The role of business planning in small and medium-sized enterprises, within Absa Bank Limited

Abstract

The Global Entrepreneurship Monitor report of 2006 revealed that since 2000 a total number of 24,920 business liquidations and 18,730 insolvencies amounted in South Africa. In a country where entrepreneurship holds the key to economic growth this is a worrying founding. Commercial banks are profit seeking and risk-averse institutions needing to be satisfied in respect of financial stability of SMEs that seek funding from these institutions. This study researches the role of business planning to establish the importance of planning efforts in selected SMEs within Absa Bank Limited. Entrepreneurship today requires skills and ingenuity to manage and control resources in order to pursue the opportunity. However, before and after startup not many entrepreneurs plan properly to contemplate the future, or take the necessary steps to revisit the performance of the business regularly. It is evident from the literature review that planning activities are a critical element of business survival in new economies. Recent surveys indicate that 90% of business failure relates strongly to a lack of managerial skills such as financial planning and related managerial skills. The research findings confirm that SME owners and managers experience business planning as an important managerial function to increase business success. The study concludes that many practical significant relationships exist between planning and other variables. The challenge is to improve the level of financial and managerial skills of business owners and managers in South Africa to improve the understanding of how a business should operate more successfully through continuous planning efforts.