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EntrepreneurshipUnit 3.2:

Creating the Business Plan

Creating the Business Plan

• Students will be able to:– Construct a mission statement for a company– Explain rationale for starting a business by utilizing

market research– Describe a business, it’s products/services, and

customers– Compare types of ownership for a business, and

select best option– Determine organizational structure and

management skills needed to operate a business– Assess locations for a business

Creating the Business Plan(Organizing the structure of the business)

The Business Plan format used in this unit closely follows the “DECA Entrepreneurship Participating” event. It is a 10-page business prospectus, and can be easily completed by students. This format contains all the common components of a business plan, however some parts are combined to shorten the document.

It’s advised for teachers/students to get a copy of this format on the DECA or USOE website. (http://www.deca.org/pdf/ENPI-ENPFguide.pdf)

Students, however, are not required to use this format. Other formats are available from FBLA, DECA, the USOE website, or on the internet.

DECA Business Plan Format

• Section I: Executive Summary• Section II: Analysis of Business Situation

– Rationale and marketing research, Description of Business, Self-analysis, Analysis of the business opportunity, customer and location, and Proposed organization

• Section III: Marketing and Promotional Plan

• Section IV: Financing Plan– Income Statements, Amortization, and Return on Investment

Section I:Executive Summary

• Summarizes the main points covered in the business plan– Even though this is the first page of the

document, it is usually written last…thus the word “summary”

– May contain the Mission Statement (Goals) of company

Section I:Constructing a Mission Statement

• A mission statement expresses “specific” goals for the company

• Example: “To maintain 30 lawns on a weekly basis by

the end of the first year”

Section II:Explain Rationale for Starting Business

by Utilizing Market Research

• The Market Analysis section:– Presents your market research– Features a customer demographic profile– Identifies and analyzes competitors and

explains your competitive advantage– Addresses industry trends and growth

Section II:Description of Company, Products/Services,

and Customers

• Includes history and background of idea

• Describes the product or service

• Discusses features and benefits of the products/services offered and how it benefits the customer

• Discusses target market, market segments, or market niche served

• Assess locations

Assessing Locations for Business

• Location, Location, Location– The location of a business—especially retail—is often a critical

factor in its success

– WHERE you will locate and WHY…Regardless of type of business, this is an important aspect of all business plans and must be explained in detail, including…

• Zoning & Parking • Visibility of site• Square footage • Costs (Lease, taxes, renovations)• Traffic counts • Nearby businesses, including• Accessibility target market

Section II:Select a Form of Ownership

• Sole Proprietorship• Partnership• Corporation

– Subchapter S Corporation– C-Corporation

• Other legal form of Ownership– Limited Liability Company

*See Unit 3.2A “Legal Forms of Ownership” slide presentation

Sole Proprietorship

• Owned and operated by one person

• Easy to create

• Receives all profits, incurs any losses, and is liable for the debts of business

• Most entrepreneurs often switch to another form that provides more personal financial protection as the business grows

Partnership

• A business with two or more owners

• Partners do not have to share a business equally

• How the partnership interests are divided are spelled out in the Partnership Agreement.

Corporation

• Registered by the state and operates apart from its owners

• A corporation lives-on after the owners die or have sold interest

• Ownership is represented by shares of stock, public or private

2 Types of Corporations

• C-Corporation

• Subchapter S Corporation

C-Corporation

• The most common corporate form for large businesses (i.e., Federal Express, Microsoft)

• Can create status that may assist in getting loans

• Shareholders are owners of the corporation• Required to have an elected Board of

Directors to make decisions for the company • Structured to accommodate employee

benefits; i.e., pensions, retirement plans, and profit sharing

Subchapter S Corporation

• Designed for owners of smaller companies who want the liability protection of a corporation, but want to avoid double taxation– Pass-through Taxation: Profits are taxed once at

shareholder’s personal tax rate– Shareholders liable to amount invested

• In smaller private corporations, the founders generally hold all–or a majority–of the stock.

Other Forms of Ownership

• Limited Liability Company• Nonprofit Corporations

IMPORTANT: Before you start your company… Check with your state, accountants, or attorneys to determine which form of legal ownership most benefits your needs, company size, financial status, and issues of liability.

Source: Entrepreneurship and Small Business Management, Glencoe, 2006, pg. 143.

Source:

Allen, Kathleen R., & Meyer, Earl (2006). “Entrepreneurship and Small Business Management.” New York: Glencoe, p. 143

Section II:Organizational Structure and

Management Skills

• Organizational Structure– A plan which shows how the jobs in your

company relate to one another• Smaller companies may have everyone report

to the owner. The larger the company, the more layers of management needed.

Organizational Chart

• A graphic representation of the organizational structure.

Management Skills

• The management and staffing section should provide skill sets needed–a job description–for each position

• Show you and your staff have the experience, maturity, and common sense to manage your business well

Good Management Skills

• Human Relations• Communications• Networking• Math• Problem Solving & Decision-making• Technical Skills• Time Management• Conceptual Skills

Section III:The Marketing Mix

• The Marketing Mix (the 4 P’s)– Product– Price– Place– Promotion

*See Unit 3.2B “The Marketing Mix” slide presentation

Products/ServicesAnswers: What are you selling?

• Product brands– Ford, Dell, Kellogs

• Product Mix– Used cars: Ford, GMC, Chrysler, Toyota,

Kia– Ford only: Trucks, SUVs, Sedans, Hybrids

• Inventory methods– Keeping track of available stock of goods

Pricing StrategiesAnswers: How much is it?

• You’re in business to make profit. Know which pricing strategies to utilize.

– Mark-up– Cost-based– Competition-based

– Demand-based– Psychological Pricing– Discounting– Credit

Channels of DistributionAnswers: Where can I get it?

• The path a product takes from producer to final user (consumer)– Direct– Indirect (intermediaries)

• Use if results in lower cost than you would charge if you were handling all the phases of distribution yourself or if middle men have a “ready-made” network for wider distribution.

– Includes transportation, storage & product handling

Promotional MixAnswers: Why should I buy it?

• Advertising:

– Paid non-personal presentation of ideas directed toward a mass audience.

• Publicity:

– Free placement of newsworthy items about company, etc. in the media.

• Personal Selling:

– Giving an oral presentation to one or more potential buyers.

• Promotions:

– Use of incentives or interest-building activities to create demand. Be creative!!

Planning Organizational Structure for Business

• Let’s Review:– Construct a mission statement for a company– Explain rationale for starting a business by utilizing

market research– Describe a business, it’s products/services, and

customers– Compare types of ownership for a business, and

select best option– Determine organizational structure and

management skills needed to operate a business– Assess locations for a business

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