1. SMALL BUSINESS MANAGEMENT Chapter 4 The Business Plan

2. Aggasiz Brewing Company 1. Briefly discuss the problems of starting from scratch, as illustrated by the Aggasiz Brewing Company 2. How could Gary DePape have avoided these problems? 3. What would have been the advantages and disadvantages of Gary purchasing a microbrewery instead of starting from scratch? 4. What risks would Gary have faced if he had dropped the price of his product?

3. Getting Started Establishing the Business  Advantages of Organizing a Business from Scratch Define nature of business Exact physical _______ Fresh inventory Employee selection Develop _______ system

4. Getting Started Establishing the Business  Disadvantages of Organizing a Business from Scratch Lack of _______ info Time assembling physical facilities Start-up bugs & problems Establishing outside relationships Risk of _______

5. Caribbean Beer vs Agassiz Beer  Compare and contrast the two small business ventures in similar industry Non-Quantitative Assessment  Personality Characteristics  Goals  Content of _______  Lifestyle  Capabilities  Experience Quantitative _______ of Business

6. Small Business Plan  _______ purposes Blueprint to maintain focus Tool to evaluate performance  _______ purposes Recruit lenders & investors Test of ideas viability Form and emphasis will vary depending on the user

8. The Investor’s Perspective  Plans that speak the investors’ language:  Are brief, not extremely _______ in written length.  Have an a _______ overall appearance.  Are well-organized with a table of contents and numbered pages.  Are _______ _______ in meeting customer needs; are not product-oriented.  Show _______ of customer acceptance of the proposed product or service.

9. Features of Plans that will Repel Investors  Plans that create _______ reactions:  Show an infatuation with the product or service and downplay market needs or acceptance.  Are based on financial _______ at odds with accepted industry norms.  Have unrealistic _______ projections.

10. Business Plans that Attract Investors Recognize the _______ needs for required rates of return on investments. Demonstrate _______ of focus on a limited number of products or services Have a proprietary market position through patents, copyrights, and _______

11. Business Planning Needed and Influencing Factors  Factors affecting the extent of a business plan:  Cost in _______ and money to prepare the plan  Management style and ability  _______ of the management team  Complexity of the business  Competitive _______  Level of _______

12. Preparing a Business Plan  Two issues critical in preparing a business plan:  The basic format and _______ of the written presentation.  Clear writing that effectively communicates  The _______ of the plan.  Factual support for the concept in the form of _______ _______ evidence

13. Resources for Business Plan Preparation  Computer-Aided Planning  Word-processing  Spreadsheets  Specialized _______ Plan Software Packages (BizPlan)  Professional Assistance  Lawyers  Marketing specialists  Engineering and production experts  Accounting firms  Incubator organizations  Small business development agencies

14. Research to Support the Plan  Both primary and secondary research must be carried out by the writer of the business plan. Secondary Research Primary Research

15. The Small Business Plan  There are ten components in a plan: 1. Prepare a table of contents. 2. Prepare a synopsis of the plan in an executive summary and background statement. 3. Describe the management team. 4. Describe the business objective. 5. Plan the marketing approach.

16. The Small Business Plan  Components of the Plan (cont.) 6. Describe the selection of the location. 7. Determine the physical facilities. 8. Plan the financing. 9. Plan the personnel. 10. Investigate the legal requirements.

17. Components of the Plan  1. Prepare a table of contents. Overview of the plan Quick access to the various parts of the plan

18. Components of the Plan  2. Prepare synopsis of the plan in an executive summary and background statement. completed at the end of the complete plan history of the project to date statement of the intended mission of the venture

19. Components of the Plan  3. Describe the management team. résumé and background of those making the decisions for the organization

20. Components of the Plan  4. Establish business objectives. Business Size Production Levels Performance Levels

21. Components of the Plan  5. Plan the marketing approach. Have a clear concept of the target market. Understand the target market’s needs, wants and purchasing habits  Answer the following questions: where, when, what, how much, why.

22. Components of the Plan  5. Plan the marketing approach (cont.) Be aware of any uncontrollable factors that might affect the marketing of the product or service such as  existing or pending legislation relevant to the business.  state of the _______ in the market.  extent and strategies of the competition.  cultural _______ of the market.  new technologies that might offset the business.

23. Components of the Plan  5. Plan the marketing program (cont.)

24. Components of the Plan  6. Describe the selection of the location. the trading area  the Economic _______ attitude of the _______ area towards new businesses  Competition  Costs

25. Components of the Plan  6. Describe the selection of the location. The Site  accessibility, site costs, _______, site history, proximity to other businesses, physical characteristics The Buy-or-Lease Decision  cost of the lease, length of the lease, restrictions, repairs and lease hold improvements, _______ coverage Running the Business from One’s Home

26. Components of the Plan  7. Determine the physical facilities. Building, equipment, fixtures, starting inventory _______ flow in business  Production, layout, distribution of product _______  Don’t risk more than you can lose  Don’t risk a lot for a little  Buy insurance only when necessary  Investigate company and agent

27. Components of the Plan  7. Determine the physical facilities. insurance types  loss or _______ to the property  business interruption  liability and _______ life insurance insurance _______  what kind to purchase, how much to purchase, from whom to purchase the insurance

28. Components of the Plan  8. Plan the financing. establish capital requirements make _______ projections determine the sources of funding plan the _______, and bookkeeping systems determine the _______ evaluation measures

29. Components of the Plan  9. Plan the personnel. Administrative structure Employee _______ and training Personnel Policies

30. Components of the Plan  10. Investigate the legal requirements. Legal Structure (four styles)  1.Sole _______ advantages and disadvantages  2. Partnership Limited, _______ advantages and disadvantages  3. Cooperative one member-one vote vs each share a vote

31. Components of the Plan  10. Investigate the legal requirements. (cont.)  4. Corporation advantages and disadvantages of a corporation steps in incorporation  selection of the business name  development of the share structure, directors, restrictions on share transfers, etc.  description of the company operations  acquiring the necessary supplies

32. Components of the Plan  10. Investigate the legal requirements (cont.)  5. Joint Ventures

33. Components of the Plan  10. Investigate the legal requirements. (cont.) Licenses and Taxes  Federal Government  Provincial Government  Municipal Governments Intellectual Property Protection patent steps

34. Appendices  Appendix A - Checklist for a Small Business Plan  Appendix B - Sample Business Plans (2) The Sock Hop, Quality Cuts  Appendix C - Incorporation of Companies and Associations  Appendix D - Jurisdiction of Licenses and Taxes

35. Concept Checks  1. What are the advantages and disadvantages of owning a small business?  2. What steps are involved in preparing a business plan?  3. What criteria must be evaluated before choosing a trading area?  4. When is it advantageous to lease instead of owning?

36. Concept Checks  5. What information should be investigated before construction starts and purchasing equipment?  6. Why is insurance purchased? What are some small business insurance types?  7. What major financial aspects should be planned in advance of business operation?  8. What are four legal structures that an owner can utilize?

37. Concept Checks  9. What are the advantages and disadvantages of incorporation?  10. What level of government issues business licences?  11. What taxes are levied by the federal government?  12. What are the steps required to register a patent?