1. SMALL BUSINESS MANAGEMENT
Chapter 4
The Business Plan

2. Class notes

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

4. Getting Started Establishing the Business
Advantages of Organizing a Business from Scratch
Define nature of business
Exact physical facilities
Fresh inventory
Employee selection
Develop information system
Advantages of Organizing a Business from Scratch
Define nature of business
Competitive environment, nature of business appropriate market size and extent of operation
Ie West jet example of starting from scratch
Exact physical facilities
Building , equipment, location
Fresh inventory
Employee selection
Develop information system
Latest technology and systems

5. Getting Started Establishing the Business
Disadvantages of Organizing a Business from Scratch
Lack of historical info
Time assembling physical facilities
Start-up bugs & problems
Establishing outside relationships
Risk of demand
Disadvantages of Organizing a Business from Scratch
Lack of historical info
On which to base market demand, supplies, and operations, more difficult obtaining financing
Time assembling physical facilities
Start-up bugs & problems
Establishing outside relationships
Trade credit, savings in intrest can be substancial
Risk of demand

6. Caribbean Beer vs Agassiz Beer
Compare and contrast the two small business ventures in similar industry
Non-Quantitative Assessment
Personality Characteristics
Goals
Content of Work
Lifestyle
Capabilities
Experience
Quantitative Assessment of Business
Personality Characteristics
Achievement Orientation Risk Taking Independence, Self Confidence, Self Assurance Innovativeness
Strong Verbal and Numerical Skills Problem Solving Abilities Strategic Planning Perseverance Selling Skills
Caribbean Beer

7. What happened?
The Agassiz Brewing Company is based in Winnipeg, Manitoba, Canada. It is named for the prehistoric glacial Lake Agassiz which once covered much of Manitoba. Agassiz beer is available in Manitoba, Ontario, and British Columbia.
The company was established in Winnipeg on March 17, 1999.
Agassiz Brewing had difficulties covering its operating costs because of the small volume. After considering several options, including approaching rival Fort Garry Brewing, it closed its Winnipeg operation and now has its beer brewed under contract in Thunder Bay, Ontario.

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

9. New Venture Business Plan Outsiders Banker & Lenders Firm’s Management
Employees
Firm’s Management
Insiders
New Venture
Business Plan
Customers
Suppliers
Investors
Internal purposes
Blueprint to maintain focus
Tool to evaluate performance
External purposes
Recruit lenders & investors
Test of ideas viability
Form and emphasis will vary depending on the user
Outsiders
Banker & Lenders

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

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

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

13. Business Planning Needed and Influencing Factors
Factors affecting the extent of a business plan:
Cost in time and money to prepare the plan
Management style and ability
Preferences of the management team
Complexity of the business
Competitive environment
Level of uncertainty

14. Preparing a Business Plan
Two issues critical in preparing a business plan:
The basic format and effectiveness of the written presentation.
Clear writing that effectively communicates
The content of the plan.
Factual support for the concept in the form of strong supporting evidence

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

16. 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
Both primary and secondary research must be carried out by the writer of the business plan.
Secondary Research
secondary published sources
books, published reports, newspaper, journal articles, statistics databases, and Internet sites
Primary Research
derived directly from people
experts in the field, professionals such as lawyers and accountants, industry contacts such as trade association representatives or suppliers and potential customers

17. 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.

18. 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.

19. 1. Prepare a table of contents.
Overview of the plan
Quick access to the various parts of the plan

20. 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

21. 3. Describe the management team.
résumé and background of those making the decisions for the organization

22. 4. Establish business objectives.
Business Size
Production Levels
Performance Levels

23. 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.

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

25. 5. Plan the marketing program (cont.)

26. 6. Describe the selection of the location.
the trading area
the Economic Base
attitude of the trading area towards new businesses
Competition
Costs

27. 6. Describe the selection of the location.
The Site
accessibility, site costs, restrictions, 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, insurance coverage
Running the Business from One’s Home

28. 7. Determine the physical facilities.
Building, equipment, fixtures, starting inventory
Operations flow in business
Production, layout, distribution of product
Insurance
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
Montreal Sandwich

29. Montreal Sandwich
Comment on the location selection of Montreal Sandwich
Suppliers
Employees
Cost
Competition
Physical characteristics
Comment on the Physical facilites
Organization of facilites
Equipment, start-up supplies, costs, permits, insurance
Production process
Interior layout

30. 7. Determine the physical facilities.
insurance types
loss or damage to the property
business interruption
liability and disability
life insurance
insurance decisions
what kind to purchase, how much to purchase, from whom to purchase the insurance

31. 8. Plan the financing. establish capital requirements
make feasibility projections
determine the sources of funding
plan the accounting, and bookkeeping systems
determine the financial evaluation measures

32. 9. Plan the personnel. Administrative structure
Employee recruitment and training
Personnel Policies

33. 10. Investigate the legal requirements.
Legal Structure (four styles)
1.Sole Proprietorship
advantages and disadvantages
2. Partnership
Limited, General
3. Cooperative
one member-one vote vs each share a vote

34. Advantages & Disadvantages of a Sole Proprietorship
1. simple & inexpensive
2. offers individual control over operations, profits, etc
3. fewer forms and reports to fill out
Disadvantages
1. unlimited liability
2. often more difficult to obtain financing
3. personal tax rate may be higher than corporate rate
4. life of the business terminates on owners death
return

35. Advantages & Disadvantages of a Partnership
1. simple & inexpensive
2. pooling of financial & skill resources
3. tax advantages – income splitting
Disadvantages
1. unlimited liability
2. death of partner terminates partnership unless specified otherwise
3. greater possibilty for disagreements
Buy sell agreements
return

36. 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

37. Advantages & Disadvantages of a Corporation
1. continuity in event of death
2. limited liability
3. owner & manger may be separate
4. Easier to raise funds
5. corporate tax rate
6. commercial credibility
7. liability insurance may be cheaper
Disadvantages
1. cost
2. increased govt. reporting
3. losses cannot be deducted from personal income
4. Lender may require personal guarantee negating advantage of limited liability
return

38. 10. Investigate the legal requirements (cont.)
5. Joint Ventures

39. 10. Investigate the legal requirements. (cont.)
Licenses and Taxes
Federal Government
Provincial Government
Municipal Governments
Intellectual Property Protection
patent steps
10. Investigate the legal requirements. (cont.)
Licenses and Taxes
Federal Government
income tax, goods and services taxes, excise tax
Provincial Government
income tax, licenses, sales tax
Municipal Governments
licenses, property taxes, business taxes
Intellectual Property Protection
patent steps
search and file

40. 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