The relationship between business planning and business performance in small and medium enterprises in the Gauteng Province.

Abstract

ABSTRACT Small and medium enterprises (SMEs) play a significant role in any country’s Gross Domestic Product (GDP) through the creation of employment, increasing production volumes, increasing exports and through the development of innovation and entrepreneurial skills. However, SMEs continue to suffer high failure rate as a result of numerous challenges they face such as shortage of financial resources, tough and unpredictable business environments, lack of support from the respective governments, highly competitive business environment. The aim of this study was to determine the relationship between business planning and business performance. The study was cross-sectional and quantitative in nature, with a 109 SMEs participating from the Gauteng province, which represented a 23% response rate. Data were collected using self-administered questionnaire. The results of the study indicated that business planning in general does have a positive impact on the performance of small and medium enterprises. Results from the individual components of business planning indicate that all three constructs of business planning have a positive impact on SME performance. Based on this outcome, it is proposed that SMEs should adopt formal business planning activities to help these businesses navigate the treacherous conditions imposed by external and internal factors in a business environment, if they are to be successful.