1. PowerPoint Slides for use with Building a Dream
Dr. Walter Good
Department of Marketing
Asper School of Business
University of Manitoba

2. Stage 1 What is Entrepreneurship?

3. Principal Reasons Why People Start Businesses of Their Own
To achieve a sense of accomplishment 82%*
To be their own boss %
To have an element of variety and adventure 66%
To make better use of their training and skills 63%
To be able to adapt their own approach to their work 62%
To be challenged by new opportunities 61%
* sums to more than 100% due to multiple responses

4. An Entrepreneur
Someone who perceives an opportunity and creates an organization to pursue it.
Bygraves

5. Entrepreneurs Can Play a Number of Roles in the Economy
1. Create new product and/or service businesses.
2. Bring creative and innovative methods to developing or producing new products or services.
3. Provide employment opportunities and create new jobs as a result of growing their businesses consistently and rapidly.
4. Help contribute to regional and national economic growth.
5. Encourage greater industrial efficiency/productivity to enhance our international competitiveness.

6. The Components of Successful Entrepreneurial Ventures
Business Plan
The Entrepreneur
Opportunity
Resources
Organization
Strategy

7. Outline of the Entrepreneurial Process
Decide to go into business for yourself
Assess your potential
Find an appropriate product or service idea
Buy a business
Start a new business
Acquire a franchise
Conduct a feasibility study
Technical feasibility
Market acceptability
Financial viability
Organize your business structure and legal requirements
Protect your idea
Arrange the necessary financing
Develop a comprehensive business plan

8. Myths About Entrepreneurship
Myth 1 Entrepreneurs are born, not made.
Myth 2 Anyone can start a business. It’s just a matter of luck and guts.
Myth 3 Entrepreneurs are gamblers.
Myth 4 Entrepreneurs want to run the whole show themselves.
Myth 5 Entrepreneurs are their own bosses and completely independent.
Myth 6 Entrepreneurs work longer and harder than corporate managers.
Myth 7 Entrepreneurs face greater stress and more pressures, and thus pay a higher personal price in their jobs than do other managers.
Continued

9. Myths About Entrepreneurship
(Continued)
Myth 8 Starting a business is risky and often ends in failure.
Myth 9 Money is the most important ingredient for success.
Myth 10 New business start-ups are for the young and energetic.
Myth 11 Entrepreneurs are motivated solely by their quest for the almighty dollar.
Myth 12 Entrepreneurs seek power and control over other people so that they can feel “in charge.”

10. Rules of the Road 1. Spot the opportunity around you
2. Bring in the experts
3. Keep your options open
4. Be prepared to work
5. Learn when to hand off to suppliers
6. Look for value-added deals
7. Expand strategically
8. Think BIG
9. Lever relationships
10. Have a fallback

11. Stage 2 Assessing Your Potential for an Entrepreneurial Career

12. What is Your Entrepreneruial Potential?
Realistically assess your potential for an
Entrepreneurial Career
Understand the
personal attributes
important for
success in a
business of your
own
demands the
entrepreneurial
role will make on
you and your
family
Evaluate
your managerial
skills
Conduct a
personal financial
assessment
Develop a
personal
balance sheet
budget
Assess your strengths and weaknesses
that will affect your ability to achieve
your entrepreneurial goals

13. Attitudes and Behaviours Valuable for Turning a Business Dream into Reality
Commitment, Determination, and Perseverance
A Success Orientation
Opportunity and Goal Orientation
Action Orientation and Personal Responsibility
Persistent Problem Solving and a Need to Achieve
A Reality Orientation
The Ability to Seek and Use Feedback
Self-Reliance
Continued

14. Attitudes and Behaviours Valuable for Turning a Business Dream into Reality
(Continued)
Self-Confidence
A Tolerance of Ambiguity and Uncertainty
Moderate Risk Taking and Risk Sharing
The Ability to Respond Positively to Failure
A Need for Status and Power
Integrity and Reliability
A Team Builder

15. An Entrepreneur’s Creed
1. Do what gives you energy - have fun.
2. Figure out how to make it work.
3. Anything is possible if you believe you can do it.
4. If you don’t know it can’t be done, then you’ll go
ahead and do it.
5. Be dissatisfied with the way things are - and look
for ways to improve them.
6. Do things differently.
7. Businesses can fail. Successful entrepreneurs
learn from failure - but keep the tuition low.
8. It’s easier to beg for forgiveness than ask for
permission in the first place.
Continued

16. An Entrepreneur’s Creed (Continued)
9. Make opportunity and results your obsession
- not money.
10. Making money is even more fun than spending it.
11. Take pride in your accomplishments
- it’s contagious.
12. Sweat the details that are critical to success.
13. Make the pie bigger - don’t waste time trying
to cut smaller pieces.
14. Play for the long haul. It’s rarely possible to
get rich quickly.
15. Remember: only the lead dog gets a change
in scenery.

17. Business Skills Needed by Successful Entrepreneurs
1. Managing Money
2. Managing People
3. Directing Business Operations
4. Directing Sales and Marketing Operations
5. Setting Up a Business

18. Kinds of Entrepreneurs
CRAFTSPEOPLE:
60% of all small business owners
Derive their sense of self-worth form their mastery
of a craft or trade
FREEDOM FIGHTERS:
30% of all small businesses
Prime motivation is simply being in business for
themselves
MOUNTAIN CLIMBERS:
10% of all small businesses
Growth-oriented business owners who are motivated
almost solely by achievement.

19. Stage 3 Exploring New Business Ideas and Opportunities

20. Searching for Ideas Search for a product or service idea
Evaluate the possible alternatives
Determine your preferences
From your
previous
employment
From
hobbies
casual
observation
From a
deliberate
search
Magazines
and other
publications
Trade shows
and
conventions
Product
licensing
information
services
Government
agencies and
departments
Use
creative
thinking

21. Ideas VS. Opportunities
Decision to Start
a New venture
Potential New
Opportunities
Initial New
Venture Ideas

22. Sources of Ideas for a New Business
Your Job
Your Hobbies
Personal Observation
Casual Observation
Deliberate Search
Publications
Inventors’ Shows, Trade Shows and Conventions
Patent Brokers and Product Licensing Information Services
Friends, Acquaintances, and Other Social Contacts
Federal and Provincial Government Agencies and Departments
Using Creative Thinking

23. Faith Popcorn’s Predictions for the Future
99 Lives
Anchoring
AtmosFEAR
Being Alive
Cashing Out
Clanning
Down-Aging
Egonomics
EVEolution
Fantasy Adventure
Icon Toppling
Pleasure Revenge
Small Indulgences
SOS (Save out Society)
Vigilante Consumer

24. Top 10 Business Opportunities
1. Personal coaches
2. Sex Toys
3. Teen gadgets
4. Outsourced business services
5. Specialist financial advisors
6. Vanity products for aging boomers
7. Escape Inc.
8. E-biz security
9. High-tech marketers
10. Youth education

25. Shirley Robert’s Best Businesses for Beyond the Year 2000
1. Self-diagnostic medical tools
2. Affordable organic foods
3. Educational books, videos, and CD-ROMs
4. Technology-training centres
5. Customized information services
6. Anti-aging cosmetics
7. Pet-related products and services
8. Financial services tailored to women
9. Activewear for aging adults
10. Home-safety devices

26. How to Select the Right Opportunity for You
Step 1: Identify Your Business and Personal Goals
Step 2: Research Your Favourite Industries
Step 3: Identify Promising Industry Segments
Step 4: Identify Problem Areas and Brainstorm Solutions
Step 5: Compare Possible Solutions with Your Objectives and Opportunities in the Marketplace
Step 6: Focus on the Most Promising Opportunities

27. Characteristics of the “IDEAL” Business
Requires no investment
Has a recognized, measurable market
A perceived need for the product or service
A dependable source of supply for the required inputs
No government regulation
Requires no labour force
Provides 100% gross margin
Buyers purchase frequently
Continued

28. Characteristics of the “IDEAL” Business
(Continued)
Receives favourable tax treatment
Has a receptive, established distribution system
Has great publicity value
Customers pay in advance
No risk of product liability
No technical obsolescence
No physical perishability
Impervious to weather conditions
Possesses some proprietary rights

29. Stage 4 Buying a Business

30. Buying a Business Buy an existing business
Where can you find a business to buy?
Business
brokers and
real estate
agents
Current
job
contacts
Local
newspapers
and trade
associations
Lawyers,
accountants
and other
professionals
Your
personal
network
Evaluate all the aspects of the potential acquisition
Determine an appropriate price
Purchase assets
of business
Purchase shares

31. Where to Find a Business to Buy
1. In your present business activity
2. From direct, independent contact
3. Through business brokers and
other middlemen
4. Through confidential advisors
5. From other sources

32. Ratio Analysis 1. Current Ratio 2. Quick Ratio
3. Debt to Net Worth Ratio
4. Gross Profit to Sales Ratio
5. Net Profit to Sales Ratio
6. Return on Assets
7. Sales to Inventory Ratio
8. Average Collection Period

33. Example of a Simplified Balance Sheet
THE CAMPBELL CO.
BALANCE SHEET AS OF DEC. 31, 200Y
ASSETS (000s)
Current Assets
Cash $ 25
Accounts receivable 53
Inventory
Total current assets $ 158 (A)
Fixed Assets
Machinery $ 40
Less: Accumulated depreciation
Equipment and fixtures 30
Less: Accumulated depreciation
Total fixed assets (B)
Total Assets (C = A + B) $ 185 (C)
LIABILITIES AND OWNER’S EQUITY
Current Liabilities*
Accounts payable $ 60
Notes payable 35
Total current liabilities 95
Long-Term Liabilities
Notes payable** $ 40
Total long-term liabilities
Total liabilities $ 135 (D)
OWNER’S EQUITY
Capital investment 20
Retained earnings
Total owner’s equity (E)
Total Liabilities and Owner’s Equity (F = D + E) $ 185 (F)
* Debt is due within 12 months. ** Debt is due after 1 year.

34. Example of a Simplified Income Statement
THE CAMPBELL CO.
INCOME STATEMENT FOR YEAR ENDING DEC. 31, 200Y
(000s)
Gross sales $ 428
Less: Returns
Net Sales $ 425 (A)
Cost of goods sold:
Beginning inventory $ 75
Plus: Net purchases 297
Cost of goods available 372
Less: Ending inventory
Cost of Goods Sold 292 (B)
Gross Profit (C = A - B) $ 133 (C)
Selling Expenses $ 29 (D)
Administrative expenses:
Office salaries $ 60
Interest 9
Depreciation 10
Other administrative expenses
Total Administrative Expenses 86 (E)
Profit Before Income Tax (F = C - D - E) $ 18 (F)
Income Tax (G = 25% of F) 4.5 (G)
Net Profit (G = F - G) $ (H)

35. Determining an Appropriate Price to Pay for a Business
Balance Sheet Methods
Net Book Value
Modified Book Value
Liquidation Value
Earnings-Based Methods
Capitalization of Earnings
Discounted Future Earnings
Discounted Cash Flow

36. Advantages of Buying an Established Business
Reduced risk
Increased likelihood of successful operation for the new owner
A proven location for successful operation
Has a product or service that is presently being produced, distributed, and sold
A clientele has already been developed
Financial relationships have already been established with banks, trade, creditors and other sources
The equipment needed for production is already available and its limitations and capabilities are known
An existing firm can often be acquired at a good price relative to the value of the assets

37. Disadvantages of Buying an Established Business
The physical facilities and product line may be old and obsolete
Union/management relationships may be poor
Present personnel may be unproductive and have a poor track record
The inventory may contain a large amount of “dead” stock
A high percentage of the assets may be in poor-quality accounts receivable
The location of the business may be bad
The financial condition of the business, and its relationships with its creditors may be poor
As a buyer, you inherit any ill will or unfavourable reputation that may exist toward the business among customers or suppliers
You have more freedom of choice in defining the nature of the business if you start one of your own

38. Key Points to Consider in Buying a Business
Take your time and verify the information you are given before you commit yourself
Don’t fall in love with the business before you do your homework
Be careful not to pay too much for goodwill
Buy a business within an industry you know well
Buy based on the return on investment, not the price
Don’t use all your cash for the purchase
Investigate before you buy

39. Stage 5 Considering a Franchise

40. Interested in a Franchise?
Consider a franchise
Finding a franchised business
Check out the franchise opportunity
Evaluate disclosure and other legal requirements
Is a franchised business for you?
Area
franchise
Single-unit
Master

41. Advantages of Franchising
Enables you to compete through the use of a well-known trademark or trade name
Franchisor may provide you with with assistance in such areas as site selection, equipment purchasing, national advertising, bookkeeping, the acquisition of supplies and materials, business counseling and employee training
Reduced risk of failure
May be able to take advantage of large-scale, centralized buying
May have access to special financing and credit arrangements
The opportunity to acquire a proven system that has already been developed, tested and refined

42. Disadvantages of Franchising
The high degree of control which franchisors exercise over their franchisees
Contractually required to report regularly to the franchisor and subject to frequent inspection and constant supervision
The cost of the services provided to you by the franchisor is based on your total sales revenue, not your profitability
Franchisor may add a mark-up to the supplies and equipment you are required to buy from them, thereby increasing your operating costs
Must pay the franchisor an initial franchise fee as well as periodic royalty payments and advertising contributions
Continued

43. Disadvantages of Franchising
(Continued)
The benefits available through franchising may not always materialize
Termination policies of many franchisors give franchisees little or no security in many cases

44. Types of Franchises Product Distribution Arrangements Business Format
Single-unit franchise
Area franchise
Master franchise
Business Format
Franchises

45. The Top 10 Franchise Organizations
1. Subway
2. Mail Boxes Etc.
3. McDonald’s
4. Jiffy Lube Int’l Inc.
5. Taco Bell Corp.
6. The Quizno’s Corp.
7. Sonic Drive-In Restauarants
8. RadioShack
9. General Nutrition Centers
10. Jani-King

46. Articles in a Typical Franchise Agreement
The full initial costs and what they cover
Use of the franchisor’s trademarks by the franchisee
Licensing fees
Land purchase or lease requirements
Building construction or renovation requirements
Equipment needs
Initial training provided
Starting inventory requirements
Promotional fees or allowances
Use of operations manual
Royalties payable
Continued

47. Articles in a Typical Franchise Agreement
Slide 5.6B Building a Dream
Articles in a Typical Franchise Agreement
(Continued)
Other payments that must be made to the franchisor
Ongoing training requirements
Cooperative advertising fees
Insurance requirements
Interest charges on financing
Requirements regarding purchasing supplies from the franchisor and prices
Restrictions that apply to competition with other franchisees
Terms covering termination, renewal rights, sale of the franchise and similar topics

48. A Sampling of Canadian Franchisors
Boston Pizza $45,000 7% 3% $1-1,200,000
Dollar Rent-a-Car $15-59, $90-150,000
Great Canadian
Dollar Store $15, $125,000
Molly Maid 1 76 $14, $18,000
Dairy Queen
Canada $35, $500-1,200,000
We Care Home
Health Services 2 52 $40, $150,000
McDonald’s
Restaurants
of Canada $45, % -- $ ,000
(including rent,
service fees
and advertising)
Midas Muffler $25, $225,000
Yogen Fruz $25, $ ,000
Second Cup
Coffee Co $20, $ ,000
Tim Hortons $50, $ ,000
Kwik-Kopy Printing 4 74 $29, $200,000
Shred-It $45,000 US $300,000
Number Number of Approximate
of Owned Franchisees Investment Units /Dealers Initial Fee Royalty Advertising Required
Source: Adapted from The 1999 Franchise Annual, Info Franchise News Inc., 1999.

49. Future Trends in Franchising
Conversion franchising
Increase in the number of women involved in franchising
Growth in non-food retail stores
Impact of computer technology
Growth of franchised medical services
Continuing importance of restaurants
Growth of auto repair franchises
Growth in such areas as automobile leasing, packaging and rapid delivery of parcels, home building, medical centres, temporary help services, business brokers and financial planners
Increased number of convenience stores
Growth of franchised educational services

50. Stage 6 Conducting a Feasibility Study Part 1: Technical and Market Assessment

51. Conducting a Feasibility Study: Part 1
Start a new business
Develop the concept for your venture
Develop a sales forecast
Flesh out your marketing plan
Develop a detailed marketing program for each channel you plan to use
Market through
traditional distribution
channels
Market direct
to the consumer
Market to the
government
Market in
foreign markets
specialty channels
Evaluate technical feasibility
How will product be produced
Determine fixed production costs
Establish a price structure for your
product or service
Determine variable production costs
Develop a preliminary marketing plan
Research customers
and markets
Test your product
or service
Assess market size,
segments and trends
Evaluate the
competition

52. Feasibility Study Contents
A Typical Feasibility Study
Explain clearly and concisely the principal concept underlying your venture and what sets it apart from other businesses.
Indicate the degree of innovativeness of your venture idea and the risks associated with it.
Does it need to be subjected to some form of technical evaluation or assessment?
Describe the profile of your principal target customers.
Indicate current market size, trends and seasonal patterns.
How do you plan to test your idea?
Describe any market research or customer surveys you plan to conduct.
Assess the nature of your competition.
Estimate your expected sales and market share.
Concept for your
venture
Technical feasibility
of your idea
Market
assessment
Continued
Feasibility Study Contents

53. Feasibility Study Contents
A Typical Feasibility Study
(Continued)
Detail the marketing strategy you plan to use.
Describe your marketing plan, including your sales strategy, advertising and promotion plans, pricing policy, and channels of distribution
How do you plan to assure continuing access to critical supplies of raw materials and component parts at reasonable prices?
Will you produce or subcontract your production?
Feasibility Study Contents
Your marketing
plan
Managing the
supply situation
Continued

54. Feasibility Study Contents
A Typical Feasibility Study
(Continued)
Conduct cost
and profitability
assessment
Plan for
future action
Determine the funds required to set up your business.
Develop short-term financial projections including:
Cash flow forecasts
Pro forma profit and loss statements
Pro forma balance sheet
Breakeven analysis
Whet were the strong and weak points of your venture idea?
Did your assessment indicate the business was likely to be profitable?
Is it sufficiently attractive to proceed with the development of a complete business plan?
Feasibility Study Contents

55. Some Guidelines for Market Research Questionnaires
Pre-test the survey on a small group of people
Make certain you are asking the “right” questions
Decide how you intend to use the information when designing the questionnaire
Keep your survey concise and readily understandable
Ask direct questions that relate specifically to the topic in which you are interested
If you are providing a finite range of possible answers, try to provide a maximum of five possible responses
Make sure your questions can be easily answered by your respondents
Continued

56. Some Guidelines for Market Research Questionnaires (Continued)
Don’t offend anyone
Don’t mislead respondents about the purpose of the survey
Don’t answer the questions for them by prompting them for answers
Give respondents sufficient time to provide an appropriate response
Don’t bias their responses by personally reacting to their answers
Ask all personal information at the end of the survey
Always be courteous; remember they are doing you a favour

57. How to Market Test Your Idea
1. Develop a Prototype
2. Obtain Opinions from Prospective Distributors
3. Compare with Competitor’s Products
4. Conduct a One-Store Test
5. Exhibit at Trade Shows
6. Conduct a Customer Survey

58. Stage 7 Conducting a Feasibility Study Part 2: Cost and profitability Assessment

59. Conducting a Feasibility Study: Part 2
Evaluate financial feasibility of concept
Estimate one-time start-up expenditures
Estimate expected monthly operating expenses
Develop short-term financial projections
Determine your breakeven point
Forecast your
cash flow
Pro forma
income statement
balance sheet

60. Sample Pro Forma Income Statement
TOUGH GUYS SPORTING GOODS
PRO FORMA INCOME STATEMENT
For the year ending [date]
Net sales $714,000 (A)
Less: Cost of goods sold:
Beginning inventory $195,000
Plus: Net purchases 483,000
Goods available for sale $678,000
Less: Ending inventory ,000
Cost of goods sold ,000 (B)
Gross margin $246,000 (C)
Operating expenses ,000 (D)
Net Profit (Loss) Before Income Tax $ 15,000 (E)

61. Completed Pro Forma Income Statement
TOUGH GUYS SPORTING GOODS
PRO FORMA INCOME STATEMENT
For the Year (date)
1. Gross Sales $714,000
2. Less: Cash Discounts
A. NET SALES 714,000
Cost of Goods Sold:
3. Beginning Inventory $167,000
4. Plus: Net Purchases 483,000
5. Total Available for Sale $528,000
6. Less: Ending Inventory 210,000
B. COST OF GOODS SOLD $468,000
C. GROSS MARGIN $246,000
Less: Variable Expenses
7. Owner’s Salary 40,000
8. Employees’ Wages and Salaries 71,384
9. Supplies and Postage 0
10. Advertising and Promotion 20,706
11. Delivery Expense 5,712
12. Bad Debt Expense 0
13. Travel 0
14. Legal and Accounting Fees 4,284
15. Vehicle Expense 0
16. Miscellaneous Expenses ,124
Continued

62. Completed Pro Forma Income Statement (Continued)
TOUGH GUYS SPORTING GOODS
PRO FORMA INCOME STATEMENT
For the Year (date) - Continued
D. TOTAL VARIABLE EXPENSES $189,210
Less: Fixed Expenses
17. Rent 11,424
18. Repairs and Maintenance 3,570
19. Utilities (Heat, Light, Power) 7,140
20. Telephone 1,000
21. Taxes and Licences 1,000
22. Depreciation 7,140
23. Interest 8,568
24. Insurance 3,570
25. Other Fixed Expenses
E. TOTAL FIXES EXPENSES $ 43,412
F. TOTAL OPERATING EXPENSES $231,000 *
G. NET OPERATING PROFIT (LOSS) $ 15,000
* Numbers may not match operating expense percentages exactly due to rounding.

63. Sample Cash Flow Forecast
Pro Forma Cash Flow Forecast for Tough Guys Sporting Goods
12-Month Cash Flow Projections
Minimum Cash
Balance Required =
Year 1
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total
Cash Flow from Operations
(during month)
1. Cash Sales 12,000 18,000 22,200 28,800 30,000 36,600 39,000 30,000 24,000 24,000 21,000 30, ,600
2. Payments for Credit Sales 0 8,000 12,000 14,800 19,200 20,000 24,400 26,000 20,000 16,000 16,000 14, ,400
3. Investment Income
4. Other Cash Income
A. TOTAL CASH ON HAND $12,000 $26,000 $34,200 $43,600 $49,200 $56,600 $63,400 $56,000 $44,000 $40,000 $37,000 $44,000 $506,000
Less Expenses Paid
(during month)1
5. Inventory or New Material -13, , , , , , , , , , , , ,160
6. Owner’s Salary -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3,000 -3, ,000
7. Employees’ Wages
and Salaries -2,000 -3,000 -3,000 -3,500 -4,300 -4,300 -4,500 -4,500 -3,000 -2,500 -2,500 -3, ,000
8. Supplies and Postage
9. Advertising and Promotion -2,000 -1, , , ,000
10. Delivery Expense ,000
11. Travel
12. Legal and Accounting Fees ,250
13. Vehicle Expense
14. Maintenance Expense -1, , , ,000
15. Rent -1,100 -1,100 -1,100 -1,100 -1,100 -1,100 -1,100 -1,100 -1,100 -1,100 -1,100 -1, ,200
16. Utilities ,400
17. Telephone
18. Taxes and Licences -1, ,000
19. Interest Payments
20. Insurance ,400
21. Other Cash Expenses -2,000 -2,000 -2,000 -2,000 -2,000 -2,000 -2,000 -2,000 -2,000 -2,000 -2,000 -2, ,000
B. TOTAL EXPENDITURES (27,050) (30,940) (35,095) (44,515) (45,240) (53,570) (56,090) (46,330) (38,000) (37,400) (34,200) (45,700) (494,130)
5,000
Continued
1. Expenses and other payments should be entered as negative (-) numbers.

64. Sample Cash Flow Forecast (Continued)
Slide 7.4B Building a Dream
Sample Cash Flow Forecast (Continued)
Pro Forma Cash Flow Forecast for Tough Guys Sporting Goods
12-Month Cash Flow Projections (Continued)
Year 1
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total
Capital
Purchase of Fixed Assets
Sale of Fixed Assets
C. CHANGE IN CASH FROM
PURCHASE OR SALE
OF ASSETS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Financing
Payment of Principal of Loan ,000 -3, ,000
Inflow of Cash from Bank Loan 11,000 4,000 1,000 1, ,000
Issuance of Equity Positions
Repurchase of Outstanding
Equity
D. CHANGE IN CASH FROM
FINANCING $11,000 $4,000 $1,000 $1,000 ($4,000) ($3,000) ($7,000) ($3,000) $0 $0 $0 $0 $0
E. INCREASE (DECREASE)
IN CASH ($4,050) ($940) $105 $85 ($40) $30 $310 $6,670 $6,000 $2,600 $2,800 ($1,700) $11,870
F. CASH AT BEGINNING OF $10,000 $5,950 $5,010 $5,115 $5,200 $5,160 $5,190 $5,500 $12,170 $18,170 $20,770 $23,570 $10,000 2
PERIOD
G. CASH AT END OF PERIOD $5,950 $5,010 $5,115 $5,200 $5,160 $5,190 $5,500 $12,170 $18,170 $20,770 $23,570 $21,870 $21,870
MEET MINIMUM CASH
BALANCE Accept. Accept. Accept. Accept. Accept. Accept. Accept. Accept. Accept. Accept. Accept. Accept. Accept.
Minimum Cash
Balance Required =
5,000
2. This entry should be the same amount as for the beginning of the year. All other rows will be the total for the entire year.
Copyright © 2000, McGraw-Hill Ryerson Limited

65. Sample Pro Forma Balance Sheet
ASSETS
Current Assets:
1. Cash 10,000
2. Accounts Receivable 30,000
3. Inventory 210,000
4. Other Current Assets 30,000 ________
A. Total Current Assets $280,000
Fixed Assets:
5. Land and Buildings 0
less depreciation 0
6. Furniture and Fixtures 90,000
less depreciation 5,000 85,000
7. Equipment 0
8. Trucks and Automobiles 0
9. Other Fixed Assets 34,000
less depreciation 3,000 31,000 _______
B. Total Fixed Assets $ 116,000
C. Total Assets (C = A + B) $396,000
TOUGH GUYS SPORTING GOODS BALANCE SHEET
End of Year 1
Continued

66. TOUGH GUYS SPORTING GOODS BALANCE SHEET End of Year 1 (Continued)
Sample Pro Forma Balance Sheet
(Continued)
TOUGH GUYS SPORTING GOODS BALANCE SHEET
End of Year 1 (Continued)
LIABILITIES
Current Liabilities (due within 12 months)
10. Accounts Payable 123,000
11. Bank Loans/Other Loans 39,000
12. Taxes Owed _______
D. Total Current Liabilities $162,000
Long-Term Liabilities
13. Notes Payable (due after one year) 150,000
14. Other Long-Term Liabilities 68,000 _______
E. Total Long-Term Liabilities $218,000
F. Total Liabilities (F = D + E) $380,000
NET WORTH (CAPITAL)
SHARE CAPITAL
Common Shares 1,000
Preferred Shares 0
RETAINED EARNINGS ,000
G. Total Net Worth (G = C - F) $ 16,000
H. Total Liabilities and Net Worth (H = F + G) $396,000

67. Determining Your Break-Even Point
Profit Area
Sales
700
Total Costs
600
Breakeven Point
500
Expenses (thousands of dollars)
400
300
Loss Area
200
Fixed Expenses
100
100
200
300
400
500
600
700
Sales Revenue (thousands of dollars)

68. Stage 8 Organizing Your Business

69. Organize Your Business
Select the organizational structure for your business
Sole
Proprietorship
Partnership
Corporation
Select and
register a
business name
partnership name
Select a
corporate
name
Draw up a
partnership
agreement
Draw up
articles of
incorporation
File for incorporation
with provincial or
federal government
Comply with
provincial licensing
requirements
municipal licensing
Deal with
mandatory
deductions
Consider
employment
standards

70. Forms of Business Organization Sole Proprietorship
Advantages
Simple and inexpensive to start
Individual control over operations
All profit to the owner
Losses deductible from any other income
Disadvantages
Unlimited liability
More difficult to obtain financing
Limited resources and opportunity

71. Forms of Business Organization Partnership
Advantages
Pooling of financial resources and talents
Simplicity and ease of organization
Increased ability to obtain capital
Potential for growth
Disadvantages
Unlimited liability
Divided authority

72. Forms of Business Organization Limited Partnership
Advantages
Limited liability for limited partners
Disadvantages
Centralized management
Difficulty in changing ownership

73. Forms of Business Organization Corporation
Advantages
Limited liability
Continuity of the business
Easier to raise capital
Potential employee benefits
Tax advantages
Disadvantages
Cost
Legal formalities
Inability to flow losses through to the shareholders
Need for personal guarantees

74. Other Legal Requirements
Licences and Permits
Municipal
Provincial
Land Use and Zoning
Mandatory Deductions
Income Tax
Employment Insurance
Canada Pension Plan
Taxes
Provincial Sales Tax
GST/HST
Employment Standards
Insurance

75. Types of Insurance 1. General Liability Insurance
2. Business Premises Insurance
3. Business Use Vehicle Insurance
4. Business Interruption or Loss-of-Income Insurance
5. Disability or Accident and Sickness Insurance
6. Key Person Insurance
7. Credit Insurance
8. Surety and Fidelity Bonds
9. Partnership Insurance
10. Workers’ Compensation

76. Stage 9 Protecting Your Idea

77. Protecting your intellectual property
Protect Your Idea
Protecting your intellectual property
Apply for any
patents
Register your
trademarks
Copyright
protection
Integrated circuit
topographies

78. Forms of Intellectual Property
Patents
Trademarks
Copyright
Industrial Designs
Integrated Circuit Topographies

79. Patent
Can be granted to the inventor of any new and useful product, chemical composition, machine or manufacturing process
Awarded on a “first to file” basis
Protection provided for 20 years from date of application
The onus is on you to protect your rights under the patent
Holding a patent does not necessarily mean commercial success

80. Trademark
A word, symbol, picture, design, or combination of these that distinguishes your goods and services from those of others
Can be registered to enable you to obtain exclusive use
Non-mandatory that it be registered but does establish obvious proof of ownership
Registration is effective for 15 years and may be renewed for a series of 15-year terms as long as it is still in use
Onus is on the owner to police the use of the trademark
Registration in Canada provides no protection in other countries

81. Copyright
Copyright precludes others from reproducing or copying your original published work--books, leaflets, lectures, maps, musical compositions, computer programs, etc.
Exists for the duration of your life plus 50 years after your death
No legal requirement the work be registered; copyright is automatically acquired upon creation of an original work
Responsibility for policing copyright rests with the holder
A copyright in Canada provides simultaneous protection in most other countries of the world

82. Stage 10 Arranging Financing

83. How will you finance your business?
Sources of Financing
How will you finance your business?
Personal savings
Credit from
suppliers
Loans and mortgages
from banks, credit
unions and others
Government
assistance programs
Love
money
Equity capital
from private
sources
Leasing
Friends and
neighbours
Local professionals
and angel
investors
Prepare loan or grant
request package
Employees
Venture
capitalists

84. Major Sources of Funds Personal Funds “Love Money”
Banks and Similar Institutions
Operating Loans
Term Loans
Federal Government
Canada Small Business Financing Program
Industrial Research Assistance Program (IRAP)
Program for Export Market Development (PEMD)
Community Futures Program (CFP)
Women’s Enterprise Initiative Loan Program
Aboriginal Business Canada – Youth Entrepreneurship
Business Development Bank of Canada (BDC)
Continued

85. Major Sources of Funds (Continued) Provincial Government Programs
Venture Capital and “Angel” Investors
Other Sources of Financing
Personal Credit Cards
Canadian Youth Business Foundation
Suppliers’ Inventory Buying Plans
Leasing vs. Buying
Negotiated Leasehold Improvements
Advance Payment from Customers

86. Getting the Best From Your Banker
Know what your banker is looking for
Don’t “tell” your banker, “show” him
Interview your banker
Passion makes perfect
Ask for more money than you need
Get your banker involved in your business
Increase your credit when you don’t need it
Make professional introductions
If all else fails, keep looking

87. Stage 11 Preparing Your Business Plan

88. Preparing Your Business Plan
Prepare your business plan
Develop a vision statement
Formulate your mission statement
Develop clear and specific objectives
Develop a realistic business plan
A typical business plan
Letter of transmittal
Title page
Table of contents
Executive summary and fact sheet
Body of the plan
Description of the company and the industry
Overview of your product/service offering
Market analysis
Your marketing plan
Your development plan
Your production/operations plan
Your management team
Your implementation schedule
Your financial plan
Appendices

89. Steps in the Business Planning Process
1. Develop a Vision Statement
2. Formulate a Mission Statement
3. Define the Fundamental Values by Which You Will Run Your Business
4. Set Clear and Specific Objectives
5. Making It Happen! Develop a Realistic Business Plan

90. Types of Business Plans
The Summary Business Plan
10 pages or so
Can be used by early-stage business to apply for a bank loan or may be all that is needed for a lifestyle business
The Full Business Plan
Will run from 10 to 40 pages plus appendices
Covers all key areas in enough depth to permit a full exploration of the principal issues
Used when trying to raise a substantial amount of external financing
The Operational Business Plan
Usually exceeds 40 pages in length
Used when a business is growing very rapidly or as part of an annual planning process

91. Advantages of Preparing a Business Plan
Helps you face reality and the facts
Forces you to think ahead and consider the future
Assists you in summarizing your skills
Helps you identify and define your strategic program
Establishes the amount of financing you require
Outlines the financial future or your business through projected statements
Provides you with an effective sales tool
Inspires confidence in yourself and projects that confidence to others

92. What Should a Business Plan Contain?
1. Letter of Transmittal
2. Title Page
3. Table of Contents
4. Executive Summary and Fact Sheet
5. Body of the Plan
The Company and Industry
The Product/Service Offering
Market Analysis
The Marketing Plan
The Development Plan
The Production/Operations Plan
The Management Team
Implementation Schedule and Risks Associated with the Venture
The Financial Plan
6. Appendices

93. Business Plan Contents
A Typical Business Plan 1.
Letter of Transmittal 2.
Title Page 3.
Table of Contents 4.
Executive Summary
and Fact Sheet
Introduce your business plan to the reader
Outline the major features that may be of interest
Provide identifying information about you and your proposed business. Name, address and contact numbers for the business as well as key company contacts
A list of the major headings and sub-headings contained in your plan.
A 1-2 page summary of the most important points in your plan
May be the most important part of your business plan
Your Fact Sheet summarizes the basic information that relates to the venture
Business Plan Contents
Continued

94. A Typical Business Plan (Continued)5.
Body of the Plan
History and current situation of your company
Goals and objectives for the business
Principal characteristics and trends in the industry
Company and the Industry
Detailed description of your product or service
Outline stage of development and proprietary position
Product-Service Offering
Describe the profile of your principal target customers
Indicate current market size, trends, and seasonal patterns
Assess the nature of your competition
Estimate your expected sales and market share
Market Analysis
Continued

95. Production/Operations
A Typical Business Plan (Continued) 5.
Body of the Plan
(Continued)
Detail the marketing strategy you plan to use
Describe your marketing plan insofar as your sales strategy, advertising and promotion plans, pricing policy, and channels of distribution
Your Marketing Plan
Outline of the development status of your product and what is still required to get it to a market-ready state
Are there regulatory, testing or other requirements that still have to be met?
Your Development Plan
Outline the operating side of your business
Describe your location, kind of facilities, space requirements, capital equipment needs, and labour requirements
Your
Production/Operations
Plan
Continued

96. A Typical Business Plan
(Continued) 5.
Body of the Plan
(Continued)
Present an overall schedule indicating what needs to be done to launch your business and the timing required to bring it about
Discuss the major problems and risks that you will have to deal with as well
Your Implementation
Schedule
Identify your key management people, their responsibilities and their qualifications
Indicate the principal shareholders of the business, your principal advisors and the members of your Board of Directors
Your Management
Team
Continued

97. A Typical Business Plan
(Continued) 5.
Body of the Plan
(Continued)
Indicate the type and amount of financing you are looking for and how the funds will be used
Outline your proposed terms of investment, the potential return to the investor, and what benefit is being provided
Provide an overview of the current financial structure of your business
Prepare realistic financial projections that reflect the effect of financing. Include:
Cash flow forecasts
Pro forma profit and loss statements
Pro forma balance sheet
Breakeven analysis
Your Financial Plan
Continued

98. A Typical Business Plan
(Continued)
Supporting material for your plan including:
Detailed resumes of the management team
Product literature and photographs
Names of possible customers and suppliers
Consulting reports and market surveys
Copies of legal documents
Publicity material
Letters of reference 6.
Appendices

99. Tips for Developing Your Business Plan
Be prepared to spend weeks – or months - completing your plan
Work on individual sections at a time
Be brief but complete
Focus on the intended reader
Use layman’s terms
Treat your business plan as a “living” document
Be realistic
Discuss the business risks of your firm
Don’t make vague or unsubstantiated statements