Description
This explanation related to factors affecting development of business plans by small and medium enterprises.
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
182
www.hrmars.com
Factors Affecting Development of Business Plans by
Small and Medium Enterprises in Kenya: A Survey of
Commercial Rabbit Farmers in Thika District
Kevin Wachira
College of Human Resource and Entrepreneurship Development, Jomo Kenyatta University of
Agriculture and Technology, Kenya.
Edna Musyoki
The Co-operative University College, Karen, Nairobi, Kenya.
DOI: 10.6007/IJARBSS/v5-i5/1601 URL:http://dx.doi.org/10.6007/IJARBSS/v5-i5/1601
ABSTRACT
The contribution of small and medium enterprises to global economy in general and the Kenyan
economy in particular has been recognized and well documented. Given their importance, it is
important that these enterprises be planned for so that possible challenges are anticipated,
possible solutions are put in place and their overall contribution of these enterprises to the
economy is increased. There is documented evidence that business planning enhances
performance of an enterprise. There is also documented evidence that most enterprises,
especially those classified as small and medium do not engage in business planning. They
therefore, as individual businesses fail to reap the benefits of planning while the economy as a
whole also suffers high mortality rates of start-ups, which are crucial for employment creation.
In view of the above, this study aimed at assessing the factors that affect development of
business plans by small and medium enterprises using a survey of rabbit farmers in Thika
District.
The specific objectives of this study were to look into the extent to which entrepreneurship
skills, stakeholders’ requirements and entrepreneurs’ attitude impact development of business
plans. It was anticipated that those who possess some business skills are in a better position to
develop business plans; that those who have a close formal relationship with major
stakeholders of their businesses are more likely to develop business plans; and that those with
a positive attitude towards planning are more likely to develop business plans. This study
adopted descriptive research design. The target population was all small and medium
enterprises engaged in commercial rabbit farming. A sample of respondents was derived using
a combination of cluster and simple random sampling techniques. A semi structured
questionnaire was used as the main data collection tool.
All the entrepreneurs interviewed had an idea of what a business plan is. The study found out
that an overwhelming majority (90%) of the respondents were of the opinion that
entrepreneurship skills affect development of business plans by SMEs. A majority (85%)
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
183
www.hrmars.com
indicated that business plans are influenced by stakeholders and their requirements. The major
stakeholders that had a high impact on development of business plans by SMEs were found to
be customers (90%), suppliers (80%), financiers (40%) and the government (40%). An outright
majority (97%) confirmed that the attitude of the entrepreneur affects development of plans
for his business. The study recommends among other things, a more active role of the
government, through the various relevant ministries, in assisting SME entrepreneurs in
developing business plans.
Key Words: Business plan, Small and Medium Enterprise, Business Planning.
1.0 Introduction
SMEs have created the majority of new jobs in Organization for Economic Cooperation and
Development (OECD) countries since the 1970s (Peacock 2004). Their collective contributions to
respective Gross Domestic Product (GDP) (e.g., approximately 30% in Australia and New
Zealand, 51% in the UK and USA, 57% in Canada and Japan, 76% in Luxembourg) is substantial
despite their individual small size (Ayyagari, Beck & Demirguc-Kunt 2003).
In Kenya SMEs are a major source of employment and income generation. In the year 2002 MSE
sector employed about 5,086,400 people up from 4,624,400 in 2001 which consisted of 74.2%
of total national employment (CBS, GOK 2003). According to the Economic Survey (2006), the
sector contributed over 70 percent of new jobs created in the year 2005. This percentage rose
to 74.3 per cent in 2006 and 76.5 percent in 2007 (GoK Economic Survey, 2008). Mead (1998)
observes that the health of the economy as a whole has a strong relationship with the health
and nature of micro and small enterprise sector. SMEs reflect the competitive spirit that a
market economy needs for efficiency; they provide an outlet for entrepreneurial talents, a
wider range of consumer goods and services, a check to monopoly inefficiency, a source of
innovation, and a seedbed for new industries; they allow an economy to be more adaptable to
change through continuous initiatives embodying new technologies, skills, processes or
products (Ibielski 1997).
Despite their significance, past statistics indicate that three out of five business start-ups fail
within the first few months of operation (Kenya National Bureau of Statistics, 2007).
2.0 Problem Statement
A number of studies suggest that having a business plan enhances growth in small enterprises
(e.g. Bracker et al., 1988; Lyles et al., 1993; Schwenk and Shrader, 1993). Almost every
entrepreneur recognizes the virtues of sound planning, yet it remains one of the most
neglected aspects of management (Kinard, 1992). Business planning no doubt occurs in small
enterprises (McCarthy, 2003). However, planning activities of SMEs are often intuitive, less
sophisticated and less formalized in comparison to large enterprises (Naffziger and Kuratko,
1994; Stonehouse and Pemberton, 2002). Lack of proper plans in conjunction with other
external factors such as unsupportive legislations, inaccessibility to markets and lack of
financing have made SMEs to remain small and rarely graduate to medium or large businesses
and are often characterized by low capital investment (McCormick, 2001).
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
184
www.hrmars.com
According to Barringer (2008) a large percentage of entrepreneurs do not write business plans
for their ventures. Many entrepreneurs say that the day to day pressures of getting a company
up and running leave them little time for planning. Among the issues that have been identified
as affecting business planning in SMEs include lack of management and technical skills (House,
et al., 1990); various stakeholders whose interests should be taken to consideration (Moore
et.al.,2006) and individual entrepreneur’s attitude ((Muller, 1994). Therefore, the purpose of
this study was to look into the factors affecting development of business plans by small and
medium enterprises in Kenya.
3.0 Literature Review
3.1 Business Plan Defined
It is the entrepreneur's roadmap to a successful enterprise (Cynthia 2006). It describes all the
relevant internal and external elements involved when starting and running a venture.
According to Cobweb, (2007) all businesses, whether new or established, should have a
constantly evolving business plan in order to help them define their objectives and their
strategies for achieving them.
3.2 Entrepreneurship Skills
In Kenya, one of the challenges faced by entrepreneurs in Small and Medium sized Enterprises
(SMEs) is the lack of entrepreneurship skills to match their talent and passion for
entrepreneurship (Matogo, 2008). Research shows that majority of the lot carrying out small
enterprises in Kenya are not quite well equipped in terms of education and skills. Majority of
those who run SMEs are ordinary lot whose educational background is lacking. Hence they may
not be well equipped to carry out managerial routines for their enterprises (King and McGrath
2002). Many SMEs owners lack entrepreneurial training and experience. The typical owners of
small businesses develop their own approach to management, through a process of trial and
error. As a result, their management style is likely to be more intuitive than analytical, more
concerned with day-to-day operations than long-term issues, and more opportunistic than
strategic in its concept (Hill 1987). Studies suggest that those with more education and training
are more likely to be successful in the SME sector (King and McGrath 2002).
A consequence of poor or lack of the fore mentioned skills is that SME owners are ill prepared
to face changes in the business environment and to plan appropriate changes. In addition,
SMEs may not be in a position to outsource experts to close the skills gap in their enterprises
given the many financial challenges that face them (Wanjohi & Mugure, 2008).
3.3 Stakeholders’ Requirements
According to Moore et al, (2006) there are various stakeholders to an enterprise who may at
one time or the other require guidance from the enterprise’s business plan to make decisions.
The stakeholders can either be internal to the business (e.g. employees and management) or
external (e.g. lenders, suppliers, distributors and customers) (Longnecker, 2006).
By identifying the variables that can affect the success or failure of a business, a business plan
becomes a model that helps the entrepreneur (management) focus on important issues and
activities for the new venture (Longnecker, 2006). Moore (2006) indicates that prospective
employees may require analyzing a firm’s business plan as it is a structure for communicating
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
185
www.hrmars.com
the entrepreneur’s mission goals and objectives. Employees are able to see what is in it for
them in terms of employee training and motivation (Moore, 2006). By enhancing a firm’s
credibility, the business can serve as an effective selling tool to use with suppliers (DeThomas &
Derammelaere, 2003). For example, suppliers extend trade credit, which is often an important
part of a new firm’s financial plan. A well prepared business plan may be helpful in gaining a
supplier’s trust and securing favourable credit terms (DeThomas & Derammelaere, 2003). A
business plan can improve sales prospects of a business e.g. by convincing prospective
customers of a firm’s potential for longevity, the plan may reassure those customers that the
new firm is likely to be around for a longer time to continue as a procurement source
(Longnecker, 2006). Financiers or lenders may require to see a firm’s business plan (Longnecker,
2006). Formal financial institutions require marketable collateral, proper book keeping and
most often a bankable business plan particularly for start ups (Mulei & Bokea, 1999). This then
means that for those SMEs that secure funding from formal financing institutions there is high
likelihood of them coming up with business plans. However, such SMEs are the minority
(Steven & St Onge, 2005).
3.4 Attitude
Studies show that the mental attributes of individuals have a significant impact on their work
(Stevens, Philipsen & Diederiks, 1992).
In SMEs, the link between attitudes and plans is more likely to be direct because these
enterprises have not yet developed bureaucratic blockages that shield managerial personalities
from organizational processes (Muller, 1994). Due to the fact that SMEs have yet to develop
institutional constraints to change, entrepreneurs are more readily able to instill their attitudes
into the firm’s activities (Muller, 1994). Carland et al (1984) suggests that the ability to separate
one’s attitudes from the operations of the firm is what distinguishes the entrepreneur from the
business manager. The level in the organization that the manager occupies has an impact on
the extent to which his attitudes can influence action plans (Munro & Noori, 1985). Since owner
-managers tend to have a sort of ‘super’ managerial status their attitudes have a more direct
impact on development of action plans. initial motivations for being in business determine
whether owner-managers will pursue either (a) profit/growth maximization goals or (b)
personal fulfillment goals. This choice of goals subsequently determines the planning
imperatives of the business. Given that business planning is recognized as a vehicle to drive
business development, competitiveness and hence, economic success (Vicere, 1995). It is
proposed that owner-managers pursuing a profit/growth maximization agenda will be more
inclined to engage in business planning. Conversely, those pursuing personal fulfillment
objectives will be less inclined.
4.0 Methodology
This was a descriptive survey research. According to Zickmund (2003), the main goal of a survey
is to provide facts and estimates that can be used by decision makers to gain insights to
understanding relationships, validate existence of relationships and make accurate predictions
about relationships between business factors. The target population for this study comprised of
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
186
www.hrmars.com
all SMEs engaged in commercial rearing of rabbits. There are currently 1,000 commercial rabbit
farmers spread across various parts of the country, mainly in Central Province who are
registered with the Association (Rabbit Breeders Association of Kenya, 2010). The researcher
narrowed down to farmers in Thika District which then becomes the study population. There
are 350 rabbit farmers in Thika District who are registered with the association. Rabbit farming
in Thika is expanding with the association having its head offices here. Kenya Institute of
Organic Farming (KIOF), one of the main trainers in commercial rabbit farming, is also situated
in the district.
From the sampling frame (list of 350 rabbit farmers in Thika District) provided by the Rabbit
Breeders Association of Kenya, simple random sampling was used to select a sample of 40
respondents who were then requested to participate as respondents in the study. Primary data
was collected through a semi structured questionnaire while secondary data was collected from
existing research findings, journals, books and the internet. The researcher personally
administered the questionnaires to the respondents. Data was analyzed by use of measures of
central tendency such as mean and mode. It was also analyzed by percentages and frequencies.
5.0 Findings
This research found out that business planning is suitable for all kinds of business, small or
large. 70% of respondents were of this opinion. Every business should plan as far as its capacity
and ability allows.
A majority (85%) indicated that business plans are influenced by stakeholders and their
requirements. This is a confirmation that businesses are complex relationships between entities
and individuals each of which has a degree of effect on the operations of a business. The major
stakeholders that had a high impact on development of business plans by SMEs were found to
be customers (90%), suppliers (80%), financiers (40%) and the government (40%).
A majority (97%) confirmed that the attitude of the entrepreneur affects development of plans
for his business. It confirms that plans and planners cannot be completely separated and more
often than not the planner’s biases will be reflected in his plans. The research also found out
that a majority (90%) of entrepreneurs have a positive attitude towards planning. They
appreciate possible positive results and benefits that a business can derive from planning.
The research established that continuous monitoring and evaluation affects development of
business plans. 40 percent of the respondents mentioned monitoring and evaluation as a
factor. Plans should be constantly reviewed to ensure that they reflect changing circumstances.
Entrepreneurs should on a continuous basis appraise performance based on the set out
business plan, meaning the plan itself and the strategies it puts forward are themselves
assessed as to how far they go in meeting the expected objectives of the business. With
continuous appraisal it is envisaged that any deficiencies in the existing plans will be mitigated
and the entrepreneur is better prepared to develop a better business plan next time.
6.0 Recommendations
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
187
www.hrmars.com
The study recommends that the government, through the Ministry of Education come up with
deliberate measures to impact entrepreneurship skills and culture among students at all levels.
Such measures may include introducing entrepreneurship as major subject in secondary
education. All technical colleges and polytechnics should also ensure that their students at one
point or another in their technical training, undertake entrepreneurship as a unit or part of the
course work. This will work towards developing skills and attitudes that make up an
entrepreneurial perspective. With the right perspective and focus, entrepreneurs will perhaps
be able to understand that they are separate entities with their enterprises. They will be able to
focus on economic facts as benchmarks for planning rather than their own emotions.
The government should take a more active role in helping small entrepreneurs develop
business plans e.g. field extension officers from the ministry of agriculture should be in a
position to provide basic business planning information to livestock keepers. The youth is a
major component of SMEs and the Ministry of Planning and that of Industrialization should be
on the forefront to impact entrepreneurship skills and business planning abilities among the
youth.
Further research should be carried out to establish the impact of monitoring and evaluation
and business environment risks on development of business plans by SMEs.
Corresponding Author
Kevin Wachira
Email: [email protected]
College of Human Resource and Entrepreneurship Development, Jomo Kenyatta University of
Agriculture and Technology P.O Box 62000-00200 Nairobi, Kenya.
References
Baringer, J. & Duane, C. (2008). Entrepreneurship: Successfully launching new ventures
NJ
rentice Hall
Cooper, D. R., & Schinder, P. S. (1998). Business research methods. Boston: Irwin McGraw Hill.
DeThomas, A. & Derammelaere, S. (2003). Writing a convincing business plan. Barron’s
Educational Series. NY. USA.
Emphasis on business planning (2010, November 26). Business Daily Newspaper
Hill, T. (1987). Small business production/operations management. London. Macmillan
Education Ltd
International Federation of Accountants. (2006). Business Planning Guide: Practical
applications for SMEs. New York
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188
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Kamau P. (2007). Rabbits are good for meat and income. The Organic Farmer Journal, Vol. 26,
35-39.
Kenya Institute of Management & The Ministry of Industrialization (2010) Jitihada Kenya
National Business Plan Competition Report. Nairobi.
Kenya National Bureau of Statistics. (2007).
King, K. & McGrath S. (2002). Globalisation, enterprise and knowledge: educational training
and development. International Review of Education, Vol. 50(1), 74-76
Longenecker, J. G., Petty, C. W., Moore, J. W. & Palich, L. E. (2006). Small business
Management: An entrepreneurial emphasis. London: Thomson South Western
Publishers
Matogo, J. (2008). Strathmore University Enterprise and Development Center, Nairobi.
McCarthy, B. (2003). The impact of the entrepreneur's personality on the strategy-formation
and planning process in SMEs, Irish Journal of Management.
Micro Small and Medium Enterprises. (2010). Perspectives (Bronchure).
Moore, C.W., Palich, L. & Pett, J. (2006). Small business management: An entrepreneurial
emphasis 13ed. Thomson Southern, Ohio. USA.
Muller, F. (1994). Teams between hierarchy and commitment: Change strategies and internal
environment. Journal of Management Studies 381-403
Munji, V. A. (2009) Guide on Commercial Rabbit Farming in Kenya
Peacock, R.W. (2004). Understanding small business: Practice, theory and research Scarman
Publishing, Adelaide.
Rabbit Breeders Association of Kenya Report (2009). Nairobi.
Schwenk, C. & Shrader, C.B. (1993). Effects of formal strategic planning on financial
performance insSmall firms: A Meta-Analysis Entrepreneurship: Theory and Practice
Sexton, D.L. & Smilor, R.W. (1997): Entrepreneurship 2000. Upstart Publishing, Chicago, IL.
Shaver, K. & Scott, L. (1991). Person, process, choice: The psychology of new venture creation
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Stevens, F., Philipsen, H. & Diederiks, J. (1992). Organizational and professional predictors of
physician satisfaction. Organizational studies 39, 84-101.
Stonehouse, G. & Pemberton, J. (2002). Strategic planning in SMEs. Some empirical findings,
Management Decision
Storey, D.J. (1994). Understanding the small business sector. Routledge Publishing. London.
The rise of rabbit farming (2010, January 6). The Daily Nation Newspaper
Valentin, E.K. (1994). Anatomy of fatal business strategy. Journal of Management Studies.
Wanjohi, A.M. & Mugure, A. (2008). Factors affecting the growth of MSEs in rural areas of
Kenya: A case of ICT firms in Kiserian Township, Kajiado District of Kenya. Unpublished Master’s
thesis.
Where rabbit meat compete with githeri. (2010, February 3). The Standard Newspaper.
Zickmund, W.G (2003) Business Research Methods 7
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Edition Thomson/South Western
Publishers
doc_822663323.pdf
This explanation related to factors affecting development of business plans by small and medium enterprises.
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
182
www.hrmars.com
Factors Affecting Development of Business Plans by
Small and Medium Enterprises in Kenya: A Survey of
Commercial Rabbit Farmers in Thika District
Kevin Wachira
College of Human Resource and Entrepreneurship Development, Jomo Kenyatta University of
Agriculture and Technology, Kenya.
Edna Musyoki
The Co-operative University College, Karen, Nairobi, Kenya.
DOI: 10.6007/IJARBSS/v5-i5/1601 URL:http://dx.doi.org/10.6007/IJARBSS/v5-i5/1601
ABSTRACT
The contribution of small and medium enterprises to global economy in general and the Kenyan
economy in particular has been recognized and well documented. Given their importance, it is
important that these enterprises be planned for so that possible challenges are anticipated,
possible solutions are put in place and their overall contribution of these enterprises to the
economy is increased. There is documented evidence that business planning enhances
performance of an enterprise. There is also documented evidence that most enterprises,
especially those classified as small and medium do not engage in business planning. They
therefore, as individual businesses fail to reap the benefits of planning while the economy as a
whole also suffers high mortality rates of start-ups, which are crucial for employment creation.
In view of the above, this study aimed at assessing the factors that affect development of
business plans by small and medium enterprises using a survey of rabbit farmers in Thika
District.
The specific objectives of this study were to look into the extent to which entrepreneurship
skills, stakeholders’ requirements and entrepreneurs’ attitude impact development of business
plans. It was anticipated that those who possess some business skills are in a better position to
develop business plans; that those who have a close formal relationship with major
stakeholders of their businesses are more likely to develop business plans; and that those with
a positive attitude towards planning are more likely to develop business plans. This study
adopted descriptive research design. The target population was all small and medium
enterprises engaged in commercial rabbit farming. A sample of respondents was derived using
a combination of cluster and simple random sampling techniques. A semi structured
questionnaire was used as the main data collection tool.
All the entrepreneurs interviewed had an idea of what a business plan is. The study found out
that an overwhelming majority (90%) of the respondents were of the opinion that
entrepreneurship skills affect development of business plans by SMEs. A majority (85%)
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
183
www.hrmars.com
indicated that business plans are influenced by stakeholders and their requirements. The major
stakeholders that had a high impact on development of business plans by SMEs were found to
be customers (90%), suppliers (80%), financiers (40%) and the government (40%). An outright
majority (97%) confirmed that the attitude of the entrepreneur affects development of plans
for his business. The study recommends among other things, a more active role of the
government, through the various relevant ministries, in assisting SME entrepreneurs in
developing business plans.
Key Words: Business plan, Small and Medium Enterprise, Business Planning.
1.0 Introduction
SMEs have created the majority of new jobs in Organization for Economic Cooperation and
Development (OECD) countries since the 1970s (Peacock 2004). Their collective contributions to
respective Gross Domestic Product (GDP) (e.g., approximately 30% in Australia and New
Zealand, 51% in the UK and USA, 57% in Canada and Japan, 76% in Luxembourg) is substantial
despite their individual small size (Ayyagari, Beck & Demirguc-Kunt 2003).
In Kenya SMEs are a major source of employment and income generation. In the year 2002 MSE
sector employed about 5,086,400 people up from 4,624,400 in 2001 which consisted of 74.2%
of total national employment (CBS, GOK 2003). According to the Economic Survey (2006), the
sector contributed over 70 percent of new jobs created in the year 2005. This percentage rose
to 74.3 per cent in 2006 and 76.5 percent in 2007 (GoK Economic Survey, 2008). Mead (1998)
observes that the health of the economy as a whole has a strong relationship with the health
and nature of micro and small enterprise sector. SMEs reflect the competitive spirit that a
market economy needs for efficiency; they provide an outlet for entrepreneurial talents, a
wider range of consumer goods and services, a check to monopoly inefficiency, a source of
innovation, and a seedbed for new industries; they allow an economy to be more adaptable to
change through continuous initiatives embodying new technologies, skills, processes or
products (Ibielski 1997).
Despite their significance, past statistics indicate that three out of five business start-ups fail
within the first few months of operation (Kenya National Bureau of Statistics, 2007).
2.0 Problem Statement
A number of studies suggest that having a business plan enhances growth in small enterprises
(e.g. Bracker et al., 1988; Lyles et al., 1993; Schwenk and Shrader, 1993). Almost every
entrepreneur recognizes the virtues of sound planning, yet it remains one of the most
neglected aspects of management (Kinard, 1992). Business planning no doubt occurs in small
enterprises (McCarthy, 2003). However, planning activities of SMEs are often intuitive, less
sophisticated and less formalized in comparison to large enterprises (Naffziger and Kuratko,
1994; Stonehouse and Pemberton, 2002). Lack of proper plans in conjunction with other
external factors such as unsupportive legislations, inaccessibility to markets and lack of
financing have made SMEs to remain small and rarely graduate to medium or large businesses
and are often characterized by low capital investment (McCormick, 2001).
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
184
www.hrmars.com
According to Barringer (2008) a large percentage of entrepreneurs do not write business plans
for their ventures. Many entrepreneurs say that the day to day pressures of getting a company
up and running leave them little time for planning. Among the issues that have been identified
as affecting business planning in SMEs include lack of management and technical skills (House,
et al., 1990); various stakeholders whose interests should be taken to consideration (Moore
et.al.,2006) and individual entrepreneur’s attitude ((Muller, 1994). Therefore, the purpose of
this study was to look into the factors affecting development of business plans by small and
medium enterprises in Kenya.
3.0 Literature Review
3.1 Business Plan Defined
It is the entrepreneur's roadmap to a successful enterprise (Cynthia 2006). It describes all the
relevant internal and external elements involved when starting and running a venture.
According to Cobweb, (2007) all businesses, whether new or established, should have a
constantly evolving business plan in order to help them define their objectives and their
strategies for achieving them.
3.2 Entrepreneurship Skills
In Kenya, one of the challenges faced by entrepreneurs in Small and Medium sized Enterprises
(SMEs) is the lack of entrepreneurship skills to match their talent and passion for
entrepreneurship (Matogo, 2008). Research shows that majority of the lot carrying out small
enterprises in Kenya are not quite well equipped in terms of education and skills. Majority of
those who run SMEs are ordinary lot whose educational background is lacking. Hence they may
not be well equipped to carry out managerial routines for their enterprises (King and McGrath
2002). Many SMEs owners lack entrepreneurial training and experience. The typical owners of
small businesses develop their own approach to management, through a process of trial and
error. As a result, their management style is likely to be more intuitive than analytical, more
concerned with day-to-day operations than long-term issues, and more opportunistic than
strategic in its concept (Hill 1987). Studies suggest that those with more education and training
are more likely to be successful in the SME sector (King and McGrath 2002).
A consequence of poor or lack of the fore mentioned skills is that SME owners are ill prepared
to face changes in the business environment and to plan appropriate changes. In addition,
SMEs may not be in a position to outsource experts to close the skills gap in their enterprises
given the many financial challenges that face them (Wanjohi & Mugure, 2008).
3.3 Stakeholders’ Requirements
According to Moore et al, (2006) there are various stakeholders to an enterprise who may at
one time or the other require guidance from the enterprise’s business plan to make decisions.
The stakeholders can either be internal to the business (e.g. employees and management) or
external (e.g. lenders, suppliers, distributors and customers) (Longnecker, 2006).
By identifying the variables that can affect the success or failure of a business, a business plan
becomes a model that helps the entrepreneur (management) focus on important issues and
activities for the new venture (Longnecker, 2006). Moore (2006) indicates that prospective
employees may require analyzing a firm’s business plan as it is a structure for communicating
International Journal of Academic Research in Business and Social Sciences
May 2015, Vol. 5, No. 5
ISSN: 2222-6990
185
www.hrmars.com
the entrepreneur’s mission goals and objectives. Employees are able to see what is in it for
them in terms of employee training and motivation (Moore, 2006). By enhancing a firm’s
credibility, the business can serve as an effective selling tool to use with suppliers (DeThomas &
Derammelaere, 2003). For example, suppliers extend trade credit, which is often an important
part of a new firm’s financial plan. A well prepared business plan may be helpful in gaining a
supplier’s trust and securing favourable credit terms (DeThomas & Derammelaere, 2003). A
business plan can improve sales prospects of a business e.g. by convincing prospective
customers of a firm’s potential for longevity, the plan may reassure those customers that the
new firm is likely to be around for a longer time to continue as a procurement source
(Longnecker, 2006). Financiers or lenders may require to see a firm’s business plan (Longnecker,
2006). Formal financial institutions require marketable collateral, proper book keeping and
most often a bankable business plan particularly for start ups (Mulei & Bokea, 1999). This then
means that for those SMEs that secure funding from formal financing institutions there is high
likelihood of them coming up with business plans. However, such SMEs are the minority
(Steven & St Onge, 2005).
3.4 Attitude
Studies show that the mental attributes of individuals have a significant impact on their work
(Stevens, Philipsen & Diederiks, 1992).
In SMEs, the link between attitudes and plans is more likely to be direct because these
enterprises have not yet developed bureaucratic blockages that shield managerial personalities
from organizational processes (Muller, 1994). Due to the fact that SMEs have yet to develop
institutional constraints to change, entrepreneurs are more readily able to instill their attitudes
into the firm’s activities (Muller, 1994). Carland et al (1984) suggests that the ability to separate
one’s attitudes from the operations of the firm is what distinguishes the entrepreneur from the
business manager. The level in the organization that the manager occupies has an impact on
the extent to which his attitudes can influence action plans (Munro & Noori, 1985). Since owner
-managers tend to have a sort of ‘super’ managerial status their attitudes have a more direct
impact on development of action plans. initial motivations for being in business determine
whether owner-managers will pursue either (a) profit/growth maximization goals or (b)
personal fulfillment goals. This choice of goals subsequently determines the planning
imperatives of the business. Given that business planning is recognized as a vehicle to drive
business development, competitiveness and hence, economic success (Vicere, 1995). It is
proposed that owner-managers pursuing a profit/growth maximization agenda will be more
inclined to engage in business planning. Conversely, those pursuing personal fulfillment
objectives will be less inclined.
4.0 Methodology
This was a descriptive survey research. According to Zickmund (2003), the main goal of a survey
is to provide facts and estimates that can be used by decision makers to gain insights to
understanding relationships, validate existence of relationships and make accurate predictions
about relationships between business factors. The target population for this study comprised of
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all SMEs engaged in commercial rearing of rabbits. There are currently 1,000 commercial rabbit
farmers spread across various parts of the country, mainly in Central Province who are
registered with the Association (Rabbit Breeders Association of Kenya, 2010). The researcher
narrowed down to farmers in Thika District which then becomes the study population. There
are 350 rabbit farmers in Thika District who are registered with the association. Rabbit farming
in Thika is expanding with the association having its head offices here. Kenya Institute of
Organic Farming (KIOF), one of the main trainers in commercial rabbit farming, is also situated
in the district.
From the sampling frame (list of 350 rabbit farmers in Thika District) provided by the Rabbit
Breeders Association of Kenya, simple random sampling was used to select a sample of 40
respondents who were then requested to participate as respondents in the study. Primary data
was collected through a semi structured questionnaire while secondary data was collected from
existing research findings, journals, books and the internet. The researcher personally
administered the questionnaires to the respondents. Data was analyzed by use of measures of
central tendency such as mean and mode. It was also analyzed by percentages and frequencies.
5.0 Findings
This research found out that business planning is suitable for all kinds of business, small or
large. 70% of respondents were of this opinion. Every business should plan as far as its capacity
and ability allows.
A majority (85%) indicated that business plans are influenced by stakeholders and their
requirements. This is a confirmation that businesses are complex relationships between entities
and individuals each of which has a degree of effect on the operations of a business. The major
stakeholders that had a high impact on development of business plans by SMEs were found to
be customers (90%), suppliers (80%), financiers (40%) and the government (40%).
A majority (97%) confirmed that the attitude of the entrepreneur affects development of plans
for his business. It confirms that plans and planners cannot be completely separated and more
often than not the planner’s biases will be reflected in his plans. The research also found out
that a majority (90%) of entrepreneurs have a positive attitude towards planning. They
appreciate possible positive results and benefits that a business can derive from planning.
The research established that continuous monitoring and evaluation affects development of
business plans. 40 percent of the respondents mentioned monitoring and evaluation as a
factor. Plans should be constantly reviewed to ensure that they reflect changing circumstances.
Entrepreneurs should on a continuous basis appraise performance based on the set out
business plan, meaning the plan itself and the strategies it puts forward are themselves
assessed as to how far they go in meeting the expected objectives of the business. With
continuous appraisal it is envisaged that any deficiencies in the existing plans will be mitigated
and the entrepreneur is better prepared to develop a better business plan next time.
6.0 Recommendations
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The study recommends that the government, through the Ministry of Education come up with
deliberate measures to impact entrepreneurship skills and culture among students at all levels.
Such measures may include introducing entrepreneurship as major subject in secondary
education. All technical colleges and polytechnics should also ensure that their students at one
point or another in their technical training, undertake entrepreneurship as a unit or part of the
course work. This will work towards developing skills and attitudes that make up an
entrepreneurial perspective. With the right perspective and focus, entrepreneurs will perhaps
be able to understand that they are separate entities with their enterprises. They will be able to
focus on economic facts as benchmarks for planning rather than their own emotions.
The government should take a more active role in helping small entrepreneurs develop
business plans e.g. field extension officers from the ministry of agriculture should be in a
position to provide basic business planning information to livestock keepers. The youth is a
major component of SMEs and the Ministry of Planning and that of Industrialization should be
on the forefront to impact entrepreneurship skills and business planning abilities among the
youth.
Further research should be carried out to establish the impact of monitoring and evaluation
and business environment risks on development of business plans by SMEs.
Corresponding Author
Kevin Wachira
Email: [email protected]
College of Human Resource and Entrepreneurship Development, Jomo Kenyatta University of
Agriculture and Technology P.O Box 62000-00200 Nairobi, Kenya.
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