Question :
This assessment will cover following questions:• Planning for business is the strategic business activity which enables organisations to track and plan organic growth. Analyse the important considerations that SMEs consider when evaluating the growth opportunities.
• Provides the different types of methods through which organisations access funding and when to use types of funding.
• Planning for growth is the systematic record of objectives of business. Create a business plan ( including financials) and communicate how you intended scaling up in Verdant leisure.
• Generates the ways by which small business owner exits the business and the effects of each options.
Answer :
INTRODUCTION
Small medium-sized enterprise is defined as companies that establish their new business in the form of legally independent companies with not more than 500 employees. These emerging new companies are the backbone of an economy. In this report, the key considerations taken by an SME company for evaluating growth and opportunities in the economy are explained. Verdant Leisure has been taken as the SME which is a bespoke holiday park operator offering self-catering lodges, caravan holidays, and holiday home ownership across Scotland and North England. In this report, key analytical frameworks to demonstrate the understanding of competitive advantage, steps taken for growth, and risk mitigation steps taken by the company is explained. The potential sources of funding available to businesses, with the benefits and drawbacks of each source are explained. In this report, the benefits of business plans including the financial information and strategic objectives for scaling up the business on a large-scale platform are explained. In this report, the vision and goals of Verdant Leisure as a fast-spreading small medium-sized enterprise, the points of expansion undertaken, and various management strategies to upgrade its business is explained.
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P1 Key considerations for evaluating growth in business opportunities
SMEs comprise a large part of the UK economy, and boosting SME productivity growth would have a significant impact on overall UK productivity. Innovation and expansion in the market according to the competitive industry and building a dynamic market environment with changing consumer demands is an important step taken by emerging companies for enhancement in their position in the industry.
Access to Customers:The access to customers is one of the key considerations for evaluating growth and business opportunities for Verdant Leisure as it aims to provide freedom and flexibility with a comfortable holiday experience with exciting adventure parks and tranquil escapes (Aremu, Shahzad,and Hassan, S 2020).The company offers a relaxed environment with spectacular locations across Scotland and Northern England with self-catering lodges and many activities to spend quality time in their bespoke leisure parks. The access to customers and the way they communicate their services is definitely a key consideration in measuring the growth in business opportunity for a SME. This is justified as the company has online websites and portals for easy access to customers for booking their holidays, get information related to all services and the details of picturesque spots where they can finalize their holidays.
Financial Components: The financial components are an important consideration for evaluating the business growth opportunities in SME. Evaluating the financial resources is crucial for small sized companies to enter the marketplace, the inputs in form of inventories and how much market return it needs for keeping the profit margins high. This consideration justifies that company focuses on using the financial components wisely and evaluating further business growth opportunities by increasing the financial capital in company.
Skill Set Required: The skill set required in management teams is definitely an important consideration for evaluating the business opportunities in growth of company. Management teams should be trained with efficient skills for hosting guests and giving them a good hospitable stay. This consideration is justified as Verdant Leisure aims to provide proper training and skills of hospitality in the management teams for giving satisfied customer services.
Diversification: The diversification or the extension in services with the dynamic attitude to spread in the competitive market is a key consideration for evaluating growth opportunity of a small sizes enterprise. This consideration explains the justification with the wide range of hotel stay services, entertainment activities and attractive locations it offers to all customers. The company aims to be diversified and adopt dynamic business culture for spreading its market reach.
Market Analysis: The analysis of market share is a key consideration for an SME to consider when evaluating the business opportunities. Analysing the market share of competitive industries in economy, how much financial funds it needs to pool in for establishing a prominent place in the industry is important for evaluating the business opportunities. The justification is done as gives immense importance in boosting the productivity levels of its hotels and keeping up with the customer satisfaction levels.
Opportunity Identification: The analysis of opportunity identification is a key consideration for an SME to establish business growth and evaluate the future opportunities. SMEs should identify the strengths and opportunities where they can establish their business and how to expand with further growth by understanding the customer needs, trends and insights of industry.This consideration is justified as it lays importance in identifying the growth opportunities it possesses and work in dynamic environment.
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P2 Ansoff's growth vector matrix
The opportunities for growth applying Ansoffs Growth Vector matrix can be understood as it focuses on four key strategies to develop future growth in market which are Market Penetration, product development, market development and diversification. It assists to get new customers, high revenue and grow by developing the marketing strategies. Proper implementation of the Ansoff Matrix's helps small medium-sized enterprise to increase the market share, develop the product and services with better quality and innovation. It aims companies towards increasing the market spread demographically into new segments of customers, regionally and also keeping the profit margins positive along goals of company.
Market Penetration: This strategy focuses on increasing sales of existing products and services to extend in the market share for increasing customer's satisfaction levels and target the new customers with different variety of services and advanced product services. Verdant Leisure focuses on market penetration by increasing the numbers of parks and hotels for people who look towards having a comfortable hotel stay along various entertainment activities. It aims to target young people who look for adventure activities in their holiday stay by promotion of the various parks and attractive prices along discounts.
Product Development: This strategy focuses on expanding the products and services along demographics and targeting new customer segments. This involves extensive research and development with focusing on key points of competition with other companies in the same market. Verdant Leisure focuses on including new services with attractive hotel stays all over country for travellers and people who look forward to enjoy the British heritage. It aims to get the completive advantage among other emerging new hotels with the new services and various locations to its customers to choose from.
Market Development: This strategy focuses on entering new markets and expanding the market geographies by catering to different customer segment, expanding regionally and expanding internationally. With hospitality industry being a highly competitive market in growth, the company aims to build a substantiality with targets to spread on large scale to pool large number of customers. Verdant Leisure aims to increase the market by expanding into new segments of people, increasing the market share of parks and hotels. It can develop the competitive advantage for itself by bringing in uniqueness for its services in comparison to other competitors.
Diversification: This strategy aims to focus on entering a new market with introduction of new products and services. Diversification enables company to evaluate the business opportunities in the future, the growth potentialities in new market areas and by introducing new diversified range of services (Ayunku and Eweke, 2020). It helps SME to position themselves strongly in the competitive industry and evaluate their future performance. Verdant Leisure has a dynamic business approach where it keeps on diversifying the services and the hotels by working towards customer satisfaction. It aims to get completive advantage in the hospitality industry of UK which is highly diversified with increasing number of new companies emerging.
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P3 Potential source of funding with benefits and drawbacks
SMEs comprise a large part of the UK economy, and boosting SME productivity growth would have a significant impact on overall UK productivity. Innovation and expansion with good access to financial resources and building a capital growth is a critical factor for growth and increase the scale of supply and services.
The various methods and potential sources of funding are:
Venture capital funding: These can be understood as investment funds that mange the money of investors who seek private equity stakes in start-ups and small medium-sized companies with growth potentials. The primary advantage of Venture capital financing to Verdant Leisure is an ability for company expansion in the future and smooth functioning with large amount of financial resources. The drawback of financing the capital resource in company through Venture capital funding involves high risk return. The procedure to get VC funding involves a lot of legal procedures to be followed by start-ups.
Angel Investors: Angel investors can be understood as people who invest in new or small business venture providing capital for start-up or extension. They are investors who look for higher rate of return than would be given by ant traditional investments. It is a form of equity financing where the investors supply funding in exchange by taking an equity position in company. The big advantage for Verdant Leisure is that financing from angel investors is much less risky than debt financing. Unlike a loan, invested capital does not have to be paid back in case of any loss and most angel investors understand business as a long term view. The disadvantage of angel investors is it is not always easy to attract them and there is a loss of complete control in decisions and profits of businesses as he will also have a say in running of company and proportion in profits.
Cash Advance: A cash advance is a short term loan from a bank or an alternative lender. This refers to a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash. It can be a method of funding when company does not have enough cash on hand at certain time (Gherghina and Simionescu, 2020)
The benefits of cash advance is that it is easy to get relatively and it doesn't require any money available in any account for the company. But disadvantage of cash advance charge a pretty hefty price in form of high fees and interest rates which can be an important concern for start-ups.
Crowd-funding: Crowd-funding is the practise of funding a project or venture by raising small amounts of money from many people, typically via the use of internet. The advantage of crowd funding for Verdant leisure is that company can promote the business goals to people for crowd-funding which means the business customers becomes the most loyal customers. The disadvantages in this method are that return is not guaranteed and the platform must go bust in order to take funding at large level.
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P4 Business plan for growth
Business plan can be understood as the process of developing a framework which serves a number of objectives, planning and organizing the usage of all resources in company. A business plan includes a comprehensive financial assessment that includes funding needs, setting goals and steps to implement the market growth with proper penetration strategies to scale up the business.
Financial information planning: Financial planning includes every aspect of finance in company, investment planning and the goals and objectives of company specifically. It also includes keeping the financial reports of company presentable for investors, maintaining the profit margins and scaling up the targets to spread in economy (Dunkley, 2020). Determining the financial goals for company, setting up the alternatives and planning the alternatives with revising the plans. The potential sources of funding the financial resources in Verdant Leisure are through Venture capital funding, angel investors, crowd-funding as they offer lucrative advantages in form of high investment rates and large level funding by angel investors as well. Through proper investment company enables long term stability with strategically implementing the financial goals and increasing the market share.
Strategic objectives for scaling up the business:
- Expansion- By properly planning the expansion business plans of a company, it enables growth of the market share, profit margins by increasing the sale and customer satisfaction levels with inclusion of new products and services.
- Customer satisfaction- Verdant Leisure aims to keep the customers satisfied with services and work towards formulation of business plan which helps in enhancing their services
- Qualitative services: This is strategic objective of Verdant Leisure which aims to provide good quality services to all people in their hotels.
- Innovation- This is the strategic objective where company aims to innovate in their services, bring new changes and scale up their business in comparison to other completion in markets.
- Financial growth- Verdant Leisure works on making business plans keeping the financial growth strategy objective in mind.
- Long term stability- This strategic objective of Verdant Leisure aims for long term stability in the market which ensures long term customer loyalty.
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P5 Exit options with benefits and drawbacks
The exit options for a company are taken when the business goals in context to financial goals are not reaching the margin levels. The company is not able to successfully use its resources to useful use and its facing losses with increase in liabilities. There are a number of exit options available to company:
Liquidation: It means the process of bringing a company business to an end and distributing its assets to claimants. It is an advent that usually occurs when a company becomes insolvent and is not able to pay the due obligations. In case the organization is not able to earn the fixed cost revenue liquidation is the best exit option for company (Mazzarol, and Reboud, 2020.)The drawback can be understood as it is an unpleasant strategy that includes selling off all assets and the final closure of business operations.
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Selling business to another company- This strategy means selling the business to another company working in the same industry due to loss and not able to reach the business strategy. The advantages of this exit strategy are company can give the business operations easily sell the business to another company by gaining liquidity and paying off the debts. The drawbacks of this strategy are that it involves an elaborative procedure for company to shut off all the books.
Employee buyout -This strategy means buying of company parts by the management and other interested team members who are able to pool the financial resources to buy the company. The advantage of this strategy is it protects legality and business independence (Xuan, Thu and Anh, 2020). It implies the culture of company is maintained as the management or team members are able to buy it. The disadvantage is that it’s not always possible for team employees to pool the capital necessary.
CONCLUSION
This report concludes the meaning of small medium-sized enterprises, importance in the economy and primarily responsible for economic growth, job creation and prosperity. The key considerations for evaluating growth opportunities are developing the strategies for expansion into the customer market and working on growth potentialities are explained. This report concludes the use of Ansoff matrix by Verdant Leisure to increase the market share. It also concludes the business plan and strategic objectives taken to upscale the business. The various exit strategies and their implication with benefits and drawbacks for the company is
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