1 small business management chapter 4 the business plan

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SMALL BUSINESS MANAGEMENT

Chapter 4Chapter 4

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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The Small Business Plan

There are ten components in a plan:There are ten components in a plan:1. Prepare a table of contents.1. Prepare a table of contents.

2. Prepare a synopsis of the plan in an executive 2. Prepare a synopsis of the plan in an executive summary and background statement.summary and background statement.

3. Describe the management team.3. Describe the management team.

4. Describe the business objective.4. Describe the business objective.

5. Plan the marketing approach.5. Plan the marketing approach.

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The Small Business Plan

Components of the Plan (cont.)Components of the Plan (cont.)6. Describe the selection of the location.6. Describe the selection of the location.

7. Determine the physical facilities.7. Determine the physical facilities.

8. Plan the financing.8. Plan the financing.

9. Plan the personnel.9. Plan the personnel.

10. Investigate the legal requirements.10. Investigate the legal requirements.

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Components of the Plan

1. Prepare a table of contents.1. 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. Prepare synopsis of the plan in an 2. Prepare synopsis of the plan in an executive summary and background executive summary and background statement.statement.– 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 team.3. Describe the management team.– résumé and background of those making the résumé and background of those making the

decisions for the organizationdecisions for the organization

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4. Establish business objectives.4. Establish business objectives.– Business SizeBusiness Size– Production LevelsProduction Levels– Performance LevelsPerformance Levels

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5. Plan the marketing approach.5. 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 Understand the target market’s needs, wants

and purchasing habitsand purchasing habits Answer the following questions: where, when, what, Answer the following questions: where, when, what,

how much, why.how much, why.

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5. Plan the marketing approach (cont.)5. Plan the marketing approach (cont.)– 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

business.business. state of the economy in the market.state of the economy in the market. extent and strategies of the competition.extent and strategies of the competition. cultural norms of the market.cultural norms of the market. new technologies that might offset the business. new technologies that might offset the business.

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5. Plan the marketing program (cont.)5. Plan the marketing program (cont.) the product or servicethe product or service the distribution systemthe distribution system promotion promotion pricingpricing

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6. Describe the selection of the location.6. 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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6. Describe the selection of the location.6. Describe the selection of the location.– 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 facilities.7. 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 financing.8. 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, and bookkeeping systemsplan the accounting, and bookkeeping systems– determine the financial evaluation measuresdetermine the financial evaluation measures

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

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10. Investigate the legal requirements.10. 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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10. Investigate the legal requirements. 10. Investigate the legal requirements. (cont.)(cont.)

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 suppliesacquiring the necessary supplies

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Components of the Plan 10. Investigate the legal requirements. (cont.) 10. Investigate the legal requirements. (cont.)

5. Joint Ventures5. Joint 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

– Intellectual Property ProtectionIntellectual Property Protection– patent stepspatent steps

• search and filesearch and file

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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 licences?business licences?

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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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

1 small business management chapter 4 the business plan

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