager. The plan would also be a formal statement offuture intentions rather than something roughed out on the back of an envelope.There are a number of reasons for suggesting that business planning matters tothe small firm.

First, and most importantly, effective business planning is frequently seen asone of the important factors in business success (Burns, 2001; Kuratko andHodgetts, 2004; Rue and Ibrahim, 1998). The meta-analysis undertaken bySchwenk and Shrader (1993) argued that there seemed to be a consensus thatplanning was linked positively to growth, while Woods and Joyce (2003: 191) wereof the view that the weight of research evidence points to the beneficial effectsof planning on performance. There are some who argue that the preparation ofbusiness plans may be inappropriate for the small firm (Bridge et al., 1998) butthis seems a minority view.

Second, external agencies providing funding for either start up or expansionusually require a plan. Banks, venture capitalists and business angels will needsight of business plans before considering investment. The form of the plan mayvary between the agencies (Mason and Stark, 2004) but as Kuratko and Hodgetts(2004: 2967) observe the business plan is the minimum document required byany financial source.

Third, the need to plan is emphasized in the numerous pamphlets and guidesproduced by national and local business advice agencies. It is emphasized instandard textbooks on entrepreneurship, which offer chapters on business plans(Burns, 2001: 20137: 294324; Kirby, 2003: 23442; Kuratko and Hodgetts, 2004)

Richbell et al.: Owner-managers and Business Planning in the Small Firm

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and in a range of specialist publications that outline the best ways of writingbusiness plans (e.g. Sahlman, 1997; Stutely, 2002).

Finally, the business plan may be used by the small firm to serve as a strategicplanning document for the entrepreneurs, a plan to guide the business and serveas a basis for taking strategic decisions . . . [and] . . . also it may serve as a subse-quent monitoring device (Deakins and Freel, 2003: 329).

In view of its perceived ongoing value to the small business, it might beexpected that business planning would be a feature of many, if not most, smallfirms. However, despite the plethora of advice manuals, the mainly qualitativeevidence available to date suggests that business planning, within small firms, isan activity of a minority. This is highlighted by the comment of Woods and Joyce(2003: 183) that few small businesses use strategic planning. Quantitative assess-ment of the prevalence of business planning in small firms seems to be lacking inthe published literature with the exception of the study over a decade ago byNaffziger and Kuratko (1991).

There may be a number of reasons for the lack of business planning:

Historically the typical owner-manager has tended not to have pursued higher levels ofeducation or to take formal business training. Hence there are two possible reasons whyowner-managers tend not to plan: they are emotionally unsuited to it they think andact intuitively and they are simply unaware of the various tools which would enablethem to plan systematically. (Chell, 2001, 67)

Indeed, the limited awareness among owner-managers of the tools associatedwith the practice of strategic management has been confirmed by Woods andJoyce (2003). A further constraint, likely to restrict business planning by owner-managers, is that they may not have sufficient financial information to prepare abusiness plan. For example, at the lower end of the size range of small firms (withless than 10 employees), Nayak and Greenfield (1994: 227) note that only 33 percent regularly calculate profits to monitor their firms performance. A lack ofplanning may also relate to the fact that small firms are just too busy survivingto take time out to plan ahead while others might argue that the environment, inwhich they operate, is so turbulent there is little point in planning ahead(Westhead and Storey, 1996).

A lack of business planning in small firms does not necessarily mean that thesefirms are badly managed. It does, however, suggest that many owner-managersmiss out on the opportunity to consider the overall direction of the business andthat management decisions may be made on the basis of poor information.Further, if business planning is an important component for business success,advice agencies might find it useful to identify the characteristics of those owner-managers who are most receptive to the business planning idea.

Storey (1994a) identifies three components affecting owner-manager behav-iour that might be used to inform analysis of the determinants of businessplanning in small firms. These are the characteristics of the firms, the character-istics of owner-managers, and the owner-managers business development strat-egies (hereafter termed business strategy). Firm characteristics (such as sectorand size) were controlled out of our analysis in order to focus our attention on

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the owner-manager and business strategy variables. As noted earlier, within theowner-manager characteristics, we explore only the antecedent influences thatdescribe the backgrounds of the owner-managers rather than their personalitytraits. Of course, the two components on which attention is focused (antecedentinfluences and business strategy) are related to one another and the individualvariables grouped within each category do themselves show a high degree ofinterdependence. Nevertheless, the two components and the individual variablesprovide a useful conceptual framework within which to interpret the determi-nants of business planning within the small firm.

Owner-managers: Antecedent InfluencesAlthough the impact of antecedent influences on the propensity of owner-managers to prepare a business plan is poorly researched, the antecedent influ-ences on owner-managers are seen as critical in other aspects of the activities ofsmall firms. An overview of the wide range of antecedent influences that havebeen considered in studies of small firms is provided by Storey (1994a: 123). Aselection of the antecedent influences included in his listing, which seem to havethe potential to affect an owner-managers propensity to undertake businessplanning, are discussed in this section and taken forward as variables into theempirical analysis. Predictions of the direction in which the variables will operateare inevitably problematic as there is little prior work on the determinants ofbusiness planning upon which we can draw.

Age This has been included as a key variable in a number of studies of smallfirms but its effects on owner-manager behaviour have been difficult to identify.Nevertheless, it might have an influence on the propensity to have a business planand therefore needs to be included in the analysis.

Experience This variable may be strongly linked to age. It could be argued thatit might work in two ways. A long number of years running a firm as an owner-manager might increase the propensity to plan future directions for the business.Conversely, once the initial phases of a firms life have passed and funding issecured, planning might well be less of a priority.

Education This variable has been found to be an important influence on owner-manager behaviour (e.g. Storey et al., 1989). In the context of business planning,it might seem reasonable to hypothesize that the more highly educated owner-manager will tend to be more aware of the desirability of business planning andthus firms run by the better educated owner-managers might be more likely tohave business plans. In contrast, the owner-manager with a more limitededucation will tend to work outside a formal planning framework. Indeed, this isthe one variable where the arguments from previous research are sufficientlystrong to predict the direction of the relationship already outlined.

Entrepreneurial History A distinction here may be drawn between those forwhom the current firm is their first and serial founders. Westhead and Wright


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(1999), for example, have drawn a contrast between novice, portfolio and serialentrepreneurs. The latter, more experienced owner-managers, might be expectedto have a more formal approach to business planning in their business behaviour.

Previous Size Westhead and Birley (1993) identified previous size as an influ-ence on firm behaviour. In the context of business planning, we would argue thatowner-managers with previous work experience in larger firms, perhaps wherebusiness planning was seen as an important part of business behaviour, wouldtend to encourage business planning in their own firms. We might expect thiseffect to be most marked where owner-managers had worked for larger firmsimmediately before setting up their own businesses.

Previous Position Firm founders are drawn either from operatives or fromthose with previous managerial experience. It seems reasonable to argue that theformer will tend to be less involved in business planning whereas those withmanagerial experience may perceive value in undertaking business planning.There are parallels in this dichotomy with an early study (Smith, 1967), whichdrew a distinction between craftsman and opportunist.

Sector Experience Here it might be argued that owner-managers moving intoa new sector might be encouraged to plan rather more than those whose busi-nesses were in sectors in which they had considerable prior experience. Thisfactor was seen as important in a study of firm growth by Storey (1994b).

To these seven antecedent influences drawn from Storey (1994a), this researchadded two further characteristics of owner-managers that seemed to also havepotential to influence the presence/absence of business planning.

Born Locally This was introduced into the analysis as it might be expected thatlocal owner-managers, who grew up in the geographical area under study, willtend to be introspective and less receptive to contemporary managementpractice: a reflection perhaps of their limited experience of business practices inother geographical areas.

Local Embeddedness The relationship between small firms and their localitieshas become an important research area (see for example Curran and Blackburn,1994). Firms with links with local business institutions might be more likely toprepare a business plan. The argument here would be that mixing with localbusiness leaders would increase awareness of the value of business planning.Conversely, mixing with other owner-managers of small firms might reinforcescepticism towards the idea of business planning, especially where businessplanning was not seen as a key element of business activity.

Owner-managers: Business StrategyWe turn now from the antecedent influences which might guide owner-managerbehaviour, to the possible effects of business strategy on the propensity toprepare business plans. Broadly, it is expected that firms oriented towards growth


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will show a greater propensity to undertake business planning. It does not seemunreasonable to argue that a firm with a committed development strategy wouldhave a business plan. In most cases, this might also be reflected in an aim toincrease the size of the customer base. Indeed, wherever a strategy of growthrequired external support (either from financial institutions or business adviceagencies), it is likely (as noted earlier) that the external support agencies wouldrequire a business plan as a condition of their support.

In this article, we examine the effects of both antecedent influences uponowner-managers behaviour and their business development strategies on thepresence/absence of business planning in small firms, while controlling out thecharacteristics of the firms in which the owner-managers are operating. The keyresearch questions addressed in this article are as follows:

1. How prevalent is business planning among the owner-managers of smallfirms?

2. Are owner-manager and business strategy characteristics important indistinguishing between those owner-managers with business plans andthose without?

3. Which owner-manager and business strategy characteristics are important?

Methodology

Since our interests were in owner-manager characteristics derived fromantecedent influences, together with business strategy variables, we attempted tocontrol out size and sector effects in our sample design by focusing on small firmswithin a single sector. Thus, this study is based on a sample of small metalwork-ing firms. The influence of firm characteristics, such as sector and size, on firmbehaviour has been well explored over the last three decades. Sector contrasts(between the largest group of firms in industry 316 hand tools and finishedmetal goods and all other firms in the sample) and size (employment andturnover) variables were included in some of the preliminary analysis but nosector or size effects were detected.

The sample was drawn from the small metalworking firms in Sheffield (UK).Sheffield is the fifth largest city in the UK. It has a population of around half amillion people and a metal working sector employing 17,000 people, just under ahalf of the citys entire manufacturing work force. Although Sheffields manufac-turing employment fell from around 120,000 employees in 1978 to 36,000 in 2001,Sheffield is still a city in which manufacturing, as a whole, and metalworking, inparticular, are over-represented in comparison to the national average.

A small firm was defined as one with less than 50 employees (Department ofTrade and Industry, 1999). The data relate to a sample drawn from 214 small inde-pendent metalworking firms in Sheffield listed in Dun and Bradsheets directoryof businesses in South Yorkshire. The random sample was drawn and 70 firmsparticipated in the survey based on face-to-face interviews using a semi-struc-tured interview schedule. These firms represent a response rate of 75%. Tests forresponse bias were possible on sector and size and no significant difference was


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found between the respondents and the original sample. The majority of the firms(90%) had been operating for 5 or more years. Although 4 firms could trace theirorigins to before 1914, some 63% were less than 25 years old. The median size ofthe firms was 20 employees (measured in terms of full-time equivalents) and themodal turnover was between 500,000 and 750,000.

Virtually all the interviews (85%) were with the owner-managers; the otherinterviews were with senior managers. In some cases, the senior managers werethe only viable respondents as they were working for retired owners who hadrelinquished overall control of the firm but maintained a financial link. In othercases, the senior managers worked closely with the owners, who were stillinvolved in the business, and the majority of these senior managers shared theiroffices with their respective owners. These senior managers could answer the keyquestions about the antecedent influences and strategic variables, in which wewere interested, and thus the use of a small number of senior managers is not asproblematic as it would have been if we were interested in the psychological andpersonality characteristics of the owner-managers. There were neither femaleowner-managers nor owner-managers from ethnic minorities in the randomsample upon which this article is based. They were rare in the population fromwhich the sample was drawn.

The interview schedule was designed to collect data on potential antecedentinfluences on owner-managers and a number of strategic characteristics inaddition to asking about the presence or absence of a business plan and, whereappropriate, the time period to which the plan applied. Admittedly, there arevarious degrees of business planning within a firm. Preparing a business plan doesnot necessarily mean that the plan will be used by owner-managers on a regularbasis (it may be put in a draw and never consulted again). Therefore, the natureof business planning might be better measured in a scalar form (e.g. Rhyne, 1986;Wood and LaForge, 1981) rather than as a dichotomous measure. However, adichotomous variable seemed appropriate as a first step towards measurementsince, as noted earlier, the determinants of business planning by the owner-managers of small firms is an under-researched field. The use of a dichotomousmeasure was further supported by the observation of Naffziger and Kuratko(1991: 100) that while there is a debate regarding how to measure the extent offormality in planning systems of large organisations, for small businesses thetrend seems to be one of looking at whether the firms use any planning tech-niques or not. The implications of using a dichotomous measure to indicate theprevalence of business planning in a group of small firms are considered furtherin the conclusion.

Some firm-related characteristics were also included in the interview scheduleto check for the presence of any uncontrolled firm variables. A distinction in theactivities undertaken by the firms could be drawn between firms manufacturingproducts and those treating metals, a division which cuts across conventionalindustrial categories. In the first group came activities such as the manufactureof cutting tools for machines, hand saws, scissors and springs, while in the secondgroup are activities such as electroplating, laser cutting, and heat treatment.Almost two-thirds of the firms fell into the former category. The expected


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distinction between those firms serving primarily intermediate markets and thoseselling to final demand is also clear. The majority of firms (two-thirds) sold on toother firms rather than into final markets. Lastly, and regardless of activities andend uses, technological variations between firms were marked. These weremeasured by the self ratings of the small firm owner-managers. Around half sawthemselves as users of high technology processes or producers of high technologyproducts. Analysis revealed that not one of these additional firm characteristicsshowed any significant relationship with a propensity to prepare a business plan.

The data are explored through the analysis of bivariate relationships using non-parametric statistics. The relatively small sample size precluded more detailedstatistical analysis.

Business Planning, Owner-manager Characteristics andBusiness Strategies

Business PlanningOver half the owner-managers (Table 1) had no business plan. This is a findingthat fits well with the common perception of the lack of planning in small firms.Clearly, business planning is not a feature of the majority of small firms, at leastnot within this sample of firms within this location. Nevertheless, businessplanning did exist in just under half (46%) of the surveyed firms.

Over 90% of the 32 firms with business plans were planning within a 5 yeartime frame (Table 2), with approximately one half operating within either a 3 yearor 5 year span. A further two-fifths were operating within the shorter spans ofone or two years. Since all but 10% of the firms had been operating for over 7years, it would seem that these were not business plans prepared at start-up and


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Table 1. Business Planning in Small Metal-working Firms

Business planning n %

Formal written business plan 32 46No plan 38 54

All firms 70 100

Source: Interview schedule.

Table 2. Business Planning Time Horizons in Small Metal-working Firms

Time horizon n %

One year 8 25Two year 4 13Three year 9 28Five year 8 25> Five year 3 9

All plans 32 100

Source: Interview schedule.


then forgotten. Three respondents claimed to be operating within 10 or 20 yearplans. Whether these three could be called business planners might be open todoubt but they were included within the business-planning group.

The key point to emerge from this measure of business planning in small firmsis that there are two groups of owner-managers: those who have a business planand those who do not. It is therefore important to ask how this dichotomy canbe explained.

Owner-manager CharacteristicsThe characteristics (derived from antecedent influences) of the owner-managersof the sample metal working small firms are summarized in Table 3. Owner-managers ranged in age from 26 to over 65 years of age with more than a thirdfalling in the median age range of 4655 years and well over one-half were over46 years of age. Not surprisingly, in view of the age of most of the owner-managers,


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Table 3. Owner-manager and Business Strategy Characteristics

Variable All Respondents (n) Respondents (%)

Owner-manager(Antecedent influences)

Age(46 years or more) 70 60Experience(10 years or more with present firm) 70 54Education(Left school aged 16 or younger) 70 61First firm(Yes) 70 71Previous firm size(50 or less employees) 51* 53Previous position(Managerial/executive) 53* 67Same sector(Yes) 53* 72Born locally(Yes) 70 87Local involvement(Some to high) 70 34

Business strategyCustomer target(Increase customer base) 70 73Strategy(Desire to increase turnover) 70 67

*Subset of 53 owner-managers who were employed in another firm immediately before settingup their current business. These are, of course, predominantly those setting up their first firm.No data were available for two respondents in the previous firm size category.Source: Interview schedule.


just over half had been controlling their firms for 10 or more years and 14% hadhad over 20 years experience. However, the wealth of experience should not beover-estimated as one-third had been running their firms for five years or less.

Their formal educational levels tended to be low. The majority had had onlythe minimal full-time education, leaving school at the age of 16 or earlier, andalmost three-quarters had ceased their full-time education at 18 or earlier. Therewere, however, a very small number of well-educated individuals. An estimate,based on the age at which the owner-managers had left full-time education,suggests just over 10% were university graduates. This latter figure is relativelyhigh given the age cohorts from which the sample is drawn.

Among these owner-managers, a distinction could be drawn between those forwhom their current business was their first firm and those who were serial owner-managers. The majority (almost three-quarters) were novice owner-managerssetting up their first firm. Among those owner-managers who were employed inanother firm immediately before setting up their current firm, there was analmost equal division between those who had moved out of employment in asmall firm to set up in business and those who had moved out of a medium tolarge organization. Indeed, almost 10% had been employed in firms with 1000 ormore employees immediately before setting up their own firm. Regardless of thesize of their previous firms, a significant number (two-thirds) had gained mana-gerial or executive experience in their previous employment before setting uptheir own firms. They can be contrasted with the remainder of the sample groupwho had been working more directly in production. There was a clear tendencyfor the owner-managers to build on their previous experience in that nearlythree-quarters were running their own firms in the same sector as the one theyhad worked in previously.

A striking feature of these metalworking firms (perhaps not surprising in firmsbased mainly on traditional industries) is that virtually all (87%) of the owner-managers had grown up in Sheffield. Further, this sample of owner-managerswere all very independent, self-driven individuals who seemed to see little to begained from interaction with local business institutions. Two-thirds reported noinvolvement in local institutions such as the Chamber of Commerce, the Rotaryclubs and trade organizations. The mean score, in this research, for local involve-ment was 1.6 (where 5 represented high involvement and 1 represented noinvolvement). Only one respondent was rated as fully involved in local businessinstitutions.

Business StrategiesThere were striking variations in business strategies. An active search for newcustomers was characteristic of the majority (three-quarters of the firms) but onequarter did not undertake such searches. Similarly, while two-thirds admitted toan aim to increase their turnover, one-third did not. Clearly, within this sample,there is a subset of growth-oriented owner-managers whose propensity to under-take business planning might be contrasted with those who were content withtheir current level of business. The latter may well belong to that group of owner-managers often characterized as running lifestyle firms.


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From this overview of the selected owner-manager characteristics and thestrategies of the sampled firms, it is now possible to explore the extent to whichthese differing characteristics and strategies influence whether or not a firmengages in business planning. The main focus is on the role of owner-managercharacteristics in influencing the propensity for business planning.

Owner-manager Characteristics, Business Strategies andBusiness Planning

Owner-manager Characteristics and Business PlanningThe results of the bivariate analysis are summarized in Table 4. Of the eightantecedent influences on owner-managers that were measured, five showed nosignificant relationships while three were significant at the 0.05 level.

Although age and experience had no significant relationship with businessplanning, the predicted positive relationship between higher levels of educationand undertaking business planning was in the expected direction. Those who had


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Table 4. Owner-manager and Business Strategy Characteristics and Business Planning

With business plan(Chi-square 2-tailedSignificant Difference)

Owner-manager(Antecedent influences)

Age/Experience NS(More)Education .035(Above minimum education) *

1-tailedFirst firm NS(Yes)Previous size .037(Medium/large) *Previous position NS(Operative)Different sector .049(Yes) *Grew up in city NS(Yes)Local involvement NS(Yes)

Business strategySeeks new customers .011(Yes) *Growth strategy .072(Desire to increase turnover) +

Notes: *p < 0.05; +p < 0.10; NS = Not significant.


extended their education beyond the minimum school leaving age were signifi-cantly more likely to plan than those who had not (p = 0.035, 1-tailed). Amongthose who had extended their education beyond the minimum age, almost 60%had a business plan, compared with less than 40% of those with a more limitededucation (Table 5). Similarly, those who had extended their education beyondthe age of 18 were more likely to plan than those who had left school earlier.

Rather surprisingly, those whose previous experience was at operative levelwere as likely to have a business plan as those who had held managerial or exec-utive positions, while serial entrepreneurs were no more likely to plan thannovice entrepreneurs running their first firm (Table 4).

However, an important influence on the presence/absence of business planningamong those who had previously been employed by another firm was whether ornot they had worked for a medium or large firm immediately before setting uptheir own business. There was a significant propensity to engage in businessplanning among those who had worked for a medium/large firm immediatelybefore setting up their own firm (p = 0.037). Whereas almost two-thirds of thosewith recent experience of working in a medium/large firm were business planners,this was true of only a third of those formerly working in small firms (Table 6).This finding suggests these owner-managers from the medium/large firm grouphad been aware of business planning in their previous employment.

Perhaps the most striking, but understandable finding, was the tendency (p =0.049) for owner-managers, operating in sectors with which they had little famil-iarity, to undertake business planning. Whereas two-thirds of those moving into


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Table 5. Business Planning and Full-time Education

Minimum education Above minimumeducation

With plan n 16 16% 37 59

No plan n 27 11% 63 41

Totals n 43 27% 100.0 100.0

Notes: Chi-square = 3.25; 1-tailed; p = 0.035; N = 70.

Table 6. Business Planning and Previous Size

Small (50 or less employees) Medium/Large

With plan n 9 15% 33.3 62.5

No plan n 18 9% 66.7 37.5

Totals n 27 24% 100.0 100.0

Notes: Chi-square = 4.33; 2-tailed; p = .037; N = 51.


a new sector were business planners, this was true of only just over one-third ofthose staying with the sector in which they had experience (Table 7). We wouldinterpret this tendency to produce business plans by those moving into a newsector, to reflect the higher levels of uncertainty the owner-managers faced inoperating in an area that was new to them.

The degree of engagement with the local business community had no signifi-cant influence on business planning. Those linked to business institutions were nomore likely to plan than those who were not. Similarly, those firmly grounded inthe local community were not more adverse to business planning than those bornand brought up outside the local metal working area.

Business Strategies and Business PlanningThe last stage of the analysis focused on the two business strategy variables. Thisrevealed that both measures of business strategy had a significant and positiverelationship with the presence of business planning among the owner-managersof these small metal working firms. The growth-orientated owner-managers hada high propensity to have a business plan whether growth-orientation wasmeasured by expressing an aim to increase their turnover (Table 4, p = 0.072) orby actively seeking new customers (Table 8, p = 0.011). In part, this may reflectthe point noted earlier, that the necessity to raise finance to fund expansion mightrequire the preparation of a business plan for the funding agencies. Of those smallbusinesses that actively sought new customers, over one-half had a business planwhereas this was true of less than one-quarter of those who were less proactive


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Table 7. Business Planning and Sector Experience

Same sector Different sector

With plan n 14 10% 36.8 66.7

No plan n 24 5% 63.2 33.3

Totals n 38 15% 100.0 100.0


Table 8. Business Planning and Seeking Customers

Seeking customers Not seekingcustomers

With plan n 28 4% 54.9 21.1

No plan n 23 15% 45.1 78.9

Totals n 51 19% 100.0 100.0



in developing their customer base. Contrasts between firms with growth strat-egies and those following the lifestyle path were less strong statistically. Amongfirms aiming to increase turnover, almost 80% had a business plan compared withunder 60% of those who were running more lifestyle businesses and had nodesire to increase turnover.

Limitations of the Study

Before drawing our evidence together, it is important to stress that this study isconfined to a sample of the owner-managers of small firms in one sector in onepart of the UK. Since this is one of the first studies of its kind, the measure ofbusiness planning is the presence/absence of a formal written business plan; wewere not able to measure the extent of business planning within a firm. Further,the characteristics of the owner-managers were grouped into antecedent influ-ences and business strategy variables rather than those variables that measureattributes of the personality of the owner-manager. It is also recognized that therelationships we identified are only significant at a relatively low level but thisreflects, in part, the small size of our initial sample. We would argue that despitethese caveats a number of useful conclusions can be drawn and some futureresearch agendas identified.

Conclusions

It will be recalled that previous research (Naffziger and Kuratko, 1991; Woodsand Joyce, 2003) had noted that business planning was relatively undevelopedwithin the small firm sector. Our results confirm this well-established feature. Abusiness plan is a characteristic feature of about half of the small firms in oursample. There still remains a high proportion of owner-managers of small firmswho do not have a business plan.

The results also support the view of Storey (1994a) that it is useful to measureowner-manager characteristics and business strategy variables in order to informan analysis of the behaviour of owner-managers. We have demonstrated that bothowner-manager characteristics and business strategy variables can be an influ-ence upon whether or not small firms have a business plan when controls havebeen introduced for sector and size.

The key antecedent influences, associated with a greater tendency to have abusiness plan, are a higher level of education, previous work experience in amedium/large firm and running a business in sectors outside their previousexperience. These variables have been found to be important in determiningother aspects of small firms behaviour (Storey, 1994b; Storey et al. 1989;Westhead and Birley, 1993). Not unexpectedly, those firms with growth strategiesalso tended to have business plans. There may be other variables we failed tomeasure and, indeed, in this study, the effects of both gender and ethnicity couldnot be included because of the particular characteristics of the sampled firms.

Perhaps surprisingly, there was no evidence that previous management experi-ence was linked to a higher propensity to prepare a business plan. Interpreting


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this result is problematic but it might reflect the fact that those owner-managerswith management experience are somewhat cynical about the value of paperexercises and the writing of business plans.

Although this is a study of small firms, in one industry, in one part of the UK,this article has demonstrated that antecedent influences upon owner-managersand their business strategies cannot be ignored in trying to understand whetheror not owner-managers have a business plan. Business advice agencies find thattargeting specific small firms and their owner-managers can be problematic for avariety of reasons (North et al., 1997) but our study helps to identify those smallfirm owner-managers who might be most receptive to business planning ifbusiness advice agencies adopt a proactive response. It could be argued thatsuccess is most likely to come from approaches to those owner-managers with thecharacteristics of planners but who are not yet planners. Our statistical analysishas identified a tendency for owner-managers with certain characteristics to bebusiness planners, but not all managers with these characteristics are businessplanners. These are the owner-managers who may be receptive to advice onbusiness planning rather than outwardly hostile.

However, owner-manager characteristics are rarely in the public domain sosuch targeting becomes difficult. Nevertheless, since such characteristics areimportant, selected owner-manager characteristics could be collected from smallfirms by business advice agencies as part of their regular (and sometimes annual)employers surveys to help identify where advice on business planning might betargeted most fruitfully. Such a task would not be straightforward if the aim wasto measure personal character traits but, in our analysis of the antecedent influ-ences and strategic characteristics of owner-managers, we have identified a set ofvariables that could be measured readily by organizations offering businessadvice.

In view of the very limited research into the factors influencing the propensityof owner-managers to prepare a business plan, our final comments provide anindication of possible directions for future research. First, it is clearly a priorityto identify the extent and nature of the business planning among those owner-managers who have chosen to plan. Analysis should move towards scalarmeasures of business planning rather than the dichotomous variable used here(Rhyne, 1986; Wood and LaForge, 1981). Second, rather more needs to be knownabout the ways in which the business plan informs the business behaviour of theowner-managers of small firms. Is the business plan a document that is preparedand then filed away and forgotten or is it reviewed on a regular basis? Third,investigation of the role of external assistance in driving the preparation of abusiness plan needs analysis. It could be that the antecedent influences andbusiness strategy variables that we have identified are those which are associatedwith owner-managers who seek external funding. Finally, research agendas doneed to look more closely at the ways in which personality traits of owner-managers might affect the propensity to undertake business planning.


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AcknowledgementsThe authors are indebted to the Editor and the two anonymous referees whose commentshelped us to fine-tune our arguments.

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SUZANNE M. RICHBELL is a Senior Lecturer in Sheffield University ManagementSchool with research interests in aspects of human resource management. She isparticularly interested in the public-private interface and is currently exploring theimpact of government regulation on business organizations. Her consultancy workhas involved research for both the police and prison service. Please address allcorrespondence to: Suzanne Richbell, Sheffield University Management School, 9,Mappin Street, Sheffield, S1 3DT, UK. [email: [email protected]]

H. DOUG WATTS is a Reader in Geography at the University of Sheffield whosecurrent research is focused on the roles of small firms within regions and urbaneconomies. He has published extensively on the regional impacts of both large andsmall business in the manufacturing sector. Address: H. Doug Watts, Departmentof Geography, University of Sheffield, Sheffield, S10 2TN, UK.[email: [email protected]]

PERRY WARDLE completed his doctoral studies at Sheffield University and hasworked for several local governments in the UK. He is currently Head ofRegeneration in a local authority in the West Midlands region. This article is basedupon part of the data set he collected for his PhD dissertation. Address: PerryWardle, Staffordshire Moorlands District Council, Moorlands House, StockwellStreet, Leek, ST13 6HQ, UK. [email: [email protected]]


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Propritaires exploitants et planification des activits de la petiteentreprise

Suzanne Richbellcole de gestion de lUniversit de Sheffield, RU

H. Doug WattsUniversit de Sheffield, RU

Perry WardleMunicipalit de Staffordshire Moorlands, RU

Cet article examine comment les spcificits des propritaires exploitants des petitesentreprises peuvent avoir une influence sur la dcision des entreprises dadopter ou nonun plan dactivits. Laccent est avant tout mis sur les facteurs antrieurs qui influent surla carrire de ce type de dirigeants, savoir leur niveau dducation et lexprience quilspossdent. Les informations disponibles proviennent dune tude effectue auprs depropritaires exploitants de petites entreprises de transformation de mtaux, implantes Sheffield au RU. Ainsi, lon constate qu peu prs la moiti de ces dirigeants travaillentconformment un plan dactivits, et que les facteurs dinfluence antrieurs (ducation,exprience), associs un plan dactivits, incluent un niveau dducation suprieur lamoyenne et une exprience prcdente du travail dans une grande entreprise immdiate-ment avant de fonder leur propre entreprise et de diriger des entreprises dans des secteursnappartenant normalement pas leur sphre dexprience prcdente. Il nest donc pastonnant que le fait de disposer dun plan dactivits est une composante positivementassocie aux propritaires exploitants dont lentreprise est oriente vers lessor. Ltudeconclut que les spcificits des propritaires exploitants peut contribuer dune faonsignificative expliquer la prsence/labsence dun plan dactivits au sein dune petiteentreprise.

Mots cls: plans dactivits; propritaires exploitants; petites entreprises

Directores propietarios y planificacin de actividades en la pequeaempresa

Suzanne RichbellEscuela de Gestin Empresarial de la Universidad de Sheffield, RU

H. Doug WattsUniversidad de Sheffield, RU

Perry WardleAyuntamiento de Staffordshire Moorlands, RU

Este artculo examina las formas en que las caractersticas de los directores propietariosinfluyen en la decisin de las empresas de adoptar o no adoptar un plan de actividades.Se focaliza ante todo en las influencias antecedentes ejercidas en los directores propietar-ios tales como la educacin y experiencia anterior. Los datos se obtienen de una encuestade los directores propietarios de pequeas empresas de productos metalrgicos enSheffield, RU. Casi la mitad de los directores propietarios encuestados tiene un plan deactividades. Las influencias antecedentes sobre los directores propietarios relacionadascon la posesin de un plan de actividades incluyen un nivel por encima de la media deeducacin, experiencia laboral anterior en una gran empresa antes de fundar su propia


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firma y direccin de empresas en sectores fuera de su experiencia previa. Como es lgico,la posesin de un plan de actividades demuestra una asociacin positiva con aquellosdirectores propietarios orientados hacia el crecimiento. Se concluye que las caractersti-cas de los directores propietarios pueden ser un factor importante para determinar la pres-encia o falta de un plan de actividades en la pequea empresa.

Palabras clave: planes de actividades; directores propietarios; pequeas empresas

Eigentmer-Unternehmer und Unternehmensplanung in Kleinbetrieben

Suzanne RichbellUniversitt Sheffield, Fakultt fr Betriebswirtschaftslehre, Grobritannien

H. Doug WattsUniversitt Sheffield, Grobritannien

Perry WardleKreisverwaltung Staffordshire Moorlands, Grobritannien

Dieser Beitrag untersucht die Art und Weise, in der die Charaktereigenschaften derEigentmer-Unternehmer von Kleinbetrieben einen Einflu darauf haben, ob derartigeBetriebe ber einen Geschftsplan verfgen oder nicht. Hierbei konzentriert man sich inder Hauptsache auf vorausgegangene Einflsse, wie z.B. Bildung und bisherige Erfahrung.Den Daten liegt eine Umfrage von Eigentmer-Unternehmern kleiner metallverarbeiten-der Betriebe in Sheffield in Grobritannien zugrunde. Rund die Hlfte der befragtenEigentmer-Unternehmer besitzen einen Unternehmensplan. Zu den vorausgegangenenEinflssen auf die Eigentmer-Unternehmer, die eine signifikante Beziehung mit demVorhandensein eines Unternehmensplans aufweisen, gehren u.a. ein berdurchschnit-tlicher Bildungsgrad, einschlgige Arbeitserfahrung in einer groen Firma unmittelbar vorder Grndung des eigenen Unternehmens und die Leitung von Firmen in Sektoren au-erhalb ihrer bisherigen Erfahrung. Es ist kaum berraschend, dass sich eine positiveBeziehung zwischen dem Vorhandensein eines Unternehmensplans und den Eigentmer-Unternehmern mit einer auf Wachstum ausgerichteten Einstellung feststellen lsst. Eswird der Schluss gezogen, dass die Charaktereigenschaften von Eigentmer-Unternehmern eine wichtige Rolle in der Begrndung fr das Vorhandensein bzw.Nichtvorhandensein eines Unternehmensplans innerhalb eines Kleinbetriebs spielenknnen.

Schlagwrter: Unternehmensplne; Eigentmer-Unternehmer; Kleinbetriebe


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