1. SMALL BUSINESS MANAGEMENT Chapter 4 The Business Plan

2. Getting Started Establishing the Business 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). 17/3/20112Mrs. Shefa El Sagga SBM

3. Getting Started Establishing the Business  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 interest can be substantial). Risk of demand. 17/3/20113Mrs. Shefa El Sagga SBM

4. Juice GazaFirm Vs Juice EgyptFirm 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 (Preparing the Feasibility Analysis). 17/3/20114Mrs. Shefa El Sagga SBM

5. Small Business Plan  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. 17/3/20115Mrs. Shefa El Sagga SBM

6. Customers Suppliers Investors Employees Firm’s Management Insiders Outsiders New Venture Business Plan Banker & Lenders 17/3/20116Mrs. Shefa El Sagga SBM

7. 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. 17/3/20117Mrs. Shefa El Sagga SBM

8. 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. 17/3/20118Mrs. Shefa El Sagga SBM

9. 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 17/3/20119Mrs. Shefa El Sagga SBM

10. 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 17/3/201110Mrs. Shefa El Sagga SBM

11. 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 17/3/201111Mrs. Shefa El Sagga SBM

12. Resources for Business Plan Preparation  Computer-Aided Planning.  Word-processing.  Spreadsheets.  Specialized Business Plan Software Packages.  Professional Assistance.  Lawyers.  Marketing specialists.  Engineering and production experts.  Accounting firms.  Incubator organizations.  Small business development agencies. 17/3/201112Mrs. Shefa El Sagga SBM

13. Research to Support the Plan  Both primary and secondary research must be carried out by the writer of the business plan. Secondary Research (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). 17/3/201113Mrs. Shefa El Sagga SBM

14. 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. 17/3/201114Mrs. Shefa El Sagga SBM

15. 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. 17/3/201115Mrs. Shefa El Sagga SBM

16. 1. Prepare a table of contents. Overview of the plan. Quick access to the various parts of the plan. 17/3/201116Mrs. Shefa El Sagga SBM

17. 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 17/3/201117Mrs. Shefa El Sagga SBM

18. 3. Describe the management team.  résumé and background of those making the decisions for the organization 17/3/201118Mrs. Shefa El Sagga SBM

19. 4. Establish business objectives.  Business Size  Production Levels  Performance Levels 17/3/201119Mrs. Shefa El Sagga SBM

20. 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. 17/3/201120Mrs. Shefa El Sagga SBM

21. 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. 17/3/201121Mrs. Shefa El Sagga SBM

22. 5. Plan the marketing program (cont.) Sex, Style 17/3/201122Mrs. Shefa El Sagga SBM

23. 6. Describe the selection of the location.  The trading area. the Economic Base.  Attitude of the trading area towards new businesses. Competition. Costs. 17/3/201123Mrs. Shefa El Sagga SBM

24. 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. 17/3/201124Mrs. Shefa El Sagga SBM

25. 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 17/3/201125Mrs. Shefa El Sagga SBM

26. Palmyra Sandwich  Comment on the location selection of Montreal Sandwich. Suppliers. Employees. Cost. Competition. Physical characteristics.  Comment on the Physical facilities. Organization of facilities. Equipment, start-up supplies, costs, permits, insurance. Production process. Interior layout. 17/3/201126Mrs. Shefa El Sagga SBM

27. 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. 17/3/201127Mrs. Shefa El Sagga SBM

28. 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 17/3/201128Mrs. Shefa El Sagga SBM

29. 9. Plan the personnel.  Administrative structure  Employee recruitment and training  Personnel Policies 17/3/201129Mrs. Shefa El Sagga SBM

30. 10. Investigate the legal requirements.  Legal Structure (four styles) 1. Sole Proprietorship  advantages and disadvantages. advantages and disadvantages 2. Partnership  Limited, General.  advantages and disadvantages. advantages and disadvantages. 3. Cooperative  one member-one vote vs each share a vote. 17/3/201130Mrs. Shefa El Sagga SBM

31. Advantages & Disadvantages of a Sole Proprietorship Advantages 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. 17/3/201131Mrs. Shefa El Sagga SBM

32. Advantages & Disadvantages of a Partnership Advantages 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 possibility for disagreements. Buy sell. agreements. 17/3/201132Mrs. Shefa El Sagga SBM

33. 10. Investigate the legal requirements. (cont.) 4. Corporation  advantages and disadvantages of a 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. 17/3/201133Mrs. Shefa El Sagga SBM

34. Advantages & Disadvantages of a Corporation Advantages 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. 17/3/201134Mrs. Shefa El Sagga SBM

35. 10. Investigate the legal requirements (cont.) 5. Joint Ventures. 17/3/201135Mrs. Shefa El Sagga SBM

36. 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). 17/3/201136Mrs. Shefa El Sagga SBM

37. 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?. 17/3/201137Mrs. Shefa El Sagga SBM

38. 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?. 17/3/201138Mrs. Shefa El Sagga SBM

39. Concept Checks 9. What are the advantages and disadvantages of incorporation?. 10. What level of government issues business licenses?. 11. What taxes are levied by the federal government?. 12. What are the steps required to register a patent?. 17/3/201139Mrs. Shefa El Sagga SBM