Study on the Relationship Between Formal Business Planning and Smes: the Roles of Formal Planning in Smes

The objective of this study was to identify the role of business planning in SMEs. Attempts were made to figure out why the business planning is used and to what extent the plannings are used by the entrepreneurs. In such case, studies were made to find whether the entrepreneurs use the business plan to achieve higher performance in their business or not. In the beginning hypothesis was made that a well developed plan leads to convenient access to finance and thereby improving the performance through various measures. To test the objective the authors extensively studied literature, journals and articles along with carrying out a telephone interview on a short number of specific questions. The analysis and conclusion were based on the literature and the interviews. The authors relied on a response of 8 SMEs between one to five years old to test the hypothesis. A positive relationship between business planning and bank finance was found in the study. But the data doesn't reveal that planning had any significantly direct relation with improving the performance of the business but it does have positive benefits.