Usage of business plans in the Montana business community
by George Christophis Makris
A thesis submitted in partial fulfillment of the requirements for the degree of Master of Science in
Business Education
Montana State University
© Copyright by George Christophis Makris (1993)
Abstract:
The major purpose of this study was to identify the business planning habits of Montana based small
manufacturing firms, the owners perceptions of planning and its uses, as well as their awareness of
business planning services. The population of the study consisted of 1500 Montana based
manufacturing businesses as defined, identified and compiled by the Montana Department of
Commerce in the Manufacturing Business Directory. The sample consisted of 200 firms that were
randomly selected from the population. Out of the 100 questionnaires that were received, 53 were
suitable for use in this study, 9 were not suitable, and 38 were left blank. The SAS statistical package
was used to analyze the data.
The major conclusions of this study were: (1) one out of three small manufacturing firms had
developed a written business plan upon starting their business or later. Giving direction to their
company was the most common reason that prompted them to create a plan; (2) eight out of ten of
those who prepared a business plan because it was a bank requirement do not use a plan today; (3)
contrary to the literature review, only six percent of the manufacturers refrained from planning because
it was too expensive. The most common reason for failing to develop a plan was never having thought
about it; (4) while half of these manufacturers thought a business plan might be helpful to the future
success of their company, only fifteen percent intended to develop one; (5) accounting firms had the
highest level of awareness as providers of business planning services.
The main recommendations were: (1) banks should recognize that forcing a firm to prepare a business
plan as a loan prerequisite will not necessarily guarantee that firm's success; (2) business support
groups should educate business owners about the value of business planning; (3) the SBA should
promote greater awareness of its programs; (4) future researchers should conduct studies that expand
this one and longitudinal studies that examine the relationship between planning and success. USAGE OF BUSINESS PLANS IN THE MONTANA
BUSINESS COMMUNITY
by
George Christophis Makris
A thesis submitted in partial fulfillment
of the requirements for the degree
of
Master of Science
in
Business Education
MONTANA STATE UNIVERSITY
Bozeman, Montana
July 1993
'-rw'tf
ii
APPROVAL
of a thesis submitted byGeorge Christophis Makris
This thesis has been read by each member of the thesis
committee and has been found to be satisfactory regarding
content, English usage, format, citations, bibliographic
style and consistency, and is ready for submission to the
College of Graduate Studies.
airperson, Graduate Committee
Approved for the Major Department
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7 rz,
IMS
A
Approved for the College of Graduate Studies
Date
Graduate Dean
___,
iii
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University,
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vi
LIST OF TABLES
Table
1
Page
Position of Respondents in Relation to
Business Plan Creation.....................
27
Number of Full-Time Employees in Relation
to Business Plan Creation.................
29
Legal Status in Relation to Business Plan
Creation....................................
31
Gross Sales in Relation to Business Plan
Creation....................................
33
Relation Between Routine Use of a Plan Today
and Reasons for Creating a Plan....... ; . . .
42
6
Frequency of Business Planning Elements........
45
7
Frequency of Business Planning Help.............
48
8
Relation Between Routine Use of a Plan Today
and Peception ofPlan Helpfulness..........
50
Awareness Frequency of Business Planning
Services. ...................................
57
2
3
4
5
9
V
TABLE OF CONTENTS— Continued
Page
IV.
PRESENTATION OF DATA..............-................
24
Introduction..................................
Business Demographics........................
Business Plan Statistics.....................
Business Planning Rationale..................
Business Plan Contents.......................
Business Plan Preparation....................
Business Owners Perceptions of Usefullness
and Price................................
Business Owners Awareness of Business
Planning Services.......................
Other Findings.........................
Summary.... ..... !............................
24
24
33
39
45
47
V.SUMMARY, CONCLUSIONS AND RECOMMENDATIONS.............
Introduction..................................
Summary of the Study.........................
Conclusions...................................
Recommendations....... ........................
48
57
58
59
60
60
60
62
65
BIBLIOGRAPHY................................................ '71
APPENDICES..................................................
Appendix A — Cover Letter..........................
Appendix B— Survey Instrument..............
75
76
78
■vi
LIST OF TABLES
Table
1
Page
Position of Respondentsin Relation to
Business Plan Creation.....................
'27
Number of Full-Time Employees in Relation
to Business Plan Creation..................
29
Legal Status in Relation to Business Plan
Creation...............................
31
Gross Sales in Relation to Business Plan
Creation
33
Relation Between Routine Use of a Plan Today
and Reasons for Creating a Plan............
42
6
Frequency of Business Planning Elements........
45
7
Frequency of Business Planning Help........... .
48
8
Relation Between Routine Use of a Plan Today
and Peception of Plan Helpfullness........
50
Awareness Frequency of Business Planning
Services....................................
57
2
3
4
5
9
vii
LIST OF FIGURES
Figure
1
Page
Position of Respondents Who Filled out
Questionnaire...........................
26
Number of Full-Time Employees of
Responding Businesses..................
28
3
Legal Status of Responding Businesses......
30
4
Gross Sales of Responding Businesses.......
32
5
Breakdown of Business Plan Use Among
Businesses (Plan Group)................
34
Breakdown of Businesses With Plan Upon
Startup of Business (No Plan Group)....
35
Breakdown of Businesses With Plan Upon
Startup of Business....................
37
Breakdown of Businesses That Continue
to Routinely Use a Business Plan......
38
Rationale Behind Developing a Written
Business Plan...........................
40
Rationale Behind Not Developing a
Business Plan...........................
43
11
Time Frame of Business Plans................
46
12
Payment for Business Planning H elp.........
49
13
Perception of Business Plan
Usefulness (Plan Group)...............
51
Perception of Business Plan
Usefulness (No Plan Group)...........
53
-Business Plan PricePerceptions..............
54
2
6
7
8
9
10
14
15
16
Future Business Plans
56
viii
ABSTRACT
The major purpose of this study Was to identify the
business planning habits of Montana based small manufacturing
firms, the owners' perceptions of planning and its uses, as
well as their awareness of business planning services.
The
population of the study consisted of 1500 Montana based
manufacturing businesses as defined, identified and compiled
by the Montana Department of Commerce in the Manufacturing
Business Directory. The sample consisted of 200 firms that
were randomly selected from the population. Out of the 100
questionnaires that were received, 53 were suitable for use
in this study, 9 were not suitable, and 38 were left blank,.
The SAS statistical package was used to analyze the data.
The major conclusions of this study were: (I) one out of
three small manufacturing firms had developed a written
business plan upon starting their business or later. Giving
direction to their company was the most common reason that
prompted them to create a plan; (2) eight out of ten of those
who prepared a business plan because it was a bank
requirement do not use a plan today; (3) contrary to the
literature review, only six percent of the manufacturers
refrained from planning because it was too expensive. The
most common reason for failing to develop a plan was never
having thought about it; (4) while half of these
manufacturers thought a business plan might be helpful to the
future success of their company, only fifteen percent
intended to develop one; (5) accounting firms had the highest
level of awareness as providers of business planning
services.
The main recommendations were: (I) banks should
recognize that forcing a firm to prepare a business plan as a
loan prerequisite will not necessarily guarantee that firm's
success; (2) business support groups should educate business
owners about the value of business planning; (3) the SBA
should promote greater awareness of its programs; (4) future
researchers should conduct studies that expand this one and
longitudinal studies that examine the relationship between
planning and success.
I
CHAPTER I
INTRODUCTION
Introduction
"Having the right mental attitude is important
but it is not enough to guarantee the small
company's success. What is essential -even
for the smallest of companies- is
planning."
(Fasano 1990)
Business planning is defined as "any process or strategy
by which a business intends
to accomplish its
goals
and to
reduce risk and uncertainty in the future." (Cook 1985)
In
other words, taking concrete actions today, so that managers
can effectively deal with tomorrow's events.
of
planning
success,
enables
to
have
a
a
business
guide
for
to
make
better
The discipline
a
commitment
communication
to
and
management, and to be proactive rather than reactive.
When Bill and and Julie Brice
invested $10,000
unprofitable frozen-yogurt stores 10 years ago,
have time to prepare a plan.
Nevertheless,
they
expansion
began
operations,
rapid
in two
they did not
one year
and
the
after
involved
nature of the business forced Julie to acquire the necessary
skills
and develop a written business
plan.
Today,
along
with her brother Bill, she owns and manages the 120 member
Can't
Believe
It's Yogurt'■ franchise
chain.
Their
‘I
success
story was featured in the August 1988 edition of the Nation1s
Business
magazine.
"If
I
had
to
start
over
again,
I
2
definitely would do a business plan to take a look at all the
opportunities,
quoted as
the
positives
saying.
planned prudently
In addition,
from
Commerce
and
to
data
the
SBA
negatives, "
she added that
released by
as
certain
she
was
if she had
early
errors
(Thompson 1988)
the U.S.
reported
Systems's book The New American
of all new businesses
the
the beginning,
would not have taken place.
According
and
in
Department
Meridian
of
Learning
Business System, "Over 80% '
fail within
the
first
five years-and
about half of them don't even make it through the first year.
The
reason
for
92%
of
these
experience and expertise."
failures
is
lack
of
business
(Chickadel et al 1991)
opinion of small business consultant Harriett Fox,
In the
as it was
reported in a June 1991 article in the Entrepreneur Magazine,
the high failure rate small businesses experience every year
can
be
directly
(Cook 1991)
attributed
In the end,
to
lack
of
business
as popular wisdom has
it:
planning.
"Failing
to plan is planning to fail."
Need for the Study
In
view
of
the
volatility
and
uncertainty
of
the
business environment, the strong belief among small business
experts
that
there
is
no
substitute
for
a
well-prepared
business plan, as well as the intrinsic value of planning,
it
would seem rational that most small businesses would engage
3
to some extent in formal planning.
1991)
Nevertheless, what
always the case.
(Dilts et al 1989)
appears
to
be
rational
(Cook
is
not
In the same article that described the
'I
Can't Believe It's Yogurt' story,
Leo Lauzen, chairman of a
nationwide
reported
business
accounting
owners
franchise,
that
many
small
"never write a proper plan," although
they
generally agree that a business plan would be beneficial
their long term growth.
the process
are
business plan.
According
October 23,
two
to
Lack of time and apprehension with
often cited reasons
for
not
writing
a
(Thompson 1988)
to 1a
special
report
that
appeared
in
the
1989 issue of U.S. News and World Report, "Small
businesses, defined as those with fewer than 100 workers, now
employ
nearly
60%
of
the
work
force
and
are
expected
to
generate half of all jobs betwen now and the year 2000."
In
view
play
in
period
of
of
the very
stimulating
slow
important
the economy,
economic
research needs.
growth
to
role
it makes
focus
small
sense
attention
businesses
at
this
on
small
business
(Drucker 1984)
This study will explore the business planning habits of
Montana-based
small
manufacturing
businesses,
the
owners'
perceptions about business planning and its uses, as well as
their awareness of outside help.
The results of this study
may be used by the Small Business.Administration,
the Montana
Department of Commerce, professional organizations and others
I
4
to create or improve mechanisms that encourage.and facilitate
effective business planning within the state of Montana.
Statement of the Problem
The
major
purpose
of
this
study was
to
identify
the
business planning habits of Montana based small manufacturing
businesses,
to assess the perceptions of small manufacturing
business owners and general managers in relation to business
planning,
and
to
determine
their
awareness
of
public
and
private professional business planning services.
Questions to be Answered
1.
What proportion of Montana based small manufacturing
businesses prepare written business plans?
2.
Why do they prepare or not prepare a written
■1
business plan?
3.
What do they include in a business plan?
4.
What help, if any, do they receive in preparing
a business plan?
5.
What are the perceptions of small manufacturing
business owners and general managers in relation
to certain aspects of business planning?
(especially usefulness and price)
5
6.
What is their awareness of public and private
professional business planning services?
Limitations of the Study
The study was limited to small manufacturing businesses
that
operated
in Montana
at
the
time
of
the
study.
The
population of the study was comprised of 1500 firms that the
Montana Department of Commerce had identified and compiled in
the
1992
edition
According1 to
an
comprehensive.
of
the
Manufacturing
official
The
of
the
instrument
Department
of
Directory.
this
the study was
self-administered
questionnaire
that
randomly
participants.
A
selected
Business
was
total
list
was
a detailed
mailed
to
of
hundred
one
200
questionnaires were returned and 53 were suitable for use.
This
study
industry.
exclusively
Consequently,
examined
the
manufacturing
the results may not be
generalized
to the agricultural, retail and service industries.
if
the
assumption
businesses
in
the
can
be
U.S.
made
are
that
similar
to
small
However,
manufacturing
those
in
Montana,
results may be generalized to the industrial sectors of other
states.
It
managers
is
possible
did
not
that
respond
especially when answers
their businesses.
certain
small
accurately
could have
to
business
the
owners
or
questionnaire,
reflected unfavorably on
This may have biased the findings of the
6
study.
Nevertheless,
the
researcher
believes
that
the
majority of people provided accurate reports.
Terminology
The following terminology is given as an aid to the,reader:
Business
Planning:
"Any
process
or
strategy
by
which 1 a
business intends to accomplish its goals and to reduce
and uncertainty in the future."
Key
Results
Areas
productivity,
"Customer
resources,
and performance, employee
responsibility,
(Cook 1985)
(KRAs):
innovation,
attitudes
communications,
organizational development.
risk
satisfaction,
management
development
and performance,
climate
public
management,
If a manager manages these KRAs
as well as or better than his competitors, he will be able to
increase profitability."
Long Range
company,
Plan:
"One
(Randolph 1975)
which plans
over the years ahead
the
growth,
e.g.
of
a
(usually five or more years).
In making such a plan the company's strengths and weaknesses
will be considered by the directors of the company,
as well
as the opportunities
(Wallace
and threats
in the market."
1984)
Mission
Statement:
business a firm is in.
company
and
in
"A
basic
statement
of
what
type
of
It serves in giving direction to the
reminding
everyone
company is trying to achieve."
of what
(Larson 1990)
it
is
that
the
7
Objective:
"A specific target
point in time."
functional
personnel.
setting
areas
at a specified
specific
as
finance,
objectives
for
marketing
and
Operational planning is typically performed on a
Term
things
of
such
six to twelve month basis."
Short
sought
(King et al 1987)
Operational Plan: "The
specific
to be
Planning:
will
happen
(Shrader et al 1989)
"The
soon
act
of
(e.g.
making
within
plans
about
for
a
which
year)."
(Wallace 1984)
Small Business:
"Under 20 employees very small; 20-99 small;
100-499 medium sized; and over 500, large.
consistent
receipt
Office
with
type
standard
classes
business
established
of Management and Budget
agencies
when
publishing
These breaks are
employment,
on
May
18,
to be used by
business
data."
asset,
1982
all
(Report
by
and
the
federal
of
the
President 1989)
Small
Business
Administration
(SBA):
"A
established in 1953 with responsibility
businesses.
The
SBA provides
federal
agency
for assisting small
loans and loan guarantees
well as managerial assistance."
Small Business Development Center
as
(Cook 1985)
(SBDC):
"The Montana SBDC
is a unit of the Business Assistance Division of the Montana
Department of Commerce,
the SBA.
jointly funded by the Department and
Its mission is to provide specialized consulting to
small businesses throughout the state."
(Larson 1990)
. 8
Strategic
Planning:
"A
written
long-range
includes both a corporate mission statement
of
organizational
objectives.
A
plan,
which
and a statement
strategic
plan
includes
strategies indicating how objectives will be accomplished."
(Shrader et al 1989)
Strategy:
"The general direction in which the objectives are
to be pursued."
SWOT:
(King et al 1987)
"Strengths,
weaknesses,
opportunities
and
threats."
(Larson 1990)
Tactics:
which
"Resource
strategies
are
consuming
sets
implemented
of
and
activities
goals
are
through
pursued."
(King et al 1987)
Summary
This
chapter
presented
the
concepts
that
make
up
the
framework of the study as llWell as the rationale for the study
and defined the related terminology.
The next chapter will
review the related literature.
i
9
CHAPTER II
REVIEW OF LITERATURE
Introduction
This
chapter
provides
an
analysis
of
small
planning based on a variety of related issues.
need for planning is addressed.
Second,
business
First,
the
the advantages
and
disadvantages of business planning are presented.
Third,
the
feelings and actions of small business owners toward planning
are considered.
Fourth,
and
examined,
planning
offer
is
professional
the relationship between
Fifth,
advice
are
various
listed,
groups
and
financing
that
finally
can
the
contents of a typical business plan are defined.
The Need for Planning
A business plan is like a microscope because it enables
firms to objectively examine themselves and like a telescope
because it forces them to look at the external
said
Densmore/ a member
of New
Hampshire's
environment,
Small
Business
Development Center (SBDC), in an article that appeared in the
Entrepreneur
Magazine
during
June
1991.
"I
see
a
direct
relationship between the absence of a business plan and the
10
failure
of ,a business,"
business
consulting
added
firm
in
Fox,
president
Florida,
in
the
of
a
same
small
article.
(Cook 1991)
Indeed,
empirical
relationship
between
data
small
organizational performance.
Shrader
and
others
confirm
in
that
there
business
is
planning
a
and
In a study conducted by Charles
central
Iowa,
a
stratified
sample of 115 small businesses was examined.
random
The researchers
used the Dun and Bradstreet database to select the businesses
with
the demographic
Those
were
sales,
employees.
characteristics
employment,
they deemed
SIC
codes
and
desirable.
number
of
All businesses had at least 10 employees but less
than 100 and thus could be classified as small.
The survey
was
the
conducted
executive
via
personal
officer or
interviews
top manager
of
each
with
firm.
chief
Strategic
planning as well as operational planning were both positively
correlated
strategic
with
organizational
planning
significant.
performance
correlations
Even
though
were
most
although
weaker
aspects
of
planning showed significant correlations with
performance,
the marketing
strongest relationships.
and
budgeting
found
September
the
surveyed:
1988
following
Those
small
not
as
operational
organizational
sections
had
the
(Shrader et al 1989)
A nationwide American Express survey,
in the
and
the
issue of
among
firms
the
the Journal
small
that grew
as it was cited
of Accountancy;
companies
faster
than
that
were
the rest
and had
the highest profits were
planning and management.
the ones
that
had better
(Journal of Accountancy 1988)
view of the data presented above,
In
it would appear that if a
small business develops a well thought-out business plan,
likelihood
of
that
business
failing
should
decrease.
Siegel, a business development consultant, put it:
a real good job of writing your business plan,
just putting words on paper.
you
expose
a lot of
flaws.
the
As
"If you do
it's more than
You do a lot of research and
Each one
that
you
expose
treat, you enhance the chances of your success".
Increasing environmental uncertainty can
creating a need for business planning.
and
(Moore 1989)
be a factor in
Among other
things,
Shrader's previously mentioned study had also confirmed that
there was
a positive ■correlation between
uncertainty and planning.
Finally,
commercial
plan
it
before
(Shrader et al 1989)
should be
lenders
require
they will
macro-enviromental
mentioned
the
even
that
presentation
consider
the
majority
of
granting
a
a
of
business
loan
to
a
small business. (Cook 1991)
Advantages and Disadvantages of Business Planning
In Orpen's empirical study, where he surveyed 58 owners
and
managers
despite
of
small
many
perceived
(particularly
long range
businesses,
it
difficulties,
planning)
was
concluded
business
benefits
small
that
planning
firms
in
12
many w ays.
the
1987
(Orpen 1985)
edition
Handbook,
Dr.
professor,
(King
Fox,
also
et
al
advantages
of
the
a
Strategic
business
compared
1987)
and
In a later article that appeared in
the
consultant
pros
Following
disadvantages
of
Planning
is
and
a
and
Management
and
university
cons
list
business
of
of
planning.
the
planning
major
as
they
appeared in these studies:
1.
Possible Advantages
a. Provides clear direction
b. Improves competitive position
c . Facilitates proactive attitude
d. Uncovers opportunities and weaknesses
e. Focuses attention on long term success factors
f . Promotes efficient allocation of resources
g. Assists in the creation of accurate forecasts
2.
Possible Disadvantages
a. Demands too much time
b. Costs too much money
c . Requires special skills and knowledge
d. Creates potential for information leaks
e. Tends to expand bureaucratic controls
Notwithstanding
Director
of
University
of
the
its drawbacks,
Office
Illinois
for
at
and managing a business.
Entreprenurial
Chicago,
plan is widely recognized as
according
to Dr.
Studies
"Developing
an important part
For most people,
the
a
Hills,
at
the
business
of starting
exercise
of
13
developing a comprehensive business plan can help to identify
voids, issues and uncertainties that would not
otherwise be
seen."
Small Business Owners and Planning
The majority of
formal
small business
business
planning.
plan
useful,
business
(Thompson
is
1988)
previously,
In
owners never
Although
they
his
are
1989
they
agree
too busy
empirical
engage
that
to write
study
in
a
one.
mentioned
Shrader found that the most common reasons small
business owners had for not, writing a plan included the high
cost,
lack
of
skills
and
expertise,
lack
of
time,
and
planning not being appropriate for the business. (Shrader et
al 1989)
Nevertheless,
even a 'mom and p o p 1 operation could
benefit b y some degree of planning.
According to Lauzen, a
consultant with Comprehensive Accounting,
"Ninety-two percent
of businesses remain small.
They don't grow into a size that
needs
What
plan."
a
sixty-page
plan.
they
need
is
(Thompson 1988)
Business Planning and Financing
"When seeking financing, a business plan
is an invaluable tool. It helps you
understand where your business is and
where you want to take it, and it can be
revised when you want to re-evaluate your
business or add a new partner or
product." (Goldberg 1993)
a
five-page
H
Indeed,
trying
a business plan will not
to attract
banks.
funds,
(Cook 1991),
the September
1992
was stated that an
business owner
but also
only be helpful when
it is required by
most
in an opinion article that appeared in
issue of
the Entrerpreneur
Maaazine, it
1ordinary p l a n 1 is not sufficient when a
is seeking
to
finance
a business.
Instead,
what he needs is a 1working p l a n ' which can interest a lender
because it shows
that he
successfully tested his project.
The author goes on to add the following:
"A working business plan tests the
marketability and profitability of an idea.
And both marketability and profitability must
be present before a plan is considered a
working business plan.
You might create a
product that sells like crazy, but unless you
can sell it at a price that.creates a profit
you don't have a business."
(Blechman 1992)
According
1992
edition
to
an
opinion
of , Entrepreneur
article
that
Magazine,
appeared
it was
in
stated
the that
using a business plan as nothing but a financing vehicle for
start up firms could be
The author
a
1costly mistake'.
further added that business plans
(Maturi
1992)
should not be
put aside once a business has been -established but rather be
used and updated on a regular basis.
(Maturi 1992)
Getting Professional Advice
A variety of options exist for small business owners who
want
to
enlist
business plans.
professional
assistance
in
writing
The Small Business Administration
their
(SBA), The
15
Service Corps of Retired Executives
Business Development Centers
(SCORE), as well as Small
(SBDCs) across the country offer
competent and inexpensive or free advice.
well
as
university-based
accounting
firms
should
These resources as
entrepreneurship
also
be
used
when
centers
a
and
business
is
growing more rapidly than it can handle advises Lisa J. Moore
in an article that appeared in U.S. News and World Report in
1989.
"Tapping
such
experience
between being buried by mistakes
your roots," she adds.
When
large
can
and
make
the
difference
comfortably
spreading
(Moore 1989)
companies
need
a
business
plan,
they
can
usually afford the high cost associated with hiring expensive
private consultants.
to
comparable
(Goldberg 1993)
Today, small businesses can have access
advice
low-priced
software
packages.
A significant number of books and software
on business planning
consultants
from
are
available.
Nevertheless,
should not be neglected especially when
quality document is desired.
private
a
top-
(Cook 1991)
Business Plan Contents
A typical business plan usually includes the following:
a)
of
the
Macroenvironmental analysis,
industry,
the
economy,
social, political, and legal trends.
competition,
i.e.
an examination
technology,
16
b)
SWOT
analysis,
i.e.
the
strengths,
weaknesses,
opportunities and threats the company is facing.
c)
Strategic
analysis,
i.e.
the mission
statement,
i.e.
an 'explanation- of
objectives, and strategies.
d)
product
Marketing analysis,
or
service
promotional
channels,
that
methods
the
is being
that
product's
will
marketed,
be
used,
competitive
its
the
price,
the
the
distribution
advantage
as
well
as
other related issues.
e)
company's
quality
Production
production
control,
analysis,
facilities
supplier
i.e.
a
description
of
the
and procedures, methods
references
and
other
of
production
related issues.
f)
Financial
analysis,
i.e.
projected
cash
flow
statements,
balance sheets,
income statements and break-even
schedules.
Other related items such as an executive summary
or a management profile may also be
included in a business
pl a n .
Fox, a small business consultant,
strongly suggests that
worst-case scenarios be included in a business plan.
1991)
would
Carroll,
like
to
a commercial
see
(Cook
lender with a mid-sized bank,
'footnotes'
on
plans.
"Prospective
borrowers have to show that they didn't just pick the numbers
out of
the
sky,"
he
say's.
"If you
going to be $1200 a month without
tell me
utilities
showing me you
are
contacted
17
three
lighting companies
and you
averaged the
gave you, that $1200 is meaningless."
"As
outside
and
internal
need updating when
new
they
change
the
(Cook 1991)
circumstances
business environment, your plan needs updating,
maps
figures
roads
are
just as road
built, " advises
Garner,
an official with accounting giant Ernst
(Maturi
1992)
should be
behind
Moreover,
he adds
that
the organization's
failure
to meet
should be uncovered and corrected.
and Young.
projected
compared with actual performance
and
Dan
objectives
the
those
reasons
objectives
(Maturi 1992)
Summary
The
review
of
the
certain disadvantages,
literature
has
shown
such as being expensive
that
or
despite
consuming
too much time, business planning can indeed be beneficial to
small businesses.
to allocate
offer.
Giving direction to the firm and helping
resources
are
two major
advantages
a plan
can
Small business owners can get professional help from
a variety of sources that range from inexpensive SBA programs
to expensive private consulting.
the
contents
and
implications
Chapter II has
of
the
focused on
literature
Chapter III will address the procedures of the study.
review.
18
CHAPTER III
PROCEDURES
Introduction
The major purpose
of
this
study was
to
determine
the
business planning habits of Montana-based small manufacturing
businesses,
and
its
the owner's perceptions
uses,
business
as
well
planning
as
their
services.
about business
awareness
The
of
professional
information
gathered in this study may be found useful by
people.
SBA
programs
public
needs
and
SCORE
are not widely
awareness.
for
their
executives
known
Private
services.
and
planning
may
thus
Finally,
find
may
that
to
find
Montana
was
a variety of
decide
consultants
that
their
increase
additional
educators
may
find that stressing the need for business planning in current
business curriculums is necessary.
The purpose
review
data,
of
c)
of
related
present
survey instrument,
this
chapter
literature,
b)
the ; methodology
is
to:
describe
of
a)
give
the
a brief
sources
construction
of
of
the
d) give the timeline for data collection,
e) describe the participant selection process and f) describe
the data analysis method.
19
Review of Related Literature
A business plan, similar in some respects to a road map,
can provide direction to a company, help it determine its key
objectives,
and detail the actions that need to be taken in
order to achieve success.
agree that business
SmalI-business consultants tend to
experience
or
financial
strength cannot
be used as a substitute for a functional business plan.
high
failure
rate
small
businesses
experience
every
The
year
could partially be attributed to lack of business planning.
(Cook 1991)
The ability to uncover strengths and weaknesses,
to provide clear direction as well as to enable a company to
be proactive are but a few advantages planning can offer.
the other hand, it might be too costly,
On
demand too much time,
and require special skills. (King et al 1987)
Although many small business owners agree that planning
is
useful,
they
business plan.
be helpful.
never
take
Nevertheless,
(Thompson 1988)
the
time
even a
to
write
a
formal
'miniature1 plan would
Inexpensive
or
free advice
in
writing a plan is readily available through SBA, SCORE, and
SBDCs
around
available.
the
A
macroenvironmental
analysis,
plans.
as
well
country.
typical
Private
plan
analysis,
as
marketing,
SWOT
consultants
usually
includes
analysis,
production,
are
and
also
a
strategic
financial
20
Sources of Data
The
three
information
chapters
was
that was
obtained
used
from
in preparing
the
the
following
first
sources':
Research and opinion articles were acquired through the Renne
Library of Montana State.University by conducting searches on
the Infotrac periodical
Review database
addition,
search system,
the Harvard Business
and the Dissertation Abstracts
Online.
In
the researcher possessed a number of related books
and articles.
Empirical data was collected through the use of a survey
instrument in the
was
administered
form of a questionnaire.
to
a
randomly
selected
The
sample
instrument
of
small
manufacturing businesses in Montana.
Construction Methodology of Survey Instrument
The
survey
instrument
was
a
written
questionnaire.
After reviewing the literature and consulting with Professor
Millikin,
College
of
Business,
Montana
State
University
(MSU), the researcher designed the initial form.
the instrument was presented to BuEd 524 class
Business
Education)
The participants
review
and
at MSU
during
the month
A draft of
(Research
of
July
1991.
reviewed and edited the instrument.
approval
by
Dr.
Millikin,
a
pilot
conducted to test the accuracy of. the instrument.
in
study
Upon
was
The pilot
21
study took place within the city of Bozeman, Montana,
involved ten small business owners.
Dr.
Shannon
approval by
Taylor,
the
College
graduate
made to the instrument.
further
test
instrument.
of
Under the direction of
Business,
committee,
MSU,
further
and
upon
revisions
were
A new pilot study was conducted to
the accuracy and ease
of use
of
the
improved
The pilot study took place within the cities of
Livingston and Bozeman,, Montana,
and it involved
manufacturing
No
required,
and it
business
and
upon
owners.
final
approval
further
by
five
revisions
Dr.
Taylor
small
were
the
instrument was administered. ,
Time Line for Data Collection
October 15,
1992
Initial pilot survey,
10 businesses in
Bozeman, MT
March 24,
1993
Final pilot survey, 5 small business
manufacturers in Bozeman and
Livingston, MT
April 14,
1993
Mailing of survey and cover letter to
sample
May 14,
1993
Cut-off date for returns
.
22
Participant Selection
The population of
based
manufacturing
the study consisted of
businesses
as
defined,
1500
Montana
identified
and
compiled by the Montana Department of Commerce.
All of these
businesses
had
a
address.
sample
200
businesses
of
Manufacturing
telephone
Business
researcher
every
of
letter
back.
the
A
deliverable
randomly
selected
published
by
A
from
the
the
Montana
The database was made available
disk.
The
the
database
from
selection process,
was
participants.
was
computer
seventh business
completion
cover
on
a
Directory
Department of Commerce.
the
and
mailed
total of
to
the
method
was
of
choosing
used.
the
instrument
200
randomly
100 questionnaires
were
to
Upon
and
a
chosen
received
Out of those, 53 were filled out and were suitable for
use in this study,
left blank.
Appendix
As it can be seen on the instrument itself
B) ,
questionnaire
9 were not suitable for use and 38 were
recipients
and
return
were
it,
if
asked
their
to
complete
business
classified primarily as a manufacturing company.
business
was
anything
else
but
a
(see
manufacturing
the
could
If
be
their
company,
recipients were asked to return the questionnaire blank.
This study may be subject to non-respondent bias because
only 50% of the sample participants returned the instrument.
Nevertheless,
five
of
the
firms
that
did not
respond were
23
interviewed
via
phone
and
were
found
to
have
similar
responses and demographic data as those who responded.
Data Analysis Method
The
collected
statistical
charts,
package
data were
and
frequencies,
analyzed by
Cricket
cross
Graph.
tabulations
using
Bar
and chi
the
SAS
graphs,
pie
squares were
selectively used to analyze the findings of the study.
Summary
Chapter
instrument
the
III
addressed
construction,
participant
the
selection
presented in Chapter
the
data
,issues
of
collection
process.
to
the
and
questions
information
that was obtained through the statistical analysis.
IV will present the results.
survey
timeline,
Answers
I were given by using
the
Chapter
24
CHAPTER IV
PRESENTATION OF DATA
Introduction
The objective of this chapter is to present the findings
of
the
study
in
provide comments.
given.
that
Second,
prepare
identified.
a
statistical
First,
and
graphical
form
the important demographic
outside
or
don't
Third,
prepare
the
written
rationale
of business plans
help
Sixth,
the
price
and
Seventh,
data
to
is
the number of small manufacturing businesses
business
in
business
perceptions
usefulness
the business
are
plan
of
of
shown.
owners
Fifth,
preparation
business
a
plans
behind preparing
preparing a written business plan is analyzed.
contents
and
owners
or
not
Fourth,
the
the
is
in
are
is
role
of
addressed.
relation
business
plan
awareness
of planning
to
presented.
services
is demonstrated.
Business Demographics
Out of the 100 questionaires that were returned,
filled
project,
This
out
and
were
suitable
for
use
in
this
53 were
research
9 were not suitable for use and 38 were left blank.
section
gives
the
major
demographic
data
of
the ,53
25
Montana
based
small
questionnaire
and
businesses
that
can
primarily
manufacturing companies.
be
Five
interviewed
via
of
the
phone
a
completed
considered
as
This study may be subject to non­
respondent bias because only 50% of
responded.
returned
firms
and
the sample participants
that
were
did
found
not
to
respond
have
were
similar
responses and demographic data as those who responded.
This
outcome was encouraging.
In
order
to
characteristics
respondents
enhance
communication,
the
demographic
are analyzed for the complete group
(53)
of
the
and for the two main subgroups, i.e.
those
who at some point in time used a written business plan
(Plan
Group: 19)
and those whor never used a written business plan
(No Plan Group:
34).
These characteristics are as
follows:
a) Position of the person that filled out the questionnaire,
b)
Number
of
full-time
employees,
c)
Legal
status,
and
d)
Gross sales.
Overall,
the
vast
majority
of
the
respondents
owners of the business that was being studied.
shows 44
As Figure I
(83%) were owners and 9 (17%) were managers.
I further exhibits that within the Plan Group 14
respondents
managers.
were
owners
of
the
business
Within the No Plan Group 30
and
were
Table
(74%) of the
5
(26%)
were
(88%) were owners of
the business whereas only 4 ,(12%) were managers.
26
Figure I
Number of Businesses
Position of Respondents Who
Filled Out Questionnaire
40 -
Iijijijiijj:-:-: ijijijijijijijij
30 -
jilliii;
ill
20 -
10-
I
T
M
<D
I
M
&U
C
G
S
I
Position Categories
27
Table I
Position of Respondents in Relation to Business Plan Creation
Position of
Respondents
No
Manaaer
4(12%)
5(26%)
9
Owner
30(88%)
14(74%)
44
Total
34(100%)
19(100%)
53
Business Plan
Yes
Total
Figure 2 illustrates the number of
full-time
employees
small manufacturing businesses had during 1992.
They were as
follows:
employees,
28
(58%)
had between
zero
and
(17%) had between six and ten employees,
11 and 20 employees,
five
4
employees.
question.
"very
Five respondents
According
businesses
that have
small"
and
to
less
the
than 20
businesses
that
indicate that 36 or more than half
considered very
small.
As
Table
2
and
5
President's
employees
have
are
this
Report,
20
and
99
The data presented above
(75%)
small
businesses
also
shows, the
the No-Plan Group.
had
considered
between
of the respondents
whereas
number
the
of
businesses both proportionately and numerically
larger within
(10%)
failed to answer
1989
employees are considered "small."
are
had between
3 (6%) had between 21 and 30 employees,
none had any employees between 31 and 50,
over 50
(8%)
8
Twenty six
rest
very
is
(89%)
are
small
slightly
of
the
manufacturers out of the No-Plan Group are classified as very
small
businesses
and
14
(74%)
out
classified as very small businesses.
of
the
Plan
Group
are
28
Figure 2
Number of Full-Time Employees of
Responding Businesses
H
CSJ
(T)
Number of Full-Time Employees
[f)
29
Number
of
Full-Time
Table 2
Employees in Relation
to
Business
Plan
Creation
Number of Full
Time Emolovees
Np
0-5 Emolovees
21(72%)
7(37%)
28
6-10 Emoloveees
3(10%)
5(26%)
8
11-20 Emolovees
2(7%)
2(11%)
4
21-30 Emolovees
2(7%)
1,(5%)
3
51-99 Emolovees
1(4%)
4(21%)
5
Total
29(100%)
19(100%)
53
There
was
a
manufacturers,
employees
prepare
in
Business Plan
Yes
Total
relationship
between
the
as
by
number
1992,
a written
measured
and
their
business
the
tendency
plan.
size
to
(Chi
of
of
full-time
prepare
square
small
or
was
not
11.29,
degrees of freedom were 5, probability was less than .05.)
The
majority
of
the
manufacturing
businesses
responded to the survey were organized as corporations.
that
As
Figure 3 presents 32 (60%) were organized as corporations and
21 (40%) were organized as sole proprietorships.
respondents
according
organized
was
to
Table
as
proprietorships.
organized
organized
as
proprietorships.
as
3 within
corporations
Within
a
partnership.
the
Plan Group
and
the No
corporations
None of the
Plan
and
5
Furthermore,
14
(26%)
Group
16
18
(47%)
(74%)
were
as
sole
(53%)
were
as
sole
30
Figure 3
Number of Businesses
Legal Status of Responding Businesses
M
W
&
O
0
0)
-H
o
M
4->
U
H
S
M'
01
D
i<H
O
CO
Legal Status
31
Legal
Status
in
Table 3
R e l a t i o n to B u s i n e s s
Plan
Total
Business Plan
Yes
Legal
Status
No
Corooration
18(53%)
14(74%)
32
Sole Proor.
16(47%)
5(26%)
21
Total
34(100%)
19(100%)
53
The
legal
status
relationship to their
written
business
small
of
tendency
plan.
(Chi
Creation
no
manufacturers
to prepare or not prepare
square
was
2.19,
a
of
degrees
freedom were I, probability was greater than .05)
Figure 4 presents the data relevant to the gross sales of the
qualified
(31%)
respondents.
had
$100,001
gross
to
(14%) had
had over
sales
$250,000,
$500,001
$2,000,000,
4
Of
(8%)
to
of
6
the
53
$100,000
(12%)
had $2,000,001
$5,000,001.
corresponding question.
or
had
$1,000,000,
small
manufacturers
less,
$251,000
3
(6%)
12
to
(23%)
had
$500,000,
had $1,000,001
to $5,000,000
One participant
16
failed
and 4
to answer
7
to
(8%)
the
Table 4 demonstrates the gross sales
within the Plan and No Plan Groups.
32
Figure 4
Number of Businesses
Gross Sales of Responding Businesses
CN
LO
r4
CN
I
LO
OI
r-4
Units per $100,000
O
CN
33
Gross
Sales
in
Table
R e l a t i o n to
4
Business
Plan
Creation
Gross
Sales
No
0-1
13(39%)
3(16%)
16
1-2.5
8(24%)
4(21%)
12
2.5-5
4(12%)
2(11%)
6
5-10
2(6%)
5(26%)
7
10-20
2(6%)
1(5%)
4
20-50
3(9%)
1(5%)
4
50+
1(3%)
3(16%)
4
Total
33(100%)
19(100%)
52
Business Plan
Yes
Total
The relative size of the small manufacturers, as determined
by their
1992
gross
sales,
showed no relationship
to their
tendency to prepare or not prepare a written business plan.
(Chi square was 8.73, degrees of freedom were 6, probability
was greater than .05)
Business Plan Statistics
This section examines the number of small manufacturing
businesses
that developed a written business plan
that did n o t .
Figure 5 shows that out of the
and those
53 qualified
respondents 19 (36%) had used a written business plan at some
point
in
time
and
that
34
(64%)
had
never
used
one.
Furthermore, as Figure 6 demonstrates 10 (20%) had prepared a
34
Figure 5
Breakdown of Business Plan
Use Among Businesses
.
m
y
E3
Used a Plan
HO
Never Used a Plan
35
Figure 6
Breakdown of Businesses with Plan Upon
Startup of Business
ilk
*
E3
Had Plan
H
Did Not Have PLan
36
written plan when starting their business,
not
prepare
one
upon
starting
their
and 40
(80%)
business.
did
Three
participants failed to answer the corresponding question.
addition,
as
Figure
7
indicates,
out
of
that had used a written business plan 10
written
(47%)
business
plan
upon
starting
the
manufacturers
(53%) had prepared a
their
company,
did not prepare a written business plan upon
their
company.
corresponding
One
participant
question.
Finally,
In
failed
to
Figure
8
and
8
starting
answer
shows
the
that
13
(68%) of the same 19 manufacturers that had used a business
plan (i.e. the majority) continue to routinely use a business
plan today whereas the remaining 6 (32%) do n o t .
Taking into consideration the assumption that most small
businesses
numerous
never
write
opinion
a business
articles,
businesses
in
Montana
surprising
to
find
businesses
that
are
that
belong
as
plan,
well
very
as
view
shared
the
fact
that
small,
approximately
to
a
Montana1s
it
one
was
out
industrial
used a written business plan at some point.
by
most
somewhat
of
three
sector
has
(Alexander 1991)
This data seems to indicate that a significant portion of the
people
who
Montana
own
or
run
the
(i.e.
one
third)
who recognize
the
importance
can
lead
assumption
to
the
success
are
of
small
manufacturing
plants
well-informed business
of planning as
their
that planning can be
one of the
people
a vehicle
organization.
key
of
that
If
factors
small business success (whether it provides a company with
the
of
37
Figure 7
Breakdown of Businesses with Plan Upon
Startup of Business*
m
a
E
3 Had
O
H Did
p
Plan
Not Have PLan
* T h i s i n f o r m a t i o n r e f e r s t o t h e g r o u p o f 19
respondents that had used a written business
p l a n at s o m e p o i n t in ti m e .
38
Figure 8
Breakdown of Businesses that
Continue to Routinely Use a
Business Plan*
I ^ .
m
0
Do Not Use
E
U Use
* T h i s i n f o r m a t i o n r e f e r s t o t h e g r o u p o f 19
respondents that had used a written business
p l a n at s o m e p o i n t in t i m e .
39
clear direction,
enables it to raise capital or helps it to
uncover ,its weaknesses)
is accepted as accurate,
it might be
argued that those small manufacturing firms that have used a
business plan may achieve greater success in the future than
those that did n o t .
The
assertion
future study
expressed
above
that could examine
over a period of time.
might
be
and compare
tested
the
via
a
two groups
A measure of success such as gross
sales or net profit might be set.
The
next
section
will
examine
the
reasons
small
manufacturing businesses in Montana did or did not prepare a
written business plan.
Business Planning Rationale
This section identifies the reasons behind the decision
of small manufacturing firms to prepare or not to prepare a
written business plan.
First,
the rationale of the 19 small manufacturers that
had used a written plan
that 5
(26%)
of
is, reviewed.
Figure
these qualified respondents
9 illustrates
had prepared a
business plan because it was a bank requirement, 9 (47%)
order
to give
direction to their company,
and
5
(26%)
in
for
both reasons.
The
above data also
tend to
strengthen
the
suggestion
that was presented in the previous section, i.e. that those
40
Figure 9
Rationale Behind Developing a Written
Business Plan*
E3
Bank Requirement
H
U To
I!
Give Direction to Company
Both
* T h i s i n f o r m a t i o n r e f e r s t o t h e g r o u p o f 19
respondents that had used a written business
p l a n at s o m e p o i n t in t i m e .
41
business
people
informed
that
had used
managers.
respondents
a
Indeed,
business
only
5
plan' were
(26%)
of
had prepared a written business plan
bank required
them to do
so before
loan. The rest of the respondents
either because
they
felt
the
because
they could apply
(73%)
well19
a
for a
had prepared a plan
the clear direction of a business
plan would benefit their company or for both reasons.
By comparing the data that was presented in this and the
previous
section
derived.
Again,
a
number
of
interesting
findings
can
out of the 53 qualified respondents,
be
19 had
prepared a written, business plan at some point in time.
As
Table 5 shows, out of the five small manufacturing firms that
prepared a plan because it was required by a bank in order to
process
a
routinely
loan
use
application,
a business
only
plan
one
today.
(20%)
In
continues
contrast,
to
seven
(78%) out of the nine firms that prepared a business plan in
order to give direction to their company continue
business plan today,
to
support
a
and all of the five firms that prepared
a plan for both reasons continue to use one today.
seems
to use
the
following
conclusion:
If
The data
preparing
a
written business plan was a consensual or free will decision
of
the
small
manufacturing
requirement imposed by a bank,
firm
not
strictly
a
this firm is much more likely
to routinely use a business plan
reason were true.
and
today than
if
the
latter
42
Table 5
Relation Between Routine Use of a Plan Today and Reasons for
Creating a Plan
Reason for
Planning
Routinely Use Plan Today
No
Yes
Total
Bank Reouirement
1(20%)
4(80%)
5(100%)
Direction to Firm
7 (78%)
2(22%)
9(100%)
Both Reasons
5(100%)
0(0%)
5(100%)
Total
13
6
19
There
was
developing
routinely
a
relationship
between
a written business
used
or
not
used
plan
the
initial
reasons
for
a plan
was
and whether
today.
(Chi
square
was
8.10,
degrees of freedom were 2, probability was less than .05)
Second,
not
the rationale of the 34 small manufacturers
prepared
Figure
10,
2
a
business
(6%)
of
plan
these
is
examined.
qualified
that had
According
respondents
to
had
not
prepared a business plan because it was too time consuming,
(13%) because they did not have the skills,
they did not think it was
necessary,
11
8
(35%)
(25%)
4
because
because
they
never thought about it and 7 (22%) due to other reasons. Two
participants failed to answer the corresponding question.
These
findings
largely
contradict
the
suggestion
small businesses refrain from planning mainly because
too costly,
skills
that
it
is
it takes too much time or it requires specialized
(as expressed
and empirical data).
in previously
quoted
opinion
articles
If all the responses that correspond to
43
Figure 10
Number of Businesses
Rationale Behind Not Preparing a Business
Plan*
108
x
X
=:=:
=:=:
x
:=:
X:
X;
X;
X;
X;
7
=X
=:=:
=X
=:=:
=:=:
=:=:
=X
=X
=:=:
=:=:
=:=:
=:=:
=:=:
5-
l
tn
C
-H
to
C
2
-H
CO
§
O
0
1
H
CO
-p
i
—i
•—I
-H
2
O
O
Eh
H
CO
■p
I
o
co
-P
§
O
O
H
=:=:
=:=;
=:=:
=:=:
=:=:
=X
=:=:
=:=:
=:=:
=:=:
=X
=X
X
3
F
O
.C
O
-p
S
O
,
C
B
h
M
2
2
Rationale
* This information refers to the groups of
respondents that had never used a business
34
plan
44
the above cited reasons were added they would amount to only
6
(19%)
out
of
34.
Surprisingly,
not
even
one
respondent
mentioned high cost as a reason for not preparing a written
business plan.
from
Section
This outcome may be
6 whereby
it
is
explained by a
shown
that
14
finding
(52%)
of
the
respondents are willing to pay less than $250 for a business
plan and '8 (30%) are willing to pay less than $500.
In other
words, these respondents may not have considered the cost of
preparing
a business
plan
as prohibitive
because
they
may
have grossly underestimated the actual cost of having a plan
written for them.
These findings also
(59%)
of
these
show that
the
small manufacturing
two main
reasons
19
firms d i d 'not prepare
a
business plan were simply because they never thought about it
or did not consider it necessary.
outcome
could
be
partially
It is possible that this
attributed
to
a
understanding of what exactly a business plan
can help a small
Most
banks
need
business
to
see
improve
a
well
lack
of
is or how
its
chances
thought
out
of
it
success.
business
plan
before they will consider giving a loan to a small business.
(Cook 1991)
It is possible
that
some of
the afformentioned
small manufacturers never attempted to get a loan from such a
bank
or
worked
preparation
credit.
of
with
a
a
bank
business
plan
that
did
before
not
require
deciding
to
the
extend
45
Business Plan Contents
This
business
section provides
plans.
respondents
data
According
to
concerning
the
Figure 11,
I
contents
(5%)
of
3
and 10
than
(53%)
more
(16%)
two years,
5
three years.
shows which of the elements
usually
(26%)
Furthermore,
included
a
strengths
mission
and
statements,
weaknesses,
11(65%)
marketing plan,
technology
analysis,
strategies
statement,
10
and
12
specific
(59%)
13
(77%)
(71%)
Table
an
8 (47%) a macroenvironmental analysis,
related
to
the
objectives.
Two
(53%)
a
a
industry
and 8
(47%)
participants
failed to answer the corresponding question.
Table 6
Frequency of Business Planning Elements
Mission
Analysis of Strengths and Weaknesses
Projected Financial Statements
Specific Objectives
Marketing Plan
Competition Analysis
Technology and Process Analysis
Industry Analysis
Macroenvironmental Analysis
Strategies
(65%)
9
an
of
financial
11
8 (47%)
(88%)
analysis
projected
objectives,
analysis,
6
in a plan had
a competition analysis,
process
time
three years,
been used by the aformentioned small manufacturers: 15
included
the
had a written business plan that covered a
frame of one year,
of
15(88%)
13(77%)
12(71%)
11(65%)
11(65%)
10(59%)
9(53%)
8(47%)
8(47%)
8(47%)
46
Figure 11
Time Frame of Business Plans*
Number of Businesses
12.5
7 .5-
2 .5-
Time Frame
* This information refers to the group
19 r e s p o n d e n t s t h a t h a d u s e d a w r i t t e n
b u s i n e s s p l a n at s o m e p o i n t in time.
of
47
The
single
frequently
in
planning
a business
mission statement.
element
plan
than
that
appeared
anything
else
Almost nine out of every
more
was
the
ten qualified
respondents
that had prepared a plan had included a mission
statement.
In addition, more than half of the business plans
had a time frame of over three years.
This data
appear
to
indicate that the majority of these small manufacturing firms
plan
felt
for the
very
long run.
strongly
At
least
against
following unsolicited comment
one
respondent, however,
long-range
planning
shows: "In today's
as
the
timeframe,
more than two years is a joke."
The second most frequent element included in a business
plan was an analysis of strengths and weaknesses.
The third
most frequent element was a section with projected financial
statements and the' fourth was a marketing plan along with a
section on objectives.
Business Plan Preparation
This section addresses the help manufacturing firms may
have received in preparing a plan as well
may
have
paid
manufacturers
all.
for
that
service.
that had used a plan,
As Table 7 shows,
7
(47%)
Out
as how much
of
the
4 received
of the rest
I
from other sources,
no
small
help
at
of respondents
received help from people within their company,
their accountant, 4 (27%)
19
they
4
(27%)
3 (20%)
from
from a
48
software or book in planning,
a business
consultant
that
3 (20%)
was
not
from SBA, 2 (13%)
an
accountant,
from an independent accounting firm,
2
(13%)
and 2
from local university faculty,
university
addition,
students.
as
Figure
respondents who
$501
12
received
indicates,
received some
(9%) less than $250,
between
None
to
help
(13%)
help
7
(13%)
and
I
(9%)
(13%)
from
SCORE.
of
nothing
over
2
from local
In
the
for
I (9%) between $251 and $500,
$750
2
from a bank,
(64%)
paid
from
15
it,
one
$2000.
I
(9%)
Four
participants failed to answer the corresponding question.
Table 7
Frequency of Business Planning Help
Help from Within Company
Their Accountant
Other Sources
Software or Book
SBA
Business consultant
Independent Accounting Firm
Bank
Local University/College Faculty
Local University Students
SCORE
7(47%)
4 (27%)
4 (27%)
3(20%)
3(20%)
2(13%)
2(13%)
2(13%)
2(13%)
2(13%)
0(0%)
Business Owners Perceptions of Usefulness and Price
This section is concerned with the perceptions of small
manufacturing
business
owners
and
general
managers
in
relation to business plan usefulness and price.
First, the perceptions of the 19 firms that had prepared
49
Figure 12
Payment for Business Planning Help*
to
<u 6
to
to
-
CD
G
-H
CO
3
PQ
4-1
0
i:!
CD
13
%
2-
I
<D
2
O
m
CNJ
O
O
m
V>
</>
OI
I
rH
m
CNJ
v>
O
m
r*
v>
i
O
«—i
m
v>
o
o
o
i—i
-to­
rn
m
r*
v>
o
o
O
CNJ
1—1
O
O
l—l
</>
O
O
0
CNJ
to­
ll
1
Business Planning Fee
* T h i s i n f o r m a t i o n r e f e r s t o t h e g r o u p o f 19
respondents that had used a written business
p l a n at s o m e p o i n t in time.
50
a business plan are reviewed.
Figure 13 illustrates
that 6
(32%) felt that overall the business plan was very helpful,
(32%) helpful,
and 7 (37%) slightly helpful.
the business plan was not helpful at all.
8 shows that out of the 13 respondents
Also,
3
(50%)
helpful and 2
Table
that routinely use a
3 (23%) helpful,
out of the 6 respondents
that do not routinely use a plan today,
very helpful,
felt that
In addition.
plan today 5 (38%) felt it was very helpful,
and 5 (38%) slightly helpful.
None
6
I (17%)
(33%)
felt it was
slightly helpful.
It appears that the data are mixed and that no assertion can
be made
as
to
differences
in perception
between
those
who
routinely use or don't use a business plan.
Table 8
Relation Between Routine Use of a Plan Today and Perception
of Plan Helpfulness
Dearee of
Helofulness
Routinely Use Plan Today
Total
Yes
No
Very Heloful
5(38%)
1(17%)
6
Heloful
3(23%)
3(50%)
6
Sliahtlv Heloful
5(38%)
2(33%)
7
Total
13(100%)
6(100%)
19
The perception of how
helpful
a
written
business
been showed no relationship to whether a plan was
used or not used
today.
(Chi square was
8.73,
freedom were 6, probability was greater than .05)
plan
has
routinely
degrees
of
51
Figure 13
Perception of Business Plan
Usefulness*
!..I-/::
I
Slightly Helpful
E
U Helpful
Very Helpful
* T h i s i n f o r m a t i o n r e f e r s t o t h e g r o u p o f 19
respondents that had used a written business
p l a n at s o m e p o i n t in t i m e .
52
Eleven (58%) out the 19 aforementioned firms answered an
open ended question that
the
business
plan
was
inquired as
specifically
to where
they
helpful.
thought
Five
(26%)
commented that the plan was most beneficial in helping
define
their goals.
direction,"
"To help you maintain
said one.
your
them
goals
and
"Keep focused attention on short term
and long term goals," said another.
Three
(16%)
referred to
focus and direction as being the main benefit they received.
Finally, the remaining respondents said the following:
a basis for general business money decisions."
b)
a)
"As
"Financial
control, raising equity capital." c) By highlighting good and
bad points in production." .
Second,
that
had
Figure
the perceptions
not
14
developed
demonstrates,
a
of
the
business
when
34
small
plan
is
asked whether
manufacturers
reviewed.
they
thought
written business plan could be useful to the future
of
their company,
said No,
answer
that
14
and 15
11
(33%)
said they didn't
(46%) said Y e s .
the corresponding question.
(52%)
were willing
to pay
As
know,
a
success
7
(21%)
One participant failed to
Figure
less
than
15
illustrates
$250
if
they
decided to have someone prepare a. professional business plan
for them, 8 (30%) between
$501 and $750.
$251 and $500, and 5 (19%) between
Seven participants failed to answer the
53
Figure 14
Perception of Business Plan
Usefulness*
ill
k
Iilll
Illlll
E3
Yes
H
No
®
Don't Know
* This information refers to the groups of
respondents that had never used a business
34
plan
54
Figure 15
Business Plan Price Perceptions*
to
0)
co
co
CU
c
-H
co
O
m
4-t
O
H
QJ
5-
P
o
o
m
</>
I—I
m
cm
</>
o
LO
r*
v>
i
O
LO
</>
rH
I
O
O
O
1— 1
1
O
O
O
CM
v>
v>
v>
O
O
i-H
I
rH
m
O
O
O
CM
</>
T—I
v>
Price Range for Business Plan
* This i n f o r mation refers to the groups of
respondents that had never used a business
34
plan
55
corresponding question.
Moreover,
as Figure
16 shows,
when
asked whether they intend to have a business plan done in the
future,
13
(39%) said No,
15
(46%) s.aid they didn't know and
5 (15%) said Yes.
Although almost half
general managers
(46%) of these business owners and
business
plan
could be helpful to the future success of their company,
only
a few
(15%)
future.
said they thought
a written
said they intended to have
What
could be
business planning
one prepared in the
interpreted as even worse
consultants
is
that none
of
news
for
the business
owners was willing to pay over $750 for a business plan.
It appears that most
willing
to
expend
preparing a plan,
the
of
these business
resources
that
are
owners
are not
called
for
in
although the thought may have occurred
to
them at some point that a business plan might be helpful to
their business.
lack
of
It is likely that this attitude reflects a
understanding
organization succeed.
in how
a business
plan
can
help
an
(See also Section 3)
Indeed, business planning can help the small businesses
of Montana.
agree
that
Not
a
only
business
do
small
plan
is
business
an
experts
indispensable
generally
tool
for
business success, but also empirical studies have proven that
a positive
and
1989)
small
correlation
exists
firm performance.
In addition,
between
(Cook
operational
1991)
the majority of banks
planning
(Shrader
require
et
al
to see a
business plan before they will even consider a funding
56
Figure 16
Future Business Plans*
Iliilii
iil!li!l!i!i!j|jl!!!!!l|ii!!!!!!^
m i W "
ElI Yes
EO
No
11
Unsure
* This information refers to the groups of
respondents that had never used a business
34
plan
57
request.
might
(Cook 1991)
suggest
business
that
The above findings considered together
an
support
effort
needs
to
organizations
Manufacturer's Association)
be
made
(e.g.
by
the
small
Montana
to educate small business owners
about the value of business planning.
Busines Owners Awareness of Business Planning Services
This section examines the business
managers'
refers
a
qualified
the
34
plan.
small
As
respondents
manufacturing
Table
were
offered by accounting firms,
10
(42%)
(25%)
by
and general
awareness of business planning services.
to
develop
owners'
by the SBA, 8
a
local
another source.
9
exhibits,
aware
13
of
the
18
that
(75%)
planning
did
not
of
the
services
(54%) by private consultants,
(33%) by SCORE,
university
firms
The data
or
6
(25%) by banks,
college,
and
3
Ten of the qualified respondents
(13%)
Table 9
Awareness Frequency of Business Planning Services
18(75%)
13(54%)
10(42%)
8(33%)
6(25%)
6(25%)
3(13%)
by
failed to
answer this question.
Accounting Firms
Private Consultants
SBA
SCORE
Banks
Local University/College
Another Source
6
58
The data show that accounting firms,
business
consultants,
enjoyed
the
recognition as business plan providers.
business
owners
were
aware
of
followed by private
the
highest
SBA
as
inexpensive
a
place
where
and only one out
Although none of the two groups
will write a complete plan for a business,
advice,
of
Only two out of five
business planning services may be offered,
of three was aware of SCORE.
level
booklets
and
can
they provide
generally
free
direct
a
client to someone who could provide professional help.
As
the data presented earlier
indicate,
the S B A 's
and
SCORE'S business planning assistance programs are not widely
known
among
small
manufacturers.
It
seems
plausible
■;
that
more business owners might take advantage of these services,
if they knew about them.
Although this study cannot support
this assertion, the SBA might consider taking more aggressive
steps in promoting the aforementioned services.
Other Findings
-
An attempt was made to determine whether any demographic
factor showed any relationship with the respondents' tendency
to prepare
or not prepare a business plan.
The
amount
of
full time employees,the legal status and the gross sales
of
, I'
the
qualifying
manufacturing
businesses
were
separately
'I
compared with
show,
only
their planning habits.
size,
as
determined
by
As Tables
number
of
2,3
and
4
I
:
full-time
I
employees in 1992, showed a relationship with the tendency to
prepare or not prepare a written business plan.
Legal status
and size as determined by gross sales showed no relationship.
Summary
This chapter analyzed the
findings
of
the
study.
The
data was divided into eight sections: Business Demographics,
Business
Business
Owners
Plan
Statistics,
Plan Contents,
Perception of
Business
Business
Usefulness
Planning
Plan Preparation,
and
Price,
will
recommendations.
further
interpret
the
Business
Business
Awareness of Planning Services, and Other Findings.
chapter
Rationale,
data
Owners
The next
and
make
60
CHAPTER V
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Introduction
The goal
data
of
illustrated
conclusions
this
in
as
chapter
Chapter
well
as
is
IV.
to
further
A
summary
recommendations
organizations are provided.
Finally,
interpret
of
to
the
the
study,
appropriate
further recommendations
for research are given.
Summary of the Study
The
major
purpose
of
this
study
was
to
explore
the
business planning habits of Montana-based small manufacturing
firms,
the
owners'
perceptions
planning and its uses,
in
relation
to
business
as well as their awareness of outside
help.
The need for the study was created by an understanding
of
the
positive
role
written
facilitating small business
role
small
economy.
current
businesses
Information
business
success
themselves
that
planning
business
might
and by
play
be
practices
in
used
of
plans
the
play
in
significant
stimulating ■the
in
improving
Montana's
the
small
manufacturing businesses could eventually lead to an improved
state economy.
The
.N
study
was
limited
to
manufacturing
operated within the state of Montana
took place.
at
the
firms
time
that
the study
Out of the 200 questionnaires that were mailed,
100 were returned and 53 were suitable for use in this study.
The following topics were analyzed in the literature
review:
of
The need
busines
planning,
organizational
planning,
for planning,
relation
performance,
business
advantages
of
small
planning
and disadvantages
business
planning
business
and
owners
financing,
to
and
getting
professional advice, and business plan contents.
The
final
questionnaire,
survey
was
instrument,
developed
a
self-administered
a f t e r > reviewing
the
related
literature and consulting with the graduate committee.
This study used data that were derived from responses
to
the
questionnaire
statistical package.
and
were
Relevant
analyzed
facts
using
and figures
the
SAS
that were
derived from the literature were also used.
Finally,
used
related
the study was organized into five chapters that
subtopics.
subjects were analyzed.
Sources
of
data
were
cited
and
62
Conclusions
Based on the findings presented earlier,
the
following
conclusions can be reached:
1.
Approximately
three
out
of
four
"small"
businesses
in Montana fell within the
category.
According to the President's
1989,
organization
an
considered
"very
with
less
small," whereas
manufacturing
"very small"
Report published
than
an
business
20
employees
organization
in
is
that
has
between 20 and 99 employees is considered "small."
2.
Approximately
eight
out
manufacturing businesses had
of
ten
gross
Montana
sales
based
under
one
"small"
million
dollars.
3.
Approximately
one
out
of
three
(36%)
"small"
manufacturing businesses has used a written business plan at
some
point
in
time.
One
out
of
five
(20%)
"small"
manufacturing businesses has prepared a written business plan
upon starting their business.
In addition,
of
manufacturing
ten
used
(68%)
of
a business
the
plan
"small"
at
some
point
in
roughly seven out
firms
time,
that
have
continue
to
routinely use a business plan today.
4.
Giving direction
to their
company was
the most
common
reason that prompted "small" manufacturing firms to prepare a
written
business
plan
at
some
starting their business or later.
that
nearly
half
(47%)
of
the
point
in
time,
The project
aforementioned
i.e.
upon
demonstrated
firms
that
63
developed a plan did so in order to give direction to their
company.
One fourth of the same firms
written
business
plan
because
it
(26%) had prepared a
was
a
bank
requirement
whereas the rest (26%) had prepared a plan for both reasons.
5.
The vast majority of
"small"
manufacturing
had prepared a written business plan because
firms
it was
that
a bank
requirement for financing were not routinely using a business
plan
afterwards.
contrast,
had
one
out
of
almost nine out of
ten
(86%)
prepared
a
Only
written
business
five
of
plan
(20%)
did.
those
firms
in
order
direction to their company or for both reasons
in
that
to
(i.e.
give
to give
direction to their _company and to fulfill a bank requirement)
continued to routinely use a business plan.
6.
The
most
common
reason
manufacturing firms :(35%)
that
prevented
from preparing a written business
plan was that they 1never thought about it.'
common
reason
necessary.'
review,
(25%)
was
Contrary
none
of,
the
"small"
that
they
'didn't
to the suggestions
"small"
The second most
think
of
businesses
the
it
was
literature
refrained
from
planning because it was too expensive and only a few (6%) did
not prepare a plan because it was too time consuming.
7.
The
three
major
planning
elements
that
appeared
frequently in a business plan were a mission statement
an analysis of strengths and weaknesses
financial statements (65%).
(71%)
more
(77%) ,
and projected
64
8.
The
two most prevalent
planning
assistance
to
sources
"small"
that
provided business
manufacturing
firms
were
people within their company ,(47%) and their accountant (27%).
9.
All of the firms that had developed a written business
plan
at
some point
Roughly,
thought
one out of three
it was helpful
(32%)
to
some
degree.
thought a business plan had
been very helpful.
10.
All
of
the
"small"
manufacturers
that
developed a plan were unwilling to pay over
business
plan
Furthermore,
prepared,
if
they
decided
approximately half of them
had
$750
they
never
to have
needed
a
one.
(52^) were unwilling
to pay over $250.
11.
Almost half of the "small" manufacturers that had never
developed a plan
(46%)
could
to
be
useful
Nevertheless,
thought that a written business plan
the
future
success
of
their
company.
only a few (15%) intended to have one prepared
in the future.
12.
Accounting firms had the highest level of recognition as
providers
of
business
manufacturing
findings
show
firms
planning
that
that
had
nearly
services
never
among
prepared
eight
out
the
"small"
a plan
of
ten
The
(75%)
manufacturers were familiar with accountants as a source for
business planning help,
and almost half
(54%)
with private business planning consultants.
only two out of five manufacturers
(42%)
were
were
familiar
Approximately,
aware of
the
65
SBA
as
a place
where
business
planning
services
might
be
offered and only one out of three (33%)was aware of SCORE.
13.
Size, as determined by number of full-time employees in
1992,
showed a relationship with the tendency to prepare
or
not prepare a business plan.
14.
It
is
possible
that
this
study
respondent bias because only 50% of
is
that did not
respond were
to
non­
the sample participants
responded. 'What is encouraging, however,
firms
subject
is that five of the
interviewed via
phone
and
were found to have similar responses and demographic data as
those who responded.
Recommendations
Upon reviewing the major findings of this study as well
as
the
current
literature,
incorporation
of
the
following
recommendations by the appropriate parties is suggested:
Business Groups
Business
Commerce,
support organizations
such
as
the
Chamber
the Montana Manufacturer's Association and
of
others
should engage in an educational effort whereby the value
of
business planning is clearly conveyed to small manufacturing
firms.
Undoubtedly,
written
Montana's small business
business
community.
plans
Empirical
can
benefit
studies have
66
clearly
shown a positive
relationship
organizational performance.
the
general
agreement
between planning
(Shrader et al 1989)
among
small
that business plans are essential
business
and
Moreover,
consultants
for success.
is
(Cook 1991)
If the above data as well as the fact that small businesses
play
a
key
accurate,
role
in
creating
new
jobs
are
accepted
as
it should follow that a good way to stimulate the
economy would be
to convince more
other small businesses)
small
manufacturers
(and
to develop written business plans.
SBA
The
Small
aggressive
planning
steps
manufacturing
were
aware
advantage
in
related
manufacturers.
services,
Business
Administration
promoting
less
firms know
of
it
than
about
it would be natural
of
awareness
assistance
Since
should
the
can
half
of •the
render
of
to assume
Nevertheless,
been verified with empirical data.
Montana's
that
this
small
firms
would
assumption has
In addition,
take
not
it should be
remembered that being a federal government: agency,
subject to budgetary constraints.
small
planning
if more
more
more
business
to
SB A 1s business
the aforementioned services,
them.
take
the SBA is
67
Small Manufacturing Firms
Small
plans.
manufacturers
The
size and
should
develop
complexity
of
written
a plan
needs of every particular organization.
business
should
fit
the
Among other things,
a well thought out business plan can provide a small business
with clear direction,
help
capital.
Written business plans are especially
(Orpen 1985)
it uncover weaknesses
and
raise
recommended for start-up operations because of their inherent
capacity
to
provide
business owner.
may accomplish
a
'reality
Sometimes,
is
start a business
check' to
the
prospective
the best result a business plan
to cause
such a person
that was doomed
to
to decide not
fail,
thus
saving
to
him
money and potential frustration.
Montana Department of Commerce
The
developing
Montana
an
Department
authoritative
could be used within
might
serve
as
a
the
of
Commerce
business
state
statewide
of
should
planning
Montana.
standard,
thus
consider
guide
Such
that
a guide
eliminating
confusion as to what a business plan should and should not
include.
68
Financial Institutions
Banks and other financial institutions should recognize
that
forcing business
owners
to prepare
a written
business
plan when requesting a loan will not necessarily prompt them
to use it afterwards as a management tool.
small
manufacturers
whose ' only
reason
This applies to
for
preparing
business plan is to fulfill a bank's requirement.
a
Most banks
typically request a business plan before granting a loan to
small
businesses,
in
order
to
ensure
that
the
prospective
borrower knows his business, has a blueprint for success and
has the capacity to pay back the loan from the cash proceeds.
(Handles
1993)
Nevertheless,
the
vast
majority
of
the
aforementioned small manufacturers will not routinely use the
plan once they receive the loan.
As a result,
their chances
of success will remain the same, as if they did not prepare a
business plan in the first place.
Many
banks
reports
as
further
protect
chances
demand
conditions
of
their
success
manufacturers
who
experienced business
of
time.
This
collateral
for
granting
investment
they
receive
loans
is
monthly
loans.
and
might
consultants
approach
and
expand
require
use
the
-In
a
financial
order
to
business1s
that
small
services
of
for a predetermined period
currently
Women's Economic Development Group
being
used . by
the
(WedGo), a Montana based
69
small
business
support
group
that
provides
guarantees
for
small business loans and occasionaly provides direct loans.
Business Colleges
Business
colleges
business
planning
business
curriculum
would
like
to
should
class
to
start
consider
(required
better
their
or
elective)
prepare
own
business
plan
can
organizational success.
those
business.
recommendation is based on the premise
out
incorporating
increase
the
in
a
their
students
who
Again,
this
that a well
thought
possibilities
of
(Bracker 1991)
Federal Government
The federal government should examine the possibility of
making
business
retraining
planning
programs.
skills
The
an
goal
possibly encourage willing workers
optional
would
be
to
part
of
empower
job­
and
that have been displaced
to start their own business.
Future Researchers
Future researchers should conduct periodic studies that
expand on this
study.
In
addition,
study might be
conducted in order
another
to validate
longitudinal
the positive
j
70
correlation
success
as
between
reported
business
planning
by
researchers.
other
and
organizational
Finally,
this
study may be expanded to include more detailed questions that
examine not
just what business
owners
think
about
business
plan usefulness and price but other perceptions as well.
71
BIBLIOGRAPHY
72
BIBLIOGRAPHY
A l e x a n d e r , T r a c y L. " U s a g e o f C o m p u t e r s
Business Community." Montana State
in the Mont a n a
University, 1991
American Entrepreneurs Association. "How to Develop a
Successful Business Plan." 1982
Bamberger, Ingolf. "Developing Competitive Advantage in Small
and Medium-Size Firms." Long Range Planning, Oct. 89, 80
Blechman, Bruce J . "Earn by Doing." Entrepreneur Magazine.
September 1992, 19
Bracker, Jeffrey et al. "Planning and Financial Performance
Among Small Firms in a Growth Industry." Strategic
Management Journal, Nov./Dec. 1988, 591
Chickadel, Charles et al. "The New American Business System."
Meridian Learning Systems, 1991, B-I
Cook, Williams. "Webster's Newworld Dictionary of Business
Terms." Simon and Schuster, Inc., 1991 .
Cook, Wi r t . "Strategies for Business Expansion."
Entrepreneur Magazine. June 1991, 40
Dilts, Jeffrey et a l . "Strategic Options for Environmental
Management: A Comparative Study of Large vs Small
Enterprises." Journal of Small Business Management, July
1989, 31
Dollinger, Marc J. "Environmental Contacts and Financial
Performance of the Small,Firm." Journal of Small
Business Management. Jan. 1985, 25
Drucker, Peter F . "Our Entrepreneurial Economy." Harvard
Business Review, Jan./Feb. 1984, 59
Engeleiter, Susan S. et al. "Strategic Planning for Small
Business." Barron's , July 31 1989, 41
Fasano, Michael. "Strategic Planning for Small Companies."
Best's Review, March 1990, 18
Goldberg, Cheryl J.
1993, 36
"Big Plans."
Entrepreneur Magazine. June
Golden, Sharon. "The 1990 Guide to Small Business: Special
Report." U.S. News and World Report, 1989, 72
73
Handles, Gwen. I n t e r v i e w e d on M a r c h
Bank, Livingston, M o n t a n a
16th,
First
National
Park
Hills, Gerald. "Market Analysis in the Business Plan: Venture
Capitalists Perceptions." Journal of Small Business
Management, Jan. 1985, 38
Jones Robert E. "Internal Politics and the Strategic Business
Plan." Journal of Small Business Management. 1985, 31
Journal of Accountancy. "Small Business Owners Lack Time for
Planning." Sept. 1988, 16
King, William et al. "Strategic Planning and Management
Handbook." Van Nostrand Reinhold Company, 1987, 64, 560
Larson, Paul. The Montana Entrepreneur's Guide." University
Press, 1990, 88
Maturi, Richard. "Back to the Drawing Board." Entrepreneur
Magazine, Dec. 1992, 168
Moore, Lisa. "You Can Plan to Expand or Just Let it Happen to
You. " U.S. News "and World Report, Oc t . 23, 1989, 73
Orpen, Christopher. "The Effects of Long Range Planning on
Small Business Performance: A Further Examination."
Journal of Small Business Management, Jan. 1985, 22
Pleither, Hans. "Strategic Behavior in Small and Medium Sized
Firms." Journal of Small Business Management, October
1989, 45
Randolph, Robert. "Planagement: Moving Concept into Reality."
Amacom, 1975, 87
Sherman, Andrew. "Writing a Plan for Growth." Nation's
Business. November 1991, 68
Shrader, Charles et al. "Strategic and Operations Planning,
Uncertainty and Performance in Small Firms." Journal of
Small Business Management, Oct. 1989, 45
Spragins, Ellyn. "How to Write a Business Plan that Will Get
You in the Door." Inc., Nov. 1990, 59
"The State of Small Business: A Report of the
Transmitted to the Congress 1989." United
Government Printing Office, 1989
President
States
74
Timmons, Jeffrey. "A Business Plan is More Than a Financial
Device." Harvard Business Review. Mar./Apr. 1980, 14
Touby, Laurel. "What Makes a Loan Officer Say Yes." Working
Woman. January, 1990, 47
Thompson, Roger. "Business Plans: Myth and Reality." Nation's
Business, Aug. 1988, 16
Wallace M.J. et al. "Collins Business English Dictionary."
Collins Educational, 1984
Washer Louise. "The Business Plan that Gets the Loan."
Working Woman. 'Jan. 1990, 37
75
APPENDICES
76
APPENDIX A
COVER LETTER
April
15,
1993
Dear Montana Businessperson:
W e a r e i n t e r e s t e d i n l e a r n i n g a b o u t t h e u s e o f b u s i n e s s p l a n s byM o n t a n a ' s m a n u f a c t u r i n g firms.
Your name was randomly drawn from
the M o n t a n a M a n u f acturers Di r e c t o r y for 1991-1992.
Would you
please take a few minutes to complete the enclosed questionnaire
a n d r e t u r n it i n t h e p o s t a g e - p a i d e n v e l o p e .
I t is v e r y i m p o r t a n t
t h a t y o u comp l e t e and r e t u r n th e q u e s t i o n n a i r e so t h a t our sample
w i l l b e s c i e n t i f i c a l l y valid.
W e a r e a s k i n g t h a t t h i s s u r v e y b e c o m p l e t e d b y e i t h e r t h e owner,
president,
general manager,
chief
financial
o f f i c e r or chief
o p e r a t i n g o f f i c e r of y o u r company.
T h e r e s u l t s of t h i s s u r v e y w i l l b e u s e d t o b e t t e r u n d e r s t a n d £ h e
needs
of M o n t a n a ' s m a n u f a c t u r e r s
and to guide
those who do
c o n s u l t i n g w i t h t h e s e firms.
Only summary statistics will be
i n c l u d e d in our analysis.
Y o u r s p e c i f i c d a t a w i l l b e k e p t in
strict confidence.
T h i s r e s e a r c h is p a r t o f Mr. M a k r i s ' g r a d u a t e r e s e a r c h p r o j e c t .
I a m o n h i s g r a d u a t e c o m m i t t e e . If y o u h a v e a n y q u e s t i o n s , p l e a s e
c o n t a c t e i t h e r o n e o f us.
T h a n k y o u for t a k i n g t h e time to h e l p us
w i t h t h i s project.
Sincerely,
Dr. S h a n n o n T a y l o r
Assistant Professor
M r . George Makris
Graduate Student
78
APPENDIX B
SURVEY INSTRUMENT
79
All businesses,
f r o m t h e s m a l l e s t s o l e p r o p r i e t o r s h i p t o t he
largest
corporations,
plan
for
the
future.
Some
planning
t e c h n i g u e s are v e r y informal, l o o k i n g o n l y at t h e imm e d i a t e f u t u r e .
O t h e r s a r e v e r y f o r m a l , c o v e r i n g s h o r t - t e r m t a c t i c s as w e l l a s
long-term strategies and policies. Montana's g rowing manufacturing
s e c t o r is v i t a l t o o u r e c o n o m y a n d a s s u c h it d e s e r v e s s p e c i a l
attention.
Y o u r i n p u t as a g e n e r a l m a n a g e r o r b u s i n e s s o w n e r is
g r e a t l y valued.
Please take a few minutes to answer the following
questions:
ATTENTION:
1.
THIS QUESTIONNAIRE SHOULD BE COMPLETED BY ONE OF THE
FO L L O W I N G O F F I C E R S : OWNER, PRESIDENT, G E N E R A L MANAGER,
CHIEF FINANCIAL OFFICER,
C H I E F O P E R A T I N G OFFICER.
T H A N K YOU.
Are you primarily a manufacturing company?
[] Y e s — p l e a s e c o m p l e t e t h e q u e s t i o n n a i r e .
[] N o — p l e a s e r e t u r n o u r q u e s t i o n n a i r e
in
e n v e l o p e , a n d t h a n k y o u f o r y o u r time.
is y o u r p o s i t i o n w i t h y o u r
[] O w n e r
[] M a n a g e r
t he
return
2.
What
fir m ?
3.
In w h a t year did your c o m p a n y s t a r t operat i o n ?
4.
H o w m a n y employees d i d y o u h a v e during 1992?
F u l l Time, n o t i n c l u d i n g y o u r s e l f :
0 - 5__
6 - 1 0 __ 11-2 0__ 21-3 0__ 3 1 - 5 0 __ O v e r 5 0 _
P a rt-time or seasonal:
0 - 5__ 6 - 1 0 __ 1 1 - 2 0 __ 2 1 - 3 0 __ 3 1 - 5 0 __ O v e r 5 0 _
5.
W h a t type of legal status does y o u r b u s i n e s s hold?
S o l e P r o p r i e t o r s h i p _____ P a r t n e r s h i p _____ C o r p o r a t i o n _____
6.
W h a t w a s t h e r a n g e of y o u r f i r m ' s g r o s s
__ $ 1 0 0 , 0 0 0 o r l ess
__ $ 1 0 0 , 0 0 1 t o $ 2 5 0 , 0 0 0
__ $ 2 5 0 , 0 0 1 t o $ 5 0 0 , 0 0 0
__ $ 5 0 0 , 0 0 1 t o $ 1 , 0 0 0 , 0 0 0
__ $ 1 , 0 0 0 , 0 0 1 t o $ 2 , 0 0 0 , 0 0 0
__ $ 2 , 0 0 0 , 0 0 1 t o $ 5 , 0 0 0 , 0 0 0
_$ 5 , 0 0 0 , 0 0 1 o r m o r e
sales
Y e a r ___________
in 1992?
IF Y O U H A V E E V E R U S E D A W R I T T E N B U S I N E S S PLAN, P L E A S E A N S W E R T H E
FOLLOWING QUESTIONS.
IF NOT, P L E A S E G O T O Q U E S T I O N #16 O N P A G E 3.
7.
Did you have
company?
[] Y e s
[] N o
a
written
business
plan
when
you
started
your
80
8.
Do you routinely use a business plan today?
[] Y e s
[J N o
9.
Why did
[]
[]
[]
[]
10.
Do y o u feel the business pl a n was helpful overall?
[] V e r y h e l p f u l
[] H e l p f u l
[] S l i g h t l y h e l p f u l
[] N o t h e l p f u l a t a l l
11.
If y o u felt th e b u s i n e s s p l a n wa s helpful,
d i d it help? ,
12.
W h o (if a n y one) h a s h e l p e d y o u i n d e v e l o p i n g y o u r b u s i n e s s
plan?
( c h e c k a l l t h a t apply)
[] P e o p l e w i t h i n m y c o m p a n y
[] M y a c c o u n t a n t
[ ] ,An i n d e p e n d e n t a c c o u n t i n g f i r m
[],,An i n d e p e n d e n t b u s i n e s s c o n s u l t a n t w h o w a s n o t a n
accountant
[] M y b a n k
[] F a c u l t y f r o m t h e l o c a l c o l l e g e o r u n i v e r s i t y
[] S t u d e n t s f r o m t h e l o c a l c o l l e g e o r u n i v e r s i t y
[] S m a l l B u s i n e s s A d m i n i s t r a t i o n
[] S e r v i c e C o r p s o f R e t i r e d E x e c u t i v e s (SCORE)
[] A b o o k o r s o f t w a r e o n p l a n n i n g
[] I r e c e i v e d n o h e l p a t a l l
[] Other, p l e a s e e x p l a i n ______________________________________
13.
If s o m e o n e else ha s h e l p e d y o u p r epare th e p l a n , ho w m u c h di d
y o u p a y for that service?
[] F r e e
[] L e s s t h a n $250
[] $ 2 5 1 t o $500
[] $ 5 0 1 t o $750
[] $ 7 5 1 t o $ 1 , 0 0 0
[] $ 1 , 0 0 1 t o $ 2 , 0 0 0
[] O v e r $ 2 , 0 0 0
14.
P l e a s e i n d i c a t e t h e t i m e f r a m e y o u r b u s i n e s s p l a n covered:
,[] L e s s t h a n a y e a r
[] O n e y e a r
I
[] T w o y e a r s
[] T h r e e y e a r s
[] M o r e t h a n t h r e e y e a r s
you develop a written business plan?
It was a b ank req u i r e m e n t for a loa n application.
I w anted to give direction to m y c o m p a n y .
Both
O t h e r , p l e a s e e x p l a i n _________________________________
w h e r e specifically
81
15.
P l e a s e indicate w h i c h of t h e f o l l o w i n g e l e m e n t s w e r e included
i n y o u r b u s i n e s s plan:
[] I n d u s t r y a n a l y s i s
[] C o m p e t i t i o n a n a l y s i s
[] A n a l y s i s o f e v e n t s b e y o n d y o u r c o n t r o l (e.g. econ o m y ,
social trends)
[] A n a l y s i s o f s t r e n g t h s a n d w e a k n e s s e s w i t h i n y o u r
company
[] M i s s i o n s t a t e m e n t
[] O b j e c t i v e s t h a t a r e s p e c i f i c a n d h a v e t i m e f r a m e
[] S t r a t e g i e s t h a t h e l p y o u a c c o m p l i s h t h e o b j e c t i v e s
[] M a r k e t i n g p l a n
[] T e c h n o l o g y a n d p r o c e s s a n a l y s i s
[] P r o j e c t e d f i n a n c i a l s t a t e m e n t s
[] O t h e r , p l e a s e s p e c i f y _____________________________________
T HANK Y O U FOR TAKING THE TIME TO COMPLETE OUR QUESTIONNAIRE.
****************
IF Y O U D I D NO T H A V E A
FOLLOWING QUESTIONS:
WRITTEN
BUSINESS
PLAN,
PLEASE
ANSWER
THE
16.
I d i d n o t p r e p a r e a busi n e s s p l a n because:
[] I t w a s t o o t i m e c o n s u m i n g
[i|] I t w a s t o o e x p e n s i v e
[ i ] I didn't have the skills
[] I d i d n ' t t h i n k it w a s n e c e s s a r y
[] I n e v e r t h o u g h t a b o u t it
[] O t h e r , p l e a s e e x p l a i n ____________________________________ _
17.
A l t h o u g h I d i d n o t p r e p a r e a b u s i n e s s pl a n , I t h i n k a w r i t t e n
b u s iness p l a n can be useful to the f u ture success of m y
business:
[] Yes
[] N o
[] D o n ' t k n o w
18.
If I d e c i d e d t o h a v e s o m e o n e p r e p a r e a p r o f e s s i o n a l b u s i n e s s
p l a n , I w o u l d b e w i l l i n g t o p a y w h a t a m o u n t f o r t h a t serv i c e :
[] L e s s t h a n $200
[] $ 2 5 1 t o $ 5 0 0
[] $ 5 0 1 t o $ 7 5 0
[] $ 7 5 1 t o $ 1 , 0 0 0
[] $ 1 , 0 0 1 t o $ 2 ,000
[] $ 2,000
82
19.
A l t h o u g h I d i d n o t p r e p a r e a w r i t t e n b u s i n e s s plan, I m a i n t a i n
c o n t r o l by: ( c h e c k a l l t h a t apply)
[] R e v i e w i n g m y f i n a n c i a l s t a t e m e n t s
[] K e e p i n g t r a c k o f m y s a l e s
[] T a l k i n g t o m y a c c o u n t a n t
[] K e e p i n g t r a c k o f m y c o s t s a n d e x p e n s e s
[] T a l k i n g w i t h v e n d o r s a n d s u p p l i e r s
[] O t h e r , p l e a s e s p e c i f y ______________'_______ _______________
20.
A s a b u s i n e s s o w n e r I:
[] T r y t o a n t i c i p a t e c h a n g e s a n d p r e p a r e f o r t h e m
[] R e s p o n d t o c h a n g e s a s t h e y o c c u r
21.
Do you intend to have a business plan done
[] Y e s
[] N o
[] U n s u r e
22.
in the future?
I a m a w a r e o f t h e b u s i n e s s p l a n n i n g s e r v i c e s o f f e r e d by:
[] A c c o u n t i n g f i r m s
[] g a n k s
[] S m a l l B u s i n e s s A d m i n i s t r a t i o n
[] S e r v i c e C o r p s o f R e t i r e d E x e c u t i v e s (SCORE)
[] L o c a l c o l l e g e o r u n i v e r s i t y
[] P r i v a t e b u s i n e s s c o n s u l t a n t s
[] O t h e r , p l e a s e s p e c i f y _____________________ _
_________
■ THANK YOU FOR TAKING THE TIME TO COMPLETE O UR QUESTIONNAIRE.
****************
If y o u w o u l d l i k e t o r e c e i v e a c o p y o f t h e s u r v e y r e s u l t s ,
p r o v i d e y o u r n a m e a n d address below:
please
NAME
ADDRESS
T H ANK Y O U VE R Y MUC H FOR TAKING THE TIME TO COMPLETE A N D RETURN THIS
Q U E S T I O N N A I R E . Y O U R E F F O R T IS D E E P L Y A P P R E C I A T E D .
(