CHAPTER ONE

INTRODUCTION

1.1 Background of Study

The major objective of any meaningful business is to make profit and strive towards obtaining a fair share of the market and ultimately ensure dominance in its area of operation, be it product development, trading or service delivery. The economic strength of the nation lies in how well its businesses (private or public) fare in the face of whatever challenges may prevail domestically or globally. Technological and scientific advancement has brought with it a paradigm shift from the classical concept of total isolation in business to an approach that involves national consideration in major business decisions.

According to Egbe (2013), it is conventional wisdom that new businesses be planned prior to their start-up hence prospective business founders are generally advised to develop formal plans of their proposed ventures. For instance, a study by Lawal and Adoki (2016) found that 20% of non-planners failed within three years. This correlates with the dictum that “failing to plan is planning to fail”. Thus, businesses that want to maintain a firm grip on its market share require strategic and comprehensive planning.

Large firms develop fundamentally from small and medium scale enterprises (SMEs). The dynamic role of small scale enterprises in developing countries as engines through which the growth objectives of developing countries can be achieved has long been recognized (Kayanula Dalitso and Peter Quartey 2015).

A business planning document being a document containing specific information about a business, and its future is essentially becoming an imperative document in the development of SMEs.

In the struggle for market share and finance for expansion, communication is inevitable. A business planning document will communicate to potential investors where the business is going and the plan to get there. It aids in tracking, monitoring, and evaluating business progress over the short and long term. It also assists in strategic and successful planning for the future. In fact the business plan is a great tool with which to chart and gauge business growth. However, the business plan will continually change and evolve over time.

Essentially if the availability or non-availability of business planning document for small scale businesses in the Kaduna metropolis is properly examined and comprehensively evaluated, an all-inclusive plan could be put in place to aid in the maximum exploitation of the full potentials of SMEs. A boost in SMEs in the Kaduna Metropolis will essentially lead to job creation and contribute to national development at large.

It is against this background that the research seeks to carry out a comparative analysis of business plan on the performance of small and medium (SMEs) in Nigeria.

1.2 Statement of the Problem

Knowledge of the pragmatic and significant role SMEs play in enhancing the economic stability of the city and the region as a whole: ideas, interventions, policies and extensive plan of action that will ensure its growth cannot be overemphasized. With the spotlight on SMEs, government policies and interventions, many financial institutions are willing to provide credit to promising SMEs. However, creditors would always want to have substantial proof of business viability and sustainability before rendering any financial assistance. Information about any business including business concept, financial features, sales highlights, profits, cash flow, return on investment financial requirements, capital needed for start-up or expanding and how capital will be used. This information among others is fundamental to every good business plan.

It is clichéd that he who fails to plan, plans to fail. The essence of this study is to examine the relevance of a business planning document (which is document containing specific information about a business, and its future) in the success of identified SMEs in the Kaduna metropolis. Kaduna has few sustained businesses with less employment opportunities and the eventual poverty rate. Sustainability of small businesses leads to poverty reduction, and proper planning is crucial to sustainability and growth of these businesses. If SMEs in the metropolis will have a very good business planning document, it would guide the businesses to growth and ultimately poverty reduction. Since properly documented business plan with systemic measures, will ensure general business growth and even facilitate access to credit, there is the need to examine the significant impact of identified SMEs within the metropolis and study the relevance of business plan to SMEs in the Kaduna Metropolis.

1.3 Research Questions

The study sought to answer the following questions:

i.                    What is the performance rate of SMEs that operate without a business plan and ones that operates with business plan in the Kaduna metropolis?

ii.                  To what extent does a proper business plan enhance the start-up, success or otherwise of SMEs in the Kaduna metropolis?

iii.                What are the effects of business planning document on the sourcing and securing of financial support for SMEs?

1.4 Objectives of the Study

The main objectives of the study is to carry out a comparative analysis of business plan on the performance of small and medium (SMEs) in Nigeria.

i.                    To examine the performance rate of SMEs that operate without a business plan and ones that operates with business plan in the Kaduna metropolis.

ii.                  To determine the extent to which a proper business plan can enhance the start-up of SMEs in the Kaduna metropolis.

iii.                To find out whether business plan document affect the sourcing and securing of financial support for SMEs.

1.5      Hypothesis

H01: There is no significant relationship between business plan and the performance rate of SMEs.

H02: There is no correlation between business plan and start-up of SMEs in the Kaduna metropolis.

H02   Business plan document does not have a significant effect on the sourcing and securing of financial support for SMEs.

1.6       Scope of study

This study covers a comparative analysis of business plan on the performance of small and medium (SMEs) in Nigeria, with search light on Kaduna Metropolis. Hence the study shall examine the performance rate of SMEs that operate without a business plan and ones that operates with business plan in the Kaduna metropolis as well as determine the extent to which a proper business plan enhance the start-up, success or otherwise of SMEs in the Kaduna metropolis and  find out whether business plan document affect the sourcing and securing of financial support for SMEs. The time frame for this study covers a period from 2015 to 2016. This period enable the researcher to obtain recent information.

1.7       Significance of the Study

This study will contribute to existing body of knowledge on the subject matter by showing the relationship between business plan and the performance of SMEs that effective utilizes business plan and those that do not. As such it will be a good reference material to students, scholars and the general public. The study would also be beneficial to corporate organization, by way of improving their strategic planning especially as they utilize the finding of this study.

The study will also serve as a basis for policy formulation to public and private sector. The research will also be beneficial to students, members of the public and individual who may wish to undertake their own research as it will be a springboard and a basis for further study.

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