1 SMALL BUSINESS MANAGEMENT Chapter Four The Business Plan

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SMALL BUSINESS MANAGEMENT

Chapter FourChapter Four

The Business PlanThe Business Plan

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Getting StartedEstablishing the Business

Advantages of Organizing a Business from Advantages of Organizing a Business from ScratchScratch

Disadvantages of Organizing a Business Disadvantages of Organizing a Business from Scratchfrom Scratch

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Components of the Business Plan

There are ten components in a plan.There are ten components in a plan.– 1. Prepare a Table of Contents1. Prepare a Table of Contents– 2. Executive Summary and background2. Executive Summary and background– 3. Describe the Management Team3. Describe the Management Team– 4. Describe the Business Objective4. Describe the Business Objective– 5. Plan the Marketing Approach5. Plan the Marketing Approach

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Components of the Business Plan

– 6. Describe the Selection of the Location6. Describe the Selection of the Location– 7. Determine the Physical Facilities7. Determine the Physical Facilities– 8. Plan the Financing8. Plan the Financing– 9. Plan the Personnel9. Plan the Personnel– 10. Investigate the Legal Requirements10. Investigate the Legal Requirements

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Components of the Plan

1. Prepare a Table of Contents1. Prepare a Table of Contents– overview of the planoverview of the plan– quick access to the various parts of the planquick access to the various parts of the plan

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2. Executive Summary and Background 2. Executive Summary and Background StatementStatement– Completed at the end of the complete planCompleted at the end of the complete plan– history of the project to datehistory of the project to date– statement of the intended mission of the venturestatement of the intended mission of the venture

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3. Describe the Management Team3. Describe the Management Team– resume and background of those making the resume and background of those making the

decisions for the organizationdecisions for the organization

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4. Establish the Business Objective4. Establish the Business Objective– Business SizeBusiness Size– Production LevelsProduction Levels– Performance LevelsPerformance Levels

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5. Plan the Marketing Approach5. Plan the Marketing Approach– Have a clear concept of the target market.Have a clear concept of the target market.– Understand the target market’s needs, wants and Understand the target market’s needs, wants and

purchasing habitspurchasing habits answer the following questions answer the following questions where, when, what, how much, whywhere, when, what, how much, why

– Be aware of any uncontrollable factors that Be aware of any uncontrollable factors that might affect the marketing of the product or might affect the marketing of the product or serviceservice

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– Be aware of any uncontrollable factors that Be aware of any uncontrollable factors that might affect the marketing of the product or might affect the marketing of the product or service such asservice such as existing or pending legislation relevant to the existing or pending legislation relevant to the

businessbusiness state of the economy in the marketstate of the economy in the market extent and strategies of the competitionextent and strategies of the competition cultural norms of the marketcultural norms of the market new technologies that might offset the business new technologies that might offset the business

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– Plan the Marketing ProgramPlan the Marketing Program the Product or Servicethe Product or Service the Distribution Systemthe Distribution System the Promotion Planthe Promotion Plan the Pricing Planthe Pricing Plan

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6. Describe the Selection of the Location6. Describe the Selection of the Location– the Trading Areathe Trading Area

the Economic Basethe Economic Base

– Attitude of the Trading Area towards New Attitude of the Trading Area towards New BusinessesBusinesses CompetitionCompetition CostsCosts

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– The SiteThe Site accessibility, site costs, restrictions, site history, accessibility, site costs, restrictions, site history,

proximity to other businesses, physical proximity to other businesses, physical characteristicscharacteristics

– the Buy-or-Lease Decisionthe Buy-or-Lease Decision cost of the lease, length of the lease, restrictions, cost of the lease, length of the lease, restrictions,

repairs and lease hold improvements, insurance repairs and lease hold improvements, insurance coveragecoverage

– Running the Business from One’s HomeRunning the Business from One’s Home

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7. Determine the Physical Facilities7. Determine the Physical Facilities– insurance types insurance types

loss or damage to the propertyloss or damage to the property business interruptionbusiness interruption liability and disabilityliability and disability life insurancelife insurance

– insurance decisionsinsurance decisions what kind to purchase, how much to purchase, from whom to what kind to purchase, how much to purchase, from whom to

purchase the insurancepurchase the insurance

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8. Plan the Financing8. Plan the Financing– establish capital requirementsestablish capital requirements– make feasibility projectionsmake feasibility projections– determine the sources of fundingdetermine the sources of funding– plan the accounting, bookkeeping and computer plan the accounting, bookkeeping and computer

systemssystems– determine the financial evaluation measuresdetermine the financial evaluation measures

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9. Plan the Personnel9. Plan the Personnel– Administrative structureAdministrative structure– Employee recruitment and trainingEmployee recruitment and training– Personnel PoliciesPersonnel Policies

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10. Investigate the Legal Requirements10. Investigate the Legal Requirements– Legal Structure (four styles)Legal Structure (four styles)

1.Sole Proprietorship1.Sole Proprietorship– advantages and disadvantages advantages and disadvantages

2. Partnership2. Partnership– Limited, GeneralLimited, General

– advantages and disadvantages advantages and disadvantages

3. Cooperative3. Cooperative– one member-one vote vs each share a voteone member-one vote vs each share a vote

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4. Corporation4. Corporation– advantages and disadvantages of a corporationadvantages and disadvantages of a corporation

– steps in incorporationsteps in incorporation

• selection of the business nameselection of the business name

• development of the share structure, directors, development of the share structure, directors, restrictions on share transfers, etc.restrictions on share transfers, etc.

• description of the company operationsdescription of the company operations

• acquiring the necessary supportsacquiring the necessary supports

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– Joint VenturesJoint Ventures– Licenses and TaxesLicenses and Taxes

Federal GovernmentFederal Government– income tax, goods and services taxes, excise taxincome tax, goods and services taxes, excise tax

Provincial GovernmentProvincial Government– income tax, licenses, sales taxincome tax, licenses, sales tax

Municipal GovernmentsMunicipal Governments– licenses, property taxes, business taxeslicenses, property taxes, business taxes

– PatentsPatents– registration, search, applicationregistration, search, application

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Appendices

Appendix A - Checklist for a Small Business Appendix A - Checklist for a Small Business PlanPlan

Appendix B - Sample Business Plans (2)Appendix B - Sample Business Plans (2)– The Sock Hop, Quality CutsThe Sock Hop, Quality Cuts

Appendix C - Incorporation of Companies Appendix C - Incorporation of Companies and Associationsand Associations

Appendix D - Jurisdiction of Licenses and Appendix D - Jurisdiction of Licenses and TaxesTaxes

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CONCEPT CHECKS

1. What are the advantages and 1. What are the advantages and disadvantages of owning a small business?disadvantages of owning a small business?

2. What steps are involved in preparing a 2. What steps are involved in preparing a business plan?business plan?

3. What criteria must be evaluated before 3. What criteria must be evaluated before choosing a trading area?choosing a trading area?

4. When is it advantageous to lease instead 4. When is it advantageous to lease instead of owning?of owning?

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CONCEPT CHECKS

5. What information should be investigated 5. What information should be investigated before construction starts and purchasing before construction starts and purchasing equipment?equipment?

6. Why is insurance purchased? What are some 6. Why is insurance purchased? What are some small business insurance types?small business insurance types?

7. What major financial aspects should be 7. What major financial aspects should be planned in advance of business operation?planned in advance of business operation?

8. What are four legal structures that an owner 8. What are four legal structures that an owner can utilize?can utilize?

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CONCEPT CHECKS

9. What are the advantages and 9. What are the advantages and disadvantages of Incorporation?disadvantages of Incorporation?

10. What level of government issues 10. What level of government issues business licenses?business licenses?

11. What taxes are levied by the Federal 11. What taxes are levied by the Federal Government?Government?

12. What are the steps required to register a 12. What are the steps required to register a patent?patent?

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1 SMALL BUSINESS MANAGEMENT Chapter Four The Business Plan