1. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 1 CHAPTER 2 Plan the Small Business OBJECTIVES 2-1Explain the importance of planning to the small business. 2-2Define the term business plan. 2-3Describe the components of a business plan and explain the importance of each. 2-4Identify the sources for assistance in planning a small business.

2. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 2 The Business Plan A business plan serves as a manual to help the entrepreneur during the design and start-up phases of the business. It also states the entrepreneur’s expectations, which serve as criteria by which business performance can be periodically evaluated.

3. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 3 Outline of Typical Business Plan COVER SHEET STATEMENT OF PURPOSE TABLE OF CONTENTS EXECUTIVE SUMMARY 1.Concept History and Background 2.Goals and Objectives 3.Marketing Plan 4.Legal Requirements

4. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 4 Outline of Typical Business Plan 5.Form of Ownership 6.Financial Plan 7.Organization, Management, and Staffing Plan 8.Special Considerations (continued)

5. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 5 Marketing Plan The marketing plan defines and quantifies consumers, demand, competition, geographic market, and pricing policy for a specific small business.

6. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 6 Consumers and Demand The first part of the marketing plan describes the consumers and demand for the product or service. It may profile a typical customer in terms of age, sex, income, occupation, family status, or other characteristics that make that person likely to frequent the business. It may also estimate how often a typical customer will want to buy the product or service and at what price.

7. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 7 Competition Know about your competition Consider what your competitors’ reaction will be to your business. Determine how the competition is different from the business you have in mind

8. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 8 Geographic Market Describes the geographic area from which the business will draw its customers Indicates how far people will be willing to travel Identifies areas from which customers will come

9. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 9 Pricing Policy Determines how you will set prices for the product or service Will have a direct impact on the number of customers you will have and the profits you accumulate

10. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 10 Legal Requirements Entrepreneurs must consider potential legal problems before they actually go into business. The legal requirements for conducting almost any business today can be extensive and complicated. Certain patents, copyrights, agreements, contracts, or other legal arrangements will be needed to carry out day-to-day business.

11. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 11 Form of Ownership Entrepreneurs must decide during the planning phase which form of ownership best suits the needs of the business and the people involved. The most common forms of ownership Sole proprietorship Partnership LLC (limited liability company) Corporation

12. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 12 A basic financial plan contains the entrepreneur’s estimates for the following categories: Financial Plan Cost of starting the business and maintaining it for a specified period of time (initial capitalization plan) Projected income Projected operating expenses Projected cash flow Initial balance sheet

13. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 13 Organization, Management, and Staffing Plan How many employees the business will require? What will their responsibilities be?

14. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 14 Organization Chart Deals with the actual management of the business Chart defines who will be responsible for tasks Shows who reports to whom in the organizational hierarchy

15. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 15 Sources for Planning Assistance Community colleges Chambers of commerce The Small Business Administration

16. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 16 Small Business Administration The SBA is an independent federal government agency with offices in most metropolitan areas. It offers a range of services, including seminars, counseling, and loans.

17. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 17 Small Business Administration For entrepreneurs contemplating the small business planning process, the SBA offers excellent information in the following areas: Start-up Basics Business Planning Business Plan Basics Writing the Plan Using the Plan Specific Training Financing Marketing Employees Taxes Legal Aspects Special Interests

18. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 18 Accountants and Attorneys During the planning process, the entrepreneur should establish a working relationship with an accountant and an attorney who have experience with small businesses. The accountant should review or, in some cases, help to develop the financial plan. The attorney should be consulted to determine the legal requirements of the proposed business.

19. SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS © South-Western Thomson Chapter 2Slide 19 Internet The Internet is probably the best place to start searching for planning assistance. The local chamber of commerce likely has a web page providing local business and community information. The SBA also has an excellent site. Many private sites offer excellent links.