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 – Example Tim 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 locations Various (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.

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

Wal-Mart Case Study Assignment It 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: Area Wal-Mart cut costs by… Wages Health Benefits Overtime Rubbermaid and similar suppliers Outsourcing Charity Donations Security

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.

Promotion Letting people know about products and services in a positive way so they will want to make a purchase. Promotion is used to tell potential customers about: How to use a product or service and what it is used for The quality of a product or service Where the product or service is available New products that are on the market Other important information about the product YouTube - Commercial - The Wait Which of the above 5 is this commercial being used for?

Which is the following an example of? YouTube - TV Commercial There are THREE MAJOR REASONS to use promotion. They are to INFORM customers about products, to REMIND customers of the product, and to PERSUADE customers to buy. For example: To Inform: A TV commercial airs 10 times a day before product is released. To Remind: A pizza restaurant gives away free refrigerator magnets with delivery information. To Persuade: A company uses labels to emphasize that products are “new and improved,” “concentrated,” “extra strength,” etc. Which is the following an example of? YouTube - TV Commercial

There are Five TYPES OF PROMOTION used to help sellers get their message to customers. ADVERTISING – paying to use the media to promote product (newspapers, TV, radio, magazines, billboards, etc.). PUBLICITY - Free promotion (press releases or news reports describing how the company sponsored events or donated to a cause.) SALES PROMOTION - Special things done to get customers interested in trying products or to come into a store (coupons, contests, rebates, free samples, displays, etc.) PERSONAL SELLING - A salesperson assists each customer (a shoe salesperson helps a customer select the proper shoe size. A college student goes door to door selling children’s books.) ENDORSEMENT – When a famous person is paid to promote a product or service (Tiger Woods and NIKE; Tiger Woods and ONSTAR). YouTube - Gatorade Moon Shot Commercial

Worksheet - Jane’s Market Complete and we will go over together

Type of Promotion 6. Product Placement Using brand-name products as props: the practice of placing brand-name items as props in, e.g. movies, television shows, or music videos as a form of promotion. Look for the Product Placment in this clip: YouTube - 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 Growth Maturity Decline 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