The Role of Business Planning in the Sustainable Development of

Small Business

V. V. Klimova

, A. S. Klimova

and S. V. Chekuldova

Samara state transport university, Samara, Russia

Keywords: Small Business, Business Planning, Business Environment Analysis, Regulation of Entrepreneurship,

Sustainable Development.

Abstract: In this article the problems hindered the development of small business at the present time are highlighted.

The necessity of expanding the practice of planning the activities of entrepreneurial structures at the stage of

their creation and functioning is substantiated. A necessary condition for business communication and a

standard form of information transfer is a business plan that helps an entrepreneur to understand the prospects

and possible problems of production development with optimal results. Some researchers criticize business

planning, citing entrepreneurial intuition, which is more responsive to change than the process of developing

a plan. The authors consider a business plan as a system for the effective use of material and financial

resources, which are limited in small businesses and believe that business planning is mandatory, especially

with new beginnings, identify problems associated with the development of business plans in small businesses.

1 INTRODUCTION

The process of globalization, the availability of

modern information and telecommunication

technologies, a higher level of education, access to

more markets, lead to the fact that the business

environment is now becoming more dynamic and

unpredictable, it encourages entrepreneurs to

constantly improve their economic literacy. Illiterate

management of business processes, including in the

field of small entrepreneurship, the lack of a

systematic approach give rise to unproductive actions

of participants, reduce the competitiveness of

enterprises, which ultimately affects their ability to

achieve success, both in the short and long term. We

understand that new entrepreneurial structures have

great potential and create innovation (Shane, 2009).

These structures are created when the entrepreneur

and business opportunities meet at a specific time.

One of the main management tools is considered a

business plan, which allows you to formalize the

actions of an entrepreneur in a document that reflects

the main directions of the functioning and

development of a business with a focus on analyzing

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demand, profitability and profit. In theory, it allows

you to see future performance and predict

entrepreneurial risks in advance, but in practice, it is

the most important condition for the survival and

development of a business.

Business plans are documents in which founders

present their vision for the future of a venture. In

particular, business plans allow founders to explain

their (Delmar and Shane, 2004).

The need to identify problems in the field of

business planning for small entrepreneurship and its

assessment in management confirms the relevance of

the research topic, and the existing developments of

scientists related to these problems require further

study, which predetermined the need for additional

research aimed at improving economic relations

related to business-planning.

2 RESEARCH METHODOLOGY

The research methods included analysis and synthesis

of approaches to the essence of business planning and

small business. Methods of synthesis and analysis are

Klimova, V., Klimova, A. and Chekuldova, S.

The Role of Business Planning in the Sustainable Development of Small Business.

DOI: 10.5220/0010587701670171

In Proceedings of the International Scientiﬁc and Practical Conference on Sustainable Development of Regional Infrastructure (ISSDRI 2021), pages 167-171

ISBN: 978-989-758-519-7

167

used to systematize areas of support for small

businesses, inductive and deductive reasoning is used

to determine priorities when creating new business

structures in Russian regions. The method of expert

assessments is used to select indicators for assessing

the development of small business in the regions and

to justify recommendations aimed at their use in the

practice of business planning when creating new

business units in Russian regions. The evolution of

scientific publications is considered using semantic

analysis of approaches to the study of the problem.

3 RESULTS

One of the continuously implemented tasks aimed at

the development of the domestic economy is to

promote the development of small business. The costs

of overproduction are minimized in this sector of the

economy. The heads of these business units quickly

receive the necessary information about the level of

demand for the goods they produce and in the process

of manufacturing products are guided primarily by

the level of demand from buyers. This allows them to

significantly save, for example, on the costs of

storage and maintenance of goods, the problem of

stocking a warehouse is reduced to zero.

It is easier and cheaper to diversify small

production than large production. In practice, a

number of large enterprises, due to a drop in demand

due to COVID-19, faced difficulties in their work, but

the process of re-profiling activities and even

expanding the assortment group for them is a process

that requires significant expenditures of both

financial resources and time that is especially

valuable in changing working conditions. Small

businesses in these complicated operating conditions

were able to promptly respond to changes in the

market situation, trying to neutralize the

consequences of the crisis.

Small business, in contrast to large, from this

point of view, is more dynamic, it is easier to adapt to

the changes taking place in the economy. Maintaining

the size of the small business sector at a certain level

helps to solve the problem of monopolization and

helps to stabilize the market situation in the country.

These small business units are solving one of the

pressing problems, creating jobs for the local

population and providing additional opportunities for

disadvantaged segments of the population in view of

the diversity of their inherent forms of employment.

This, in turn, helps to reduce social tension in society,

stimulates the development of new technologies,

creates additional opportunities for improving market

relations.

The dynamics of the creation of new business

units in small businesses and their number per share

of the population in the regional context in our

country is quite comparable with foreign indicators.

“However, the average volume of added value

produced by one small and medium-sized business

entity is noticeably inferior to the level of developed

countries”, (Report, 2015). At the same time, foreign

partners note that the existing conditions in which

these entrepreneurs have to work do not meet their

expectations, and all this despite the recent

transformations. The real increase in the volume of

small business and the extensive nature of its

development do not correspond to their ideas about

an effective, competitive environment conducive to

the healthy functioning and development of

entrepreneurship. The quality level of its

development does not meet global criteria. Regulators

of small business activities should not only be

developed at the legislative level in order to protect

small business owners from the arbitrariness of local

self-government, but also must ensure equal

conditions for the functioning of all business entities,

regardless of their size and form of ownership.

It is very important to ensure equal opportunities

for entrepreneurs of various forms of ownership.

Klapper et al. Investigated how established rules

affect the entry process of new limited liability firms

(Klapper et al, 2006). As noted in her work

(Chekuldova, 2015), “the availability of resources for

entrepreneurial activity is not the same for everyone”.

In addition to financial entry barriers, entrepreneurs

face a lack of, in their opinion, support from the

regional authorities and the state as a whole. It hinders

the formation and development of their activities and

the fact that there are cases when employees of local

services contribute to the development of unfair

competition. All this not only impedes the effective

attraction of capital on a long-term basis, but also

leads to an increase in economic risks for small

business units, and also undermines the stability of

the current legislation.

It is necessary to develop projects and business

plans related to entrepreneurship to implement

business ideas. A competently drawn up plan shows

the strengths and weaknesses, as well as the

capabilities of the enterprise, which should definitely

interest potential investors who will be able to assess

the economic efficiency and risks of non-return on

investment. That is why business planning plays an

essential role in the development of small business.

Specifically, we suggest that it helps founders make

decisions faster than learning by trial and error:

ISSDRI 2021 - International Scientiﬁc and Practical Conference on Sustainable Development of Regional Infrastructure

168

manage supply and demand of resources in a way that

minimizes labor-intensive bottlenecks and more

effectively translates abstract goals into concrete

design actions.

Compitent business plan makes it possible to

determine the required amount of all resources as

accurately as possible even before the start of

activities, before the start of production. This step

allows you to make a reasoned offer to potential

investors, to demonstrate them the possible

advantages, conditions and expected return on

investment. A business plan is not only a document

that substantiates the possibility of realizing an idea,

but also a tool for analyzing the expected place in the

market and ways of promoting, predicting problems

and ways to eliminate them, specifying investments

and sales, as well as calculating performance

indicators. The main purpose of a business plan is to

confirm that the project will make a profit, it is real,

the investment will pay off, it must take into account

the needs of the market and the availability of limited

resources. The business value of enterprise resource

planning costs has been confirmed in a publication by

M. Ghobakhloo (2019).

As a result of the research, it was revealed that a

business plan should be considered as a document

containing a rationale for the attractiveness of a

project or its stages. For small businesses, such a

rational element as business planning helps to assess

the level of attainability of the stated goals; determine

promising areas of activity and your target audience;

commensurate the estimated amount of financial

costs for the implementation of your idea and the

expected results; to investigate possible risks and

difficulties, to assess the degree of their influence on

the chosen type of entrepreneurial activity.

4 DISCUSSION

Analysis of some scientific publications has shown

that business planning is not very helpful when the

conditions that accompany the process of starting a

new enterprise are not very clear. For example, a

number of entrepreneurs believe that the acquisition

of fixed assets at the initial stage is a more significant

process than planning their activities. They believe

that the purchase of the premises indicates a

seriousness of their intentions and that this is enough

to start a business (Carter et al, 1996).

Allinson says in his work that in this situation, the

real entrepreneur is distinguished not just by

intention, but by an intention that has been realized,

which has led to an entrepreneurial result. (Allinson

et al, 2000).

According to Bird, the uncertainty and speed of

the pace of business situations undermines the value

of business planning (Bird, 1988).

We believe that the approach justified by these

authors contradicts the foundations of the theory of

organization. And, according to (Locke, 1980), the

active use of planning before starting decisions can

significantly improve the quality of the expected

results. Business planning, in our opinion,

undoubtedly contributes to the formation of the

initially created business units in the economy.

Planning is an essential precursor to initiating action

because it maintains the structure in which

subsequent endeavors are carried out (Mintzberg,

1990).

In our opinion, a business plan is not only a tool

for effectively substantiating the use of a given size

of material and financial resources, but also one of the

ways of their development, taking into account the

interests of entrepreneurs, the interests of regions and

the country as a whole. After all, it is known that at

all times in small business one of the first problems is

the lack of resources (Scott, 1987) and increased

risks. At the same time, researchers emphasize that

financial resources are the most significant for these

entities (Lopez et al, 2012). A limiting factor is the

fact that a combination of professions is characteristic

of small business at the stage of its creation and initial

operation. At this point, people with universal

knowledge and skills are needed (Gilbert et al, 2006).

This shortage of qualified specialists in the early

stages of creating a new business unit stems from the

limited financial resources allocated, among other

things, to wages. In addition, entrepreneurs lack

professional training in creating a business plan, and

foreign standards for writing it are not focused on

Russian business.

Аgnes Bogath (Bogаth, 2017) thinks: The

possibility of exploiting favorable credit programs

largely depends on whether the company is able to

provide adequate quality business plan attached to the

loan applications. We believe that the direction of

application of this provision is small business and this

approach is very important, but it is necessary to use

certain methods.

There are also difficulties in attracting capital,

when developing a small business, Investors are not

always ready to cooperate with this sector, as the

expected return does not always correspond to their

expectations. The situation is complicated for

entrepreneurs and the inevitable increase in the cost

of financial resources. At the state level, programs

aimed at the development of small business in the

regions are constantly being updated. But in this

The Role of Business Planning in the Sustainable Development of Small Business

169

situation, it is much more important to pay attention

to the timely and targeted organization of subventions

and subsidies to regional entrepreneurs. As practice

shows, the financial burden on these market entities

remains high. As a result, the pace of development of

this sector of the economy does not correspond to the

expectations of the authorities. The state, for its part,

regularly proposes comprehensive measures aimed at

reducing the administrative costs of small businesses.

Nevertheless, the level of transaction costs for many

entrepreneurs remains not only high, but also not a

feasible obstacle when entering the market. “The

development of measures aimed at removing

obstacles to doing business is presented not as one of

the stages of a small business development program,

but as an end result” (Chekuldova, 2015). The

construction of support mechanisms on this principle,

unfortunately, is becoming regular and, therefore,

inhibits the growth of entrepreneurial initiative,

which, in its turn, would contribute to the

achievement of the economic and social tasks of the

state.

In addition, small businesses inevitably face

market fluctuations. Currently, the situation is

complicated by a decrease in the purchasing power of

the population, which arose against the background

of rising unemployment and a fall in the level of real

incomes of the population in the context of restrictive

measures for the functioning of business entities due

to Covid-19.

Conditions dictated by larger entrepreneurs and

regional authorities, dishonesty on the part of local

government officials, a high degree of corruption -

factors that the state seeks to reduce to zero -

nevertheless, are encountered in the path of small

business owners today. It is necessary not only to

create preferential programs, but also to pay attention

to the quality of the support provided. “It is necessary

to build relationships in such a way that each small

business entity is interested not only in receiving

income, but also in meeting the social needs of its

employees, and can also freely engage in the

development of its activities, without fear of legal

delays and be confident in efficiency and

effectiveness. mechanisms and instruments that

regulate the activities of the relevant area”

(Chekuldova, 2015).

In these conditions, it is necessary to

systematically analyze the situation in the

development of small business. At the same time, it is

necessary not only to identify problem areas, which is

undoubtedly important, but also to look for promising

directions, to create favorable conditions for its

development. As an element of strategic

management, the analysis of the business

environment involves finding a balance between the

micro and macro environment of a business unit. The

most important thing in this process is to track

changes in the economy and focus on factors that can

affect not only the formation of the activity of a small

business entity, but also the possibilities of its further

functioning and development.

If the external environment at the macro level

most fully meets the needs of small businesses, then

we can talk about the presence of a favorable regime

that promotes the development of their activities.

However, the formation of such conditions at the

regional level of a particular entity is impossible in

the absence of these conditions in general throughout

the country. In the event of negative changes in the

economy and unfavorable conditions, entrepreneurs

begin to take a wait-and-see attitude, i.e. in fact, they

put their activities on pause in anticipation of a

favorable climate.

Thus, the ongoing economic transformations

affecting small business do not rid it of the existing

obstacles generated by both the general problems of

the national economy and those arising in the process

of direct reform, which, paradoxically, is designed to

improve the situation. Lack of clarity and clarity,

vague formulations of the fundamental goals in small

business support programs developed at the highest

levels of government, only complicate the situation.

In this regard, it is necessary to shift the focus and pay

attention to the development of strategic thinking,

which contributes to the prioritization of business

entities, drawing up an action plan for various

scenarios of market behavior and developing an

appropriate line of behavior.

5 CONCLUSIONS

In modern conditions of small business development,

it is advisable to systematically, comprehensively

improve the quality and efficiency of work. The

priority area should be a strategic approach to

planning their activities, for which it is necessary to

be able to develop a competent business plan. A

business plan in its essence is a legal document that

represents a program of formation and lays down a

vector for the further development of entrepreneurial

activity. Moreover, it is a reasoned need to attract a

given amount of resources, confirming the benefits of

this activity. The authors believe that in addition, this

document is a source of strategic information and an

effective tool for managing the impact on the future

of the enterprise, revealing potential opportunities

ISSDRI 2021 - International Scientiﬁc and Practical Conference on Sustainable Development of Regional Infrastructure

170

and containing ways to achieve profitability of the

project.

In the process of work, the authors identified a

number of existing problems in the development of a

business plan for small businesses in the regions:

 Limited access to external sources of

information and lack of skills to work with

them;

 Difficulties in setting goals and building tasks,

syntactic difficulties in the process of

formulating them, as well as in assessing their

implementation;

 Unsatisfactory study of the prepared action

plans and their justification;

 Inadequate assessment of the importance of

business planning on the part of staff;

 Insufficient responsibility and lack of

motivation on the part of managers for the

preparation and implementation of individual

sections of the business plan;

 Lack of due attention to the analysis of the

provided results and the preparation of the

necessary regulatory documentation;

 Lack of professionally trained specialists in

small business with the skills to create a

business plan;

 Foreign standards for developing a business

plan are not focused on Russian business, and

there is no own uniform methodology.

In the course of the research, the following

conclusions were made: the methods of business

planning used in practical activities by small business

entities will make it possible to competently build and

systematize the decision-making process, since the

technology of business planning itself is based on the

principle of finding an optimal management decision

based on currently existing time parameters of the

business environment and taking into account the

internal potential of the enterprise itself. An

entrepreneur needs to remember the above-described

features of planning in a small business and the

presence of restrictions. It is important that the

developed strategy provides an opportunity for

effective implementation of activities, thereby

positively influencing the socio-economic

development of the country as a whole. Thus,

business planning allows an entrepreneur to rationally

assess the possible consequences of various kinds of

threats - technical and technological, financial,

personnel - that can adversely affect his activities, and

at the same time contributes to the activation of

entrepreneurial start in general.

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