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Citations http://isb.sagepub.com/cgi/content/refs/24/5/496
is
bj
H . D O U G WAT T S
University of Sheffield, UK
P E R RY WA R D L E
Staffordshire Moorlands District Council, UK
Introduction
The original contribution of this article is to explore the ways in which certain
characteristics of economic actors in this case owner-managers of small manufacturing businesses generate a tendency to prepare a business plan. Ownermanager characteristics can be divided into two groups. One group is made up
of psychological characteristics and the other group consists of variables arising
from the owner-managers background. Burns (2001: 25) identifies the former as
personal character traits and the latter as antecedent influences. Our focus is
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Methodology
Since our interests were in owner-manager characteristics derived from
antecedent influences, together with business strategy variables, we attempted to
control out size and sector effects in our sample design by focusing on small firms
within a single sector. Thus, this study is based on a sample of small metalworking firms. The influence of firm characteristics, such as sector and size, on firm
behaviour has been well explored over the last three decades. Sector contrasts
(between the largest group of firms in industry 316 hand tools and finished
metal goods and all other firms in the sample) and size (employment and
turnover) variables were included in some of the preliminary analysis but no
sector 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 a
million people and a metal working sector employing 17,000 people, just under a
half of the citys entire manufacturing work force. Although Sheffields manufacturing 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, in
particular, are over-represented in comparison to the national average.
A small firm was defined as one with less than 50 employees (Department of
Trade and Industry, 1999). The data relate to a sample drawn from 214 small independent metalworking firms in Sheffield listed in Dun and Bradsheets directory
of businesses in South Yorkshire. The random sample was drawn and 70 firms
participated in the survey based on face-to-face interviews using a semi-structured interview schedule. These firms represent a response rate of 75%. Tests for
response bias were possible on sector and size and no significant difference was
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32
38
70
46
54
100
One year
Two year
Three year
Five year
> Five year
All plans
8
4
9
8
3
32
25
13
28
25
9
100
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Owner-manager Characteristics
The characteristics (derived from antecedent influences) of the owner-managers
of the sample metal working small firms are summarized in Table 3. Ownermanagers ranged in age from 26 to over 65 years of age with more than a third
falling in the median age range of 4655 years and well over one-half were over
46 years of age. Not surprisingly, in view of the age of most of the owner-managers,
Table 3. Owner-manager and Business Strategy Characteristics
Variable
Owner-manager
(Antecedent influences)
Age
(46 years or more)
Experience
(10 years or more with present firm)
Education
(Left school aged 16 or younger)
First firm
(Yes)
Previous firm size
(50 or less employees)
Previous position
(Managerial/executive)
Same sector
(Yes)
Born locally
(Yes)
Local involvement
(Some to high)
Business strategy
Customer target
(Increase customer base)
Strategy
(Desire to increase turnover)
Respondents (%)
70
60
70
54
70
61
70
71
51*
53
53*
67
53*
72
70
87
70
34
70
73
70
67
*Subset of 53 owner-managers who were employed in another firm immediately before setting
up 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.
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Business Strategies
There were striking variations in business strategies. An active search for new
customers was characteristic of the majority (three-quarters of the firms) but one
quarter did not undertake such searches. Similarly, while two-thirds admitted to
an 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 undertake business planning might be contrasted with those who were content with
their current level of business. The latter may well belong to that group of ownermanagers often characterized as running lifestyle firms.
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NS
.035
*
1-tailed
NS
.037
*
NS
.049
*
NS
NS
Business strategy
Seeks new customers
(Yes)
Growth strategy
(Desire to increase turnover)
.011
*
.072
+
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With plan
No plan
Totals
n
%
n
%
n
%
Minimum education
Above minimum
education
16
37
27
63
43
100.0
16
59
11
41
27
100.0
extended their education beyond the minimum school leaving age were significantly more likely to plan than those who had not (p = 0.035, 1-tailed). Among
those 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 limited
education (Table 5). Similarly, those who had extended their education beyond
the age of 18 were more likely to plan than those who had left school earlier.
Rather surprisingly, those whose previous experience was at operative level
were as likely to have a business plan as those who had held managerial or executive positions, while serial entrepreneurs were no more likely to plan than
novice entrepreneurs running their first firm (Table 4).
However, an important influence on the presence/absence of business planning
among those who had previously been employed by another firm was whether or
not they had worked for a medium or large firm immediately before setting up
their own business. There was a significant propensity to engage in business
planning among those who had worked for a medium/large firm immediately
before setting up their own firm (p = 0.037). Whereas almost two-thirds of those
with 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 group
had 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 familiarity, to undertake business planning. Whereas two-thirds of those moving into
Table 6. Business Planning and Previous Size
Small (50 or less employees) Medium/Large
With plan
No plan
Totals
n
%
n
%
n
%
9
33.3
18
66.7
27
100.0
15
62.5
9
37.5
24
100.0
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With plan
No plan
Totals
n
%
n
%
n
%
Same sector
Different sector
14
36.8
24
63.2
38
100.0
10
66.7
5
33.3
15
100.0
a new sector were business planners, this was true of only just over one-third of
those staying with the sector in which they had experience (Table 7). We would
interpret this tendency to produce business plans by those moving into a new
sector, to reflect the higher levels of uncertainty the owner-managers faced in
operating in an area that was new to them.
The degree of engagement with the local business community had no significant influence on business planning. Those linked to business institutions were no
more likely to plan than those who were not. Similarly, those firmly grounded in
the local community were not more adverse to business planning than those born
and brought up outside the local metal working area.
With plan
No plan
Totals
n
%
n
%
n
%
Seeking customers
Not seeking
customers
28
54.9
23
45.1
51
100.0
4
21.1
15
78.9
19
100.0
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Conclusions
It will be recalled that previous research (Naffziger and Kuratko, 1991; Woods
and Joyce, 2003) had noted that business planning was relatively undeveloped
within the small firm sector. Our results confirm this well-established feature. A
business plan is a characteristic feature of about half of the small firms in our
sample. There still remains a high proportion of owner-managers of small firms
who do not have a business plan.
The results also support the view of Storey (1994a) that it is useful to measure
owner-manager characteristics and business strategy variables in order to inform
an analysis of the behaviour of owner-managers. We have demonstrated that both
owner-manager characteristics and business strategy variables can be an influence upon whether or not small firms have a business plan when controls have
been introduced for sector and size.
The key antecedent influences, associated with a greater tendency to have a
business plan, are a higher level of education, previous work experience in a
medium/large firm and running a business in sectors outside their previous
experience. These variables have been found to be important in determining
other aspects of small firms behaviour (Storey, 1994b; Storey et al. 1989;
Westhead and Birley, 1993). Not unexpectedly, those firms with growth strategies
also tended to have business plans. There may be other variables we failed to
measure and, indeed, in this study, the effects of both gender and ethnicity could
not be included because of the particular characteristics of the sampled firms.
Perhaps surprisingly, there was no evidence that previous management experience was linked to a higher propensity to prepare a business plan. Interpreting
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Acknowledgements
The authors are indebted to the Editor and the two anonymous referees whose comments
helped us to fine-tune our arguments.
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PERRY WARDLE completed his doctoral studies at Sheffield University and has
worked for several local governments in the UK. He is currently Head of
Regeneration in a local authority in the West Midlands region. This article is based
upon part of the data set he collected for his PhD dissertation. Address: Perry
Wardle, Staffordshire Moorlands District Council, Moorlands House, Stockwell
Street, Leek, ST13 6HQ, UK. [email: perry.wardle@staffordshiremoorlands.gov.uk]
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