International Small Business Journal

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Owner-managers and Business Planning in the Small Firm

Suzanne M. Richbell, H. Doug Watts and Perry Wardle
International Small Business Journal 2006; 24; 496
DOI: 10.1177/0266242606067275
The online version of this article can be found at:
http://isb.sagepub.com/cgi/content/abstract/24/5/496

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International Small Business Journal

Copyright 2006 SAGE Publications
(London, Thousand Oaks and New Delhi)
http://isb.sagepub.com
[DOI: 10.1177/0266242606067275]
Vol 24(5): 496514

is
bj

Owner-managers and Business

Planning in the Small Firm
SUZANNE M. RICHBELL
Sheffield University Management School, UK

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

This article explores the ways in which the characteristics of the

owner-managers of small firms influence whether or not those firms have a
business plan. The focus is primarily on antecedent influences on
owner-managers such as education and prior experience. Data are drawn
from a survey of the owner-managers of small metalworking firms in
Sheffield, UK. Around half the sample of owner-managers possess a business
plan. Antecedent influences on owner-managers showing a significant
association with the possession of a business plan include an above average
level of education, previous work experience in a large firm immediately
before setting up their firm and running firms in sectors outside their
previous experience. Not surprisingly, possession of a business plan showed
a positive association with those owner-managers with a growth orientation.
It is concluded that owner-manager characteristics can be important in
explaining the presence/absence of a business plan within the small firm.
K E Y WO R D S :

business plans; owner-managers; small firms

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

primarily upon the antecedent influences such as education and prior experience
rather than those characteristics derived from personal character traits (Chell,
1985; Chell et al., 1991). We do not dismiss the potential role of personal character traits upon an owner-managers propensity to prepare a business plan but
such traits lie outside the scope of this enquiry.
The article is in five parts. The first section considers the nature of business
planning in the small firm and factors that might influence the presence or
absence of business planning activities. The second section provides a brief
outline of the sampled firms and the research methodology. The third section of
the article describes the frequency with which business planning is found in small
firms and the characteristics of the owner-managers of those firms. The fourth
explores the role of the owner-managers and their business development strategies on the presence/absence of business planning, with particular emphasis
upon the impact of antecedent influences on owner-manager behaviour. The fifth
and final section considers the implications of the findings for agencies seeking
to encourage more small firms to prepare business plans and considers ways in
which this research can be taken forward.

Business Planning and the Owner-manager

Business planning can take a variety of forms from the informal to formalized
and carefully prepared plans. In this study, we are interested in the presence or
absence of formal written plans (hereafter business plans) rather than plans held
in the head of an owner-manager. The plan would also be a formal statement of
future intentions rather than something roughed out on the back of an envelope.
There are a number of reasons for suggesting that business planning matters to
the small firm.
First, and most importantly, effective business planning is frequently seen as
one of the important factors in business success (Burns, 2001; Kuratko and
Hodgetts, 2004; Rue and Ibrahim, 1998). The meta-analysis undertaken by
Schwenk and Shrader (1993) argued that there seemed to be a consensus that
planning was linked positively to growth, while Woods and Joyce (2003: 191) were
of the view that the weight of research evidence points to the beneficial effects
of planning on performance. There are some who argue that the preparation of
business plans may be inappropriate for the small firm (Bridge et al., 1998) but
this seems a minority view.
Second, external agencies providing funding for either start up or expansion
usually require a plan. Banks, venture capitalists and business angels will need
sight of business plans before considering investment. The form of the plan may
vary between the agencies (Mason and Stark, 2004) but as Kuratko and Hodgetts
(2004: 2967) observe the business plan is the minimum document required by
any financial source.
Third, the need to plan is emphasized in the numerous pamphlets and guides
produced by national and local business advice agencies. It is emphasized in
standard textbooks on entrepreneurship, which offer chapters on business plans
(Burns, 2001: 20137: 294324; Kirby, 2003: 23442; Kuratko and Hodgetts, 2004)
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International Small Business Journal 24(5)

and in a range of specialist publications that outline the best ways of writing
business plans (e.g. Sahlman, 1997; Stutely, 2002).
Finally, the business plan may be used by the small firm to serve as a strategic
planning document for the entrepreneurs, a plan to guide the business and serve
as a basis for taking strategic decisions . . . [and] . . . also it may serve as a subsequent monitoring device (Deakins and Freel, 2003: 329).
In view of its perceived ongoing value to the small business, it might be
expected that business planning would be a feature of many, if not most, small
firms. However, despite the plethora of advice manuals, the mainly qualitative
evidence available to date suggests that business planning, within small firms, is
an activity of a minority. This is highlighted by the comment of Woods and Joyce
(2003: 183) that few small businesses use strategic planning. Quantitative assessment of the prevalence of business planning in small firms seems to be lacking in
the published literature with the exception of the study over a decade ago by
Naffziger 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 of
education or to take formal business training. Hence there are two possible reasons why
owner-managers tend not to plan: they are emotionally unsuited to it they think and
act intuitively and they are simply unaware of the various tools which would enable
them to plan systematically. (Chell, 2001, 67)

Indeed, the limited awareness among owner-managers of the tools associated

with the practice of strategic management has been confirmed by Woods and
Joyce (2003). A further constraint, likely to restrict business planning by ownermanagers, is that they may not have sufficient financial information to prepare a
business plan. For example, at the lower end of the size range of small firms (with
less than 10 employees), Nayak and Greenfield (1994: 227) note that only 33 per
cent regularly calculate profits to monitor their firms performance. A lack of
planning may also relate to the fact that small firms are just too busy surviving
to take time out to plan ahead while others might argue that the environment, in
which 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 these
firms are badly managed. It does, however, suggest that many owner-managers
miss out on the opportunity to consider the overall direction of the business and
that 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 ownermanagers who are most receptive to the business planning idea.
Storey (1994a) identifies three components affecting owner-manager behaviour that might be used to inform analysis of the determinants of business
planning in small firms. These are the characteristics of the firms, the characteristics of owner-managers, and the owner-managers business development strategies (hereafter termed business strategy). Firm characteristics (such as sector
and size) were controlled out of our analysis in order to focus our attention on
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Richbell et al.: Owner-managers and Business Planning in the Small Firm

the owner-manager and business strategy variables. As noted earlier, within the
owner-manager characteristics, we explore only the antecedent influences that
describe the backgrounds of the owner-managers rather than their personality
traits. Of course, the two components on which attention is focused (antecedent
influences and business strategy) are related to one another and the individual
variables grouped within each category do themselves show a high degree of
interdependence. Nevertheless, the two components and the individual variables
provide a useful conceptual framework within which to interpret the determinants of business planning within the small firm.

Owner-managers: Antecedent Influences

Although the impact of antecedent influences on the propensity of ownermanagers to prepare a business plan is poorly researched, the antecedent influences on owner-managers are seen as critical in other aspects of the activities of
small firms. An overview of the wide range of antecedent influences that have
been considered in studies of small firms is provided by Storey (1994a: 123). A
selection of the antecedent influences included in his listing, which seem to have
the potential to affect an owner-managers propensity to undertake business
planning, are discussed in this section and taken forward as variables into the
empirical analysis. Predictions of the direction in which the variables will operate
are inevitably problematic as there is little prior work on the determinants of
business planning upon which we can draw.
Age This has been included as a key variable in a number of studies of small
firms 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 plan
and therefore needs to be included in the analysis.
Experience This variable may be strongly linked to age. It could be argued that
it might work in two ways. A long number of years running a firm as an ownermanager might increase the propensity to plan future directions for the business.
Conversely, once the initial phases of a firms life have passed and funding is
secured, planning might well be less of a priority.
Education This variable has been found to be an important influence on ownermanager behaviour (e.g. Storey et al., 1989). In the context of business planning,
it might seem reasonable to hypothesize that the more highly educated ownermanager will tend to be more aware of the desirability of business planning and
thus firms run by the better educated owner-managers might be more likely to
have business plans. In contrast, the owner-manager with a more limited
education will tend to work outside a formal planning framework. Indeed, this is
the one variable where the arguments from previous research are sufficiently
strong to predict the direction of the relationship already outlined.
Entrepreneurial History A distinction here may be drawn between those for
whom the current firm is their first and serial founders. Westhead and Wright
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International Small Business Journal 24(5)

(1999), for example, have drawn a contrast between novice, portfolio and serial
entrepreneurs. The latter, more experienced owner-managers, might be expected
to have a more formal approach to business planning in their business behaviour.
Previous Size Westhead and Birley (1993) identified previous size as an influence on firm behaviour. In the context of business planning, we would argue that
owner-managers with previous work experience in larger firms, perhaps where
business planning was seen as an important part of business behaviour, would
tend to encourage business planning in their own firms. We might expect this
effect to be most marked where owner-managers had worked for larger firms
immediately before setting up their own businesses.
Previous Position Firm founders are drawn either from operatives or from
those with previous managerial experience. It seems reasonable to argue that the
former will tend to be less involved in business planning whereas those with
managerial experience may perceive value in undertaking business planning.
There are parallels in this dichotomy with an early study (Smith, 1967), which
drew a distinction between craftsman and opportunist.
Sector Experience Here it might be argued that owner-managers moving into
a new sector might be encouraged to plan rather more than those whose businesses were in sectors in which they had considerable prior experience. This
factor was seen as important in a study of firm growth by Storey (1994b).
To these seven antecedent influences drawn from Storey (1994a), this research
added two further characteristics of owner-managers that seemed to also have
potential to influence the presence/absence of business planning.
Born Locally This was introduced into the analysis as it might be expected that
local owner-managers, who grew up in the geographical area under study, will
tend to be introspective and less receptive to contemporary management
practice: a reflection perhaps of their limited experience of business practices in
other geographical areas.
Local Embeddedness The relationship between small firms and their localities
has become an important research area (see for example Curran and Blackburn,
1994). Firms with links with local business institutions might be more likely to
prepare a business plan. The argument here would be that mixing with local
business leaders would increase awareness of the value of business planning.
Conversely, mixing with other owner-managers of small firms might reinforce
scepticism towards the idea of business planning, especially where business
planning was not seen as a key element of business activity.

Owner-managers: Business Strategy

We turn now from the antecedent influences which might guide owner-manager
behaviour, to the possible effects of business strategy on the propensity to
prepare business plans. Broadly, it is expected that firms oriented towards growth
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Richbell et al.: Owner-managers and Business Planning in the Small Firm

will show a greater propensity to undertake business planning. It does not seem
unreasonable to argue that a firm with a committed development strategy would
have a business plan. In most cases, this might also be reflected in an aim to
increase the size of the customer base. Indeed, wherever a strategy of growth
required external support (either from financial institutions or business advice
agencies), it is likely (as noted earlier) that the external support agencies would
require a business plan as a condition of their support.
In this article, we examine the effects of both antecedent influences upon
owner-managers behaviour and their business development strategies on the
presence/absence of business planning in small firms, while controlling out the
characteristics of the firms in which the owner-managers are operating. The key
research questions addressed in this article are as follows:
1. How prevalent is business planning among the owner-managers of small
firms?
2. Are owner-manager and business strategy characteristics important in
distinguishing between those owner-managers with business plans and
those without?
3. Which owner-manager and business strategy characteristics are important?

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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International Small Business Journal 24(5)

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 their
origins to before 1914, some 63% were less than 25 years old. The median size of
the firms was 20 employees (measured in terms of full-time equivalents) and the
modal turnover was between 500,000 and 750,000.
Virtually all the interviews (85%) were with the owner-managers; the other
interviews were with senior managers. In some cases, the senior managers were
the only viable respondents as they were working for retired owners who had
relinquished overall control of the firm but maintained a financial link. In other
cases, the senior managers worked closely with the owners, who were still
involved in the business, and the majority of these senior managers shared their
offices with their respective owners. These senior managers could answer the key
questions about the antecedent influences and strategic variables, in which we
were interested, and thus the use of a small number of senior managers is not as
problematic as it would have been if we were interested in the psychological and
personality characteristics of the owner-managers. There were neither female
owner-managers nor owner-managers from ethnic minorities in the random
sample upon which this article is based. They were rare in the population from
which the sample was drawn.
The interview schedule was designed to collect data on potential antecedent
influences on owner-managers and a number of strategic characteristics in
addition to asking about the presence or absence of a business plan and, where
appropriate, the time period to which the plan applied. Admittedly, there are
various degrees of business planning within a firm. Preparing a business plan does
not necessarily mean that the plan will be used by owner-managers on a regular
basis (it may be put in a draw and never consulted again). Therefore, the nature
of 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, a
dichotomous variable seemed appropriate as a first step towards measurement
since, as noted earlier, the determinants of business planning by the ownermanagers of small firms is an under-researched field. The use of a dichotomous
measure was further supported by the observation of Naffziger and Kuratko
(1991: 100) that while there is a debate regarding how to measure the extent of
formality in planning systems of large organisations, for small businesses the
trend seems to be one of looking at whether the firms use any planning techniques or not. The implications of using a dichotomous measure to indicate the
prevalence of business planning in a group of small firms are considered further
in the conclusion.
Some firm-related characteristics were also included in the interview schedule
to check for the presence of any uncontrolled firm variables. A distinction in the
activities undertaken by the firms could be drawn between firms manufacturing
products and those treating metals, a division which cuts across conventional
industrial categories. In the first group came activities such as the manufacture
of cutting tools for machines, hand saws, scissors and springs, while in the second
group 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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Richbell et al.: Owner-managers and Business Planning in the Small Firm

distinction between those firms serving primarily intermediate markets and those
selling to final demand is also clear. The majority of firms (two-thirds) sold on to
other firms rather than into final markets. Lastly, and regardless of activities and
end uses, technological variations between firms were marked. These were
measured by the self ratings of the small firm owner-managers. Around half saw
themselves as users of high technology processes or producers of high technology
products. Analysis revealed that not one of these additional firm characteristics
showed any significant relationship with a propensity to prepare a business plan.
The data are explored through the analysis of bivariate relationships using nonparametric statistics. The relatively small sample size precluded more detailed
statistical analysis.

Business Planning, Owner-manager Characteristics and

Business Strategies
Business Planning
Over half the owner-managers (Table 1) had no business plan. This is a finding
that 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 least
not within this sample of firms within this location. Nevertheless, business
planning 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 year
time frame (Table 2), with approximately one half operating within either a 3 year
or 5 year span. A further two-fifths were operating within the shorter spans of
one or two years. Since all but 10% of the firms had been operating for over 7
years, it would seem that these were not business plans prepared at start-up and
Table 1. Business Planning in Small Metal-working Firms
Business planning

Formal written business plan

No plan
All firms

32
38
70

46
54
100

Source: Interview schedule.

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

One year
Two year
Three year
Five year
> Five year
All plans

8
4
9
8
3
32

25
13
28
25
9
100

Source: Interview schedule.

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International Small Business Journal 24(5)

then forgotten. Three respondents claimed to be operating within 10 or 20 year
plans. Whether these three could be called business planners might be open to
doubt but they were included within the business-planning group.
The key point to emerge from this measure of business planning in small firms
is that there are two groups of owner-managers: those who have a business plan
and those who do not. It is therefore important to ask how this dichotomy can
be explained.

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)

All Respondents (n)

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

just over half had been controlling their firms for 10 or more years and 14% had
had over 20 years experience. However, the wealth of experience should not be
over-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 only
the minimal full-time education, leaving school at the age of 16 or earlier, and
almost three-quarters had ceased their full-time education at 18 or earlier. There
were, 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 relatively
high given the age cohorts from which the sample is drawn.
Among these owner-managers, a distinction could be drawn between those for
whom their current business was their first firm and those who were serial ownermanagers. The majority (almost three-quarters) were novice owner-managers
setting up their first firm. Among those owner-managers who were employed in
another firm immediately before setting up their current firm, there was an
almost equal division between those who had moved out of employment in a
small firm to set up in business and those who had moved out of a medium to
large organization. Indeed, almost 10% had been employed in firms with 1000 or
more employees immediately before setting up their own firm. Regardless of the
size of their previous firms, a significant number (two-thirds) had gained managerial or executive experience in their previous employment before setting up
their own firms. They can be contrasted with the remainder of the sample group
who had been working more directly in production. There was a clear tendency
for the owner-managers to build on their previous experience in that nearly
three-quarters were running their own firms in the same sector as the one they
had worked in previously.
A striking feature of these metalworking firms (perhaps not surprising in firms
based mainly on traditional industries) is that virtually all (87%) of the ownermanagers had grown up in Sheffield. Further, this sample of owner-managers
were all very independent, self-driven individuals who seemed to see little to be
gained from interaction with local business institutions. Two-thirds reported no
involvement in local institutions such as the Chamber of Commerce, the Rotary
clubs and trade organizations. The mean score, in this research, for local involvement was 1.6 (where 5 represented high involvement and 1 represented no
involvement). Only one respondent was rated as fully involved in local business
institutions.

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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International Small Business Journal 24(5)

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

Owner-manager Characteristics, Business Strategies and

Business Planning
Owner-manager Characteristics and Business Planning
The results of the bivariate analysis are summarized in Table 4. Of the eight
antecedent influences on owner-managers that were measured, five showed no
significant relationships while three were significant at the 0.05 level.
Although age and experience had no significant relationship with business
planning, the predicted positive relationship between higher levels of education
and undertaking business planning was in the expected direction. Those who had
Table 4. Owner-manager and Business Strategy Characteristics and Business Planning
With business plan
(Chi-square 2-tailed
Significant Difference)
Owner-manager
(Antecedent influences)
Age/Experience
(More)
Education
(Above minimum education)
First firm
(Yes)
Previous size
(Medium/large)
Previous position
(Operative)
Different sector
(Yes)
Grew up in city
(Yes)
Local involvement
(Yes)

NS
.035
*
1-tailed
NS
.037
*
NS
.049
*
NS
NS

Business strategy
Seeks new customers
(Yes)
Growth strategy
(Desire to increase turnover)

.011
*
.072
+

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

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

Table 5. Business Planning and Full-time Education

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

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

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

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

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Table 7. Business Planning and Sector Experience

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

Notes: Chi-square = 3.86; 2-tailed; p = .049; N = 53.

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.

Business Strategies and Business Planning

The last stage of the analysis focused on the two business strategy variables. This
revealed that both measures of business strategy had a significant and positive
relationship with the presence of business planning among the owner-managers
of these small metal working firms. The growth-orientated owner-managers had
a high propensity to have a business plan whether growth-orientation was
measured by expressing an aim to increase their turnover (Table 4, p = 0.072) or
by actively seeking new customers (Table 8, p = 0.011). In part, this may reflect
the point noted earlier, that the necessity to raise finance to fund expansion might
require the preparation of a business plan for the funding agencies. Of those small
businesses that actively sought new customers, over one-half had a business plan
whereas this was true of less than one-quarter of those who were less proactive
Table 8. Business Planning and Seeking Customers

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

Notes: Chi-square = 6.39; 2-tailed; p = .011; N = 70.

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

in developing their customer base. Contrasts between firms with growth strategies and those following the lifestyle path were less strong statistically. Among
firms aiming to increase turnover, almost 80% had a business plan compared with
under 60% of those who were running more lifestyle businesses and had no
desire to increase turnover.

Limitations of the Study

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

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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International Small Business Journal 24(5)

this result is problematic but it might reflect the fact that those owner-managers
with management experience are somewhat cynical about the value of paper
exercises 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-managers
and their business strategies cannot be ignored in trying to understand whether
or not owner-managers have a business plan. Business advice agencies find that
targeting specific small firms and their owner-managers can be problematic for a
variety of reasons (North et al., 1997) but our study helps to identify those small
firm owner-managers who might be most receptive to business planning if
business advice agencies adopt a proactive response. It could be argued that
success is most likely to come from approaches to those owner-managers with the
characteristics of planners but who are not yet planners. Our statistical analysis
has identified a tendency for owner-managers with certain characteristics to be
business planners, but not all managers with these characteristics are business
planners. These are the owner-managers who may be receptive to advice on
business planning rather than outwardly hostile.
However, owner-manager characteristics are rarely in the public domain so
such targeting becomes difficult. Nevertheless, since such characteristics are
important, selected owner-manager characteristics could be collected from small
firms by business advice agencies as part of their regular (and sometimes annual)
employers surveys to help identify where advice on business planning might be
targeted most fruitfully. Such a task would not be straightforward if the aim was
to measure personal character traits but, in our analysis of the antecedent influences and strategic characteristics of owner-managers, we have identified a set of
variables that could be measured readily by organizations offering business
advice.
In view of the very limited research into the factors influencing the propensity
of owner-managers to prepare a business plan, our final comments provide an
indication of possible directions for future research. First, it is clearly a priority
to identify the extent and nature of the business planning among those ownermanagers who have chosen to plan. Analysis should move towards scalar
measures of business planning rather than the dichotomous variable used here
(Rhyne, 1986; Wood and LaForge, 1981). Second, rather more needs to be known
about the ways in which the business plan informs the business behaviour of the
owner-managers of small firms. Is the business plan a document that is prepared
and 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 a
business plan needs analysis. It could be that the antecedent influences and
business strategy variables that we have identified are those which are associated
with owner-managers who seek external funding. Finally, research agendas do
need to look more closely at the ways in which personality traits of ownermanagers might affect the propensity to undertake business planning.

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

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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SUZANNE M. RICHBELL is a Senior Lecturer in Sheffield University Management

School with research interests in aspects of human resource management. She is
particularly interested in the public-private interface and is currently exploring the
impact of government regulation on business organizations. Her consultancy work
has involved research for both the police and prison service. Please address all
correspondence to: Suzanne Richbell, Sheffield University Management School, 9,
Mappin Street, Sheffield, S1 3DT, UK. [email: s.m.richbell@sheffield.ac.uk]

H. DOUG WATTS is a Reader in Geography at the University of Sheffield whose

current research is focused on the roles of small firms within regions and urban
economies. He has published extensively on the regional impacts of both large and
small business in the manufacturing sector. Address: H. Doug Watts, Department
of Geography, University of Sheffield, Sheffield, S10 2TN, UK.
[email: h.watts@sheffield.ac.uk]

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

Propritaires exploitants et planification des activits de la petite

entreprise
Suzanne Richbell
cole de gestion de lUniversit de Sheffield, RU
H. Doug Watts
Universit de Sheffield, RU
Perry Wardle
Municipalit de Staffordshire Moorlands, RU
Cet article examine comment les spcificits des propritaires exploitants des petites
entreprises peuvent avoir une influence sur la dcision des entreprises dadopter ou non
un plan dactivits. Laccent est avant tout mis sur les facteurs antrieurs qui influent sur
la carrire de ce type de dirigeants, savoir leur niveau dducation et lexprience quils
possdent. Les informations disponibles proviennent dune tude effectue auprs de
propritaires exploitants de petites entreprises de transformation de mtaux, implantes
Sheffield au RU. Ainsi, lon constate qu peu prs la moiti de ces dirigeants travaillent
conformment un plan dactivits, et que les facteurs dinfluence antrieurs (ducation,
exprience), associs un plan dactivits, incluent un niveau dducation suprieur la
moyenne et une exprience prcdente du travail dans une grande entreprise immdiatement avant de fonder leur propre entreprise et de diriger des entreprises dans des secteurs
nappartenant normalement pas leur sphre dexprience prcdente. Il nest donc pas
tonnant que le fait de disposer dun plan dactivits est une composante positivement
associe aux propritaires exploitants dont lentreprise est oriente vers lessor. Ltude
conclut que les spcificits des propritaires exploitants peut contribuer dune faon
significative expliquer la prsence/labsence dun plan dactivits au sein dune petite
entreprise.
Mots cls: plans dactivits; propritaires exploitants; petites entreprises

Directores propietarios y planificacin de actividades en la pequea

empresa
Suzanne Richbell
Escuela de Gestin Empresarial de la Universidad de Sheffield, RU
H. Doug Watts
Universidad de Sheffield, RU
Perry Wardle
Ayuntamiento de Staffordshire Moorlands, RU
Este artculo examina las formas en que las caractersticas de los directores propietarios
influyen 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 propietarios tales como la educacin y experiencia anterior. Los datos se obtienen de una encuesta
de los directores propietarios de pequeas empresas de productos metalrgicos en
Sheffield, RU. Casi la mitad de los directores propietarios encuestados tiene un plan de
actividades. Las influencias antecedentes sobre los directores propietarios relacionadas
con la posesin de un plan de actividades incluyen un nivel por encima de la media de
educacin, experiencia laboral anterior en una gran empresa antes de fundar su propia

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International Small Business Journal 24(5)

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 aquellos
directores propietarios orientados hacia el crecimiento. Se concluye que las caractersticas de los directores propietarios pueden ser un factor importante para determinar la presencia 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 Richbell
Universitt Sheffield, Fakultt fr Betriebswirtschaftslehre, Grobritannien
H. Doug Watts
Universitt Sheffield, Grobritannien
Perry Wardle
Kreisverwaltung Staffordshire Moorlands, Grobritannien
Dieser Beitrag untersucht die Art und Weise, in der die Charaktereigenschaften der
Eigentmer-Unternehmer von Kleinbetrieben einen Einflu darauf haben, ob derartige
Betriebe ber einen Geschftsplan verfgen oder nicht. Hierbei konzentriert man sich in
der Hauptsache auf vorausgegangene Einflsse, wie z.B. Bildung und bisherige Erfahrung.
Den Daten liegt eine Umfrage von Eigentmer-Unternehmern kleiner metallverarbeitender Betriebe in Sheffield in Grobritannien zugrunde. Rund die Hlfte der befragten
Eigentmer-Unternehmer besitzen einen Unternehmensplan. Zu den vorausgegangenen
Einflssen auf die Eigentmer-Unternehmer, die eine signifikante Beziehung mit dem
Vorhandensein eines Unternehmensplans aufweisen, gehren u.a. ein berdurchschnittlicher Bildungsgrad, einschlgige Arbeitserfahrung in einer groen Firma unmittelbar vor
der Grndung des eigenen Unternehmens und die Leitung von Firmen in Sektoren auerhalb ihrer bisherigen Erfahrung. Es ist kaum berraschend, dass sich eine positive
Beziehung zwischen dem Vorhandensein eines Unternehmensplans und den EigentmerUnternehmern mit einer auf Wachstum ausgerichteten Einstellung feststellen lsst. Es
wird der Schluss gezogen, dass die Charaktereigenschaften von EigentmerUnternehmern eine wichtige Rolle in der Begrndung fr das Vorhandensein bzw.
Nichtvorhandensein eines Unternehmensplans innerhalb eines Kleinbetriebs spielen
knnen.
Schlagwrter: Unternehmensplne; Eigentmer-Unternehmer; Kleinbetriebe

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