Entrepreneurship 110

The Business Plan

Sections in a Business Plan Cover Page Table of Contents Business Overview/Executive Summary Management Market Research Marketing (the 4 Ps) Suppliers Employees Operations Financial Appendix

The Life Cycle of a Business All ventures go through a life cycle, or a

series of stages that begin when the business idea is initially conceived.

An entrepreneur must recognize these stages in order to anticipate and address the problems that can occur within each one.

1. Pre-Startup Stage Preparations for launching the business

are made. Generating ideas, doing research and

identifying/solving problems. At this stage you need to review

resources, consider how best to allocate them, and write a business plan.

2. Development Stage Research is complete. Finalized your business plan, completed your market

testing, reviewed the results, and made arrangements to get the funds you need.

Business opens/starts Goal is to reach the break-even-point. Breaking even is

not as easy as it may sound; you must manage your resources well in order to do so.

Break Even Point:Total monthly revenue = Total monthly costs Revenue = money that comes into the business from sales Costs = all the money paid out by the business (i.e. wages,

loan payments, etc.)

3. Growth Stage Passed the break-even point and now

making a profit: Total revenue > Total Costs

May wish to expand your business: new products/services another location, etc.If this is the case, you

should really write a new business plan.

4. Comfort Stage Venture is secure growing (although at slower

rate of approx. 10% per year.) Enjoying the benefits of success – a comfortable

income and enjoyable lifestyle. Assets (anything that a business or entrepreneur

owns that has a cash value) of the business are worth more than the liabilities (a debt; a sum of money the entrepreneur owes).

This can be a dangerous stage for the entrepreneur who forgets that growth and change are essential to future success.

5. Turnaround Stage If you reach this stage, your venture is in financial

trouble. The financial records reflect losses for more than

two years. Your competition is attracting customers away

from your business. If you want to save the business, you must act

now (eliminating nonproductive people, products and services – no matter how difficult this seems).

Liquidation (the sale of assets in order to raise funds) may be another option to generate cash.

Marketing – The 4 Ps The 4 Ps are:

Price Promotion Place Product

An Entrepreneur must have an intense understanding of each as it applies to his or her business.

An entrepreneur must also have an intense understanding of how each of these pieces work together.

4 Ps – ExampleTim Horton’s

Product Coffee and related (food, appliances, transport, etc.)

Price Varies depending on product and portion size (small, medium, large)

Place Canadian and American locationsVarious (hospitals, shopping malls,

university campuses, etc.)Promotion Various. Includes TV and radio spots,

sporting events, community sponsorship, marketing campaigns (such as “roll up the rim to win”) etc.

Activity – The Dragon’s Den

This is a CBC show which gives Entrepreneurs the opportunity to pitch their venture, product, and/or service ideas to a panel of judges.

The goal is to get the judges, or dragons, to invest.

As you watch the following clips, take notes as to how well each entrepreneur knows or understands the 4 ps of their venture idea

Dragon’s Den

YouTube - *atomic tea featured on cbc's 'dragon's den‘

YouTube - Dragons Den Season 2 Rasam Soup

YouTube - Dragons Den Season 2 Fanware

Marketing, continued

The 4Ps are: product, price, place and promotion.

Today we will explore Price.

Price is the process of determining what to charge for your product or service.

It should reflect what the customers are willing and able to pay.

It is assumed a profit is to be made. It includes determining the:

cost of production (time, labor, ingredients, packaging, advertising, etc),

the state of supply and demand, and the amount of profit to be made.

Assignment:

Complete the assignment using the textbook.

This assignment will not be passed in, but marked together.

Area Wal-Mart cut costs by…

Wages

Health Benefits

Overtime

Rubbermaid and similar suppliers

Outsourcing

Charity Donations

Security

Wal-Mart Case Study AssignmentIt has been determined that Wal-Mart is able to make so much PROFIT

because they are able to cut costs so much.Remember: Profit = Sales – Costs

Complete the chart below, explaining how Wal-Mart cut costs in each areas:

Price and the Law

The Competition Act protects customers in Canada from:

1. Price Fixing -businesses are not allowed to decide as a group what to charge consumers for a specific product. Why not?

2. Retail Price Management –no company can force another independent company to

charge a particular price for a product it has provided. A company can suggest a price (MSRP)3. Deceptive Pricing Strategies:

A. Double Ticketing - refers to the placing of two prices on the same product and charging the customer the higher price.

B. Bait and Switch - occurs when a product is advertised at a low price to attract (bait) customers then the sales staff tries to disparage the customer in order to get the customer to buy a

more expensive item.C. False Sale Price - refers to the practice by some stores of

advertising a regular price as a sale price.

PromotionPromotion

► Letting people know about products and services in Letting people know about products and services in a positive way so they will want to make a a positive way so they will want to make a purchase.purchase.

► Promotion is used to tell potential customers Promotion is used to tell potential customers about:about:1.1. How to use a product or service and what it is used forHow to use a product or service and what it is used for2.2. The quality of a product or serviceThe quality of a product or service3.3. Where the product or service is availableWhere the product or service is available4.4. New products that are on the marketNew products that are on the market5.5. Other important information about the productOther important information about the product

YouTubeYouTube - Commercial - The Wait - Commercial - The WaitWhich of the above 5 is this commercial being used for?Which of the above 5 is this commercial being used for?

► There are There are THREE MAJOR REASONSTHREE MAJOR REASONS to use to use promotion. They are to promotion. They are to INFORMINFORM customers about customers about products, to products, to REMINDREMIND customers of the product, and customers of the product, and to to PERSUADEPERSUADE customers to buy. For example: customers to buy. For example:

1.1. To Inform: To Inform: A TV commercial airs 10 times A TV commercial airs 10 times a day before product is released.a day before product is released.

2.2. To Remind: To Remind: A pizza restaurant gives away A pizza restaurant gives away free refrigerator magnets with delivery free refrigerator magnets with delivery information.information.

3.3. To Persuade: To Persuade: A company uses labels to A company uses labels to emphasize that products are “new and emphasize that products are “new and improved,” “concentrated,” “extra improved,” “concentrated,” “extra strength,” etc.strength,” etc.

Which is the following an example of?Which is the following an example of?

YouTubeYouTube - TV Commercial - TV Commercial

► There are There are Five TYPES OF PROMOTIONFive TYPES OF PROMOTION used to help sellers used to help sellers get their message to customers.get their message to customers.

1.1. ADVERTISINGADVERTISING – paying to use the media to promote – paying to use the media to promote product (newspapers, TV, radio, magazines, billboards, etc.).product (newspapers, TV, radio, magazines, billboards, etc.).

2.2. PUBLICITYPUBLICITY - - FreeFree promotion (press releases or news reports promotion (press releases or news reports describing how the company sponsored events or donated describing how the company sponsored events or donated to a cause.)to a cause.)

3.3. SALES PROMOTIONSALES PROMOTION - Special things done to get customers - Special things done to get customers interested in trying products or to come into a store interested in trying products or to come into a store (coupons, contests, rebates, free samples, displays, etc.)(coupons, contests, rebates, free samples, displays, etc.)

4.4. PERSONAL SELLING - PERSONAL SELLING - A salesperson assists A salesperson assists each customereach customer (a shoe salesperson helps a customer select the proper shoe (a shoe salesperson helps a customer select the proper shoe size. A college student goes door to door selling children’s size. A college student goes door to door selling children’s books.)books.)

5.5. ENDORSEMENT –ENDORSEMENT – When a famous person is paid to When a famous person is paid to promote a product or service (Tiger Woods and NIKE; Tiger promote a product or service (Tiger Woods and NIKE; Tiger Woods and ONSTAR).Woods and ONSTAR).YouTubeYouTube - Gatorade Moon Shot Commercial - Gatorade Moon Shot Commercial

WorksheetWorksheet - Jane’s Market - Jane’s Market

►Complete and we will go over togetherComplete and we will go over together

Type of PromotionType of Promotion6. Product Placement6. Product Placement

►Using brand-name products as Using brand-name products as props: props: the practice of placing brand-the practice of placing brand-name items as props in, e.g. movies, name items as props in, e.g. movies, television shows, or music videos as a television shows, or music videos as a form of promotion.form of promotion.

►Look for the Product Placment in this Look for the Product Placment in this clip:clip: YouTubeYouTube - Product Placement - Product Placement

Place

Place

It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.

You must decide what “channel” you will use to get your product/service to your customers.

Channel 1 - Wholesalers

Break down 'bulk' into smaller packages for resale by a retailer.

Provide storage facilities Take on the some of the marketing

responsibilities

Channel 2 - Agents

Mainly used in international markets

Agent will typically secure an order for a producer and will take a commission

Channel 3 - Retailers

Retailers will have a much stronger personal relationship with the consumer.

The retailer will hold several other brands and products. A consumer will expect to be exposed to many products

The retailer will give the final selling price to the product.

Retailers often have a strong 'brand' themselves

Channel 4 - Internet

The main benefit of the Internet is that products reach a wider audience

Start-up costs are low. Use e-commerce technology (for

payment, shopping software, etc)

Assignment - Newtown

Please read the handout and complete.

Product

Life Cycle of a Product Introduction

Need for some level of immediate profit Product is promoted Limited number of products available Most products that fail, do so during this stage

Growth Competitors arrive with very similar products Products make more profit

Maturity The products that were the most successful during the earlier stages spend

the longest time here. Sales “stabilize” Price wars might occur Competition is fierce

Decline There is likely a “downturn” in the market Often, more innovative products are introduced, OR consumer tastes have

changed There may be intense price cuts