CHAPTER 2
Plan the Small Business
OBJECTIVES
2-1 Explain the importance of planning to the small
business.
2-2 Define the term business plan.
2-3 Describe the components of a business plan and
explain the importance of each.
2-4 Identify the sources for assistance in planning a small
business.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 1
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.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
© South-Western Thomson
Chapter 2
Slide 2
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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
© South-Western Thomson
Chapter 2
Slide 3
(continued)
Outline of Typical Business Plan
5. Form of Ownership
6. Financial Plan
7. Organization, Management, and Staffing
Plan
8. Special Considerations
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 4
Marketing Plan
The marketing plan defines and
quantifies consumers, demand,
competition, geographic market, and
pricing policy for a specific small
business.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 5
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.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
© South-Western Thomson
Chapter 2
Slide 6
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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 7
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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 8
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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 9
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.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
© South-Western Thomson
Chapter 2
Slide 10
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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 11
Financial Plan
A basic financial plan contains the
entrepreneur’s estimates for the following
categories:
 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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 12
Organization, Management,
and Staffing Plan
How many employees the business will
require?
What will their responsibilities be?
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 13
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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 14
Sources for Planning Assistance
Community colleges
Chambers of commerce
The Small Business Administration
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 15
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.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 16
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
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
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Chapter 2
Slide 17
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.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
© South-Western Thomson
Chapter 2
Slide 18
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.
SUCCESSFUL BUSINESS PLANNING FOR ENTREPRENEURS
© South-Western Thomson
Chapter 2
Slide 19