SMALL BUSINESS
MANAGEMENT
Chapter 4
The Business Plan
Aggasiz
Flip Art
Caribbean Beer
Passion for fashion
Sex, Suds, Style
Montreal Sandwich
Aggasiz Brewing Company
1.
Briefly discuss the problems of starting from
scratch, as illustrated by the Aggasiz Brewing
Company
2.
How could Gary DePape have avoided these
problems?
3.
What would have been the advantages and
disadvantages of Gary purchasing a
microbrewery instead of starting from scratch?
4.
What risks would Gary have faced if he had
dropped the price of his product?
Aggasiz
Getting Started
Establishing the Business

Advantages of Organizing a
Business from Scratch

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Define nature of business
Exact physical facilities
Fresh inventory
Employee selection
Develop information system
Getting Started
Establishing the Business

Disadvantages of Organizing a
Business from Scratch



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Lack of historical info
Time assembling physical facilities
Start-up bugs & problems
Establishing outside relationships
Risk of demand
Caribbean Beer vs Agassiz Beer

Compare and contrast the two small
business ventures in similar industry

Non-Quantitative Assessment
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
Personality Characteristics
Goals
Content of Work
Lifestyle
Capabilities
Experience
Quantitative Assessment of Business
Caribbean Beer
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
Passion for fashion
Firm’s
Management
Insiders
Employees
New Venture
Business Plan
Customers
Outsiders
Suppliers
Investors
Banker & Lenders
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.
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.
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
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

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
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

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
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.
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.
1. Prepare a table of contents.


Overview of the plan
Quick access to the various parts of the
plan
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

3. Describe the management team.

résumé and background of those
making the decisions for the
organization
4. Establish business objectives.

Business Size

Production Levels

Performance Levels
Flip Art
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.
5. Plan the marketing approach (cont.)

Be aware of any uncontrollable
factors that might affect the
marketing of the product or service
such as



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
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.
5. Plan the marketing program (cont.)
Sex, Suds, Style
6. Describe the selection of the
location.

the trading area


the Economic Base
attitude of the trading area towards
new businesses


Competition
Costs
6. Describe the selection of the
location.

The Site


The Buy-or-Lease Decision


accessibility, site costs, restrictions, site
history, proximity to other businesses,
physical characteristics
cost of the lease, length of the lease,
restrictions, repairs and lease hold
improvements, insurance coverage
Running the Business from One’s
Home
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
Montreal Sandwich

Comment on the location selection of Montreal
Sandwich
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
Suppliers
Employees
Cost
Competition
Physical characteristics
Comment on the Physical facilites

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Organization of facilites
Equipment, start-up supplies, costs, permits,
insurance
Production process
Interior layout
7. Determine the physical facilities.

insurance types

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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
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
9. Plan the personnel.

Administrative structure

Employee recruitment and training

Personnel Policies
10. Investigate the legal requirements.

Legal Structure (four styles)

1.Sole Proprietorship

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2. Partnership

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advantages and disadvantages
Limited, General
advantages and disadvantages
3. Cooperative

one member-one vote vs each share a vote
Advantages & Disadvantages of a Sole
Proprietorship

Advantages




1. simple &
inexpensive
Disadvantages


2. offers individual
control over
operations, profits, etc

3. fewer forms and
reports to fill out

return
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
Advantages & Disadvantages of a
Partnership

Advantages




1. simple &
inexpensive
Disadvantages


2. pooling of
financial & skill
resources
3. tax advantages –
income splitting

return
1. unlimited liability
2. death of partner
terminates
partnership unless
specified otherwise
3. greater possibilty
for disagreements
 Buy sell
agreements
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
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


return
3. losses cannot be
deducted from personal
income
4. Lender may require
personal guarantee
negating advantage of
limited liability
10. Investigate the legal
requirements (cont.)
 5.
Joint Ventures
10. Investigate the legal
requirements. (cont.)

Licenses and Taxes
Federal Government
 Provincial Government
 Municipal Governments


Intellectual Property Protection

patent steps
Appendices


Appendix A - Checklist for a Small
Business Plan
Appendix B - Sample Business Plans
(2)
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The Sock Hop, Quality Cuts
Appendix C - Incorporation of
Companies and Associations
Appendix D - Jurisdiction of
Licenses and Taxes