1 SMALL BUSINESS MANAGEMENT Chapter 4 The Business Plan

2 Getting Started Establishing the Business u Advantages of Organizing a Business from Scratch u Disadvantages of Organizing a Business from Scratch

3 The Small Business Plan u 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.

4 The Small Business Plan u 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.

5 Components of the Plan u 1. Prepare a table of contents. – Overview of the plan – Quick access to the various parts of the plan

6 Components of the Plan u 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

7 Components of the Plan u 3. Describe the management team. – résumé and background of those making the decisions for the organization

8 Components of the Plan u 4. Establish business objectives. – Business Size – Production Levels – Performance Levels

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

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

11 Components of the Plan u 5. Plan the marketing program (cont.) F the product or service F the distribution system F promotion F pricing

12 Components of the Plan u 6. Describe the selection of the location. – the trading area F the Economic Base – attitude of the trading area towards new businesses F Competition F Costs

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

14 Components of the Plan u 7. Determine the physical facilities. – insurance types F loss or damage to the property F business interruption F liability and disability F life insurance – insurance decisions F what kind to purchase, how much to purchase, from whom to purchase the insurance

15 Components of the Plan u 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

16 Components of the Plan u 9. Plan the personnel. – Administrative structure – Employee recruitment and training – Personnel Policies

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

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

19 Components of the Plan u 10. Investigate the legal requirements. (cont.) F 5. Joint Ventures – Licenses and Taxes F Federal Government – income tax, goods and services taxes, excise tax F Provincial Government – income tax, licenses, sales tax F Municipal Governments – licenses, property taxes, business taxes – Intellectual Property Protection – patent steps search and file search and file

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

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

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

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