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Page 1: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Chapter 6Chapter 6

Planning, Planning, Organizing, and Organizing, and

Managing a Managing a Small BusinessSmall Business

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Page 2: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Planning, Organizing, and Managing a Small Business

Importance of PlanningImportance of Planning

Strategic, Operational, & Strategic, Operational, & Financial PlanningFinancial Planning

Need & Purpose of a Need & Purpose of a Business PlanBusiness Plan

6 - 2

Page 3: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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McGraw-Hill/Irwin

PlanningPlanningThe Process Of The Process Of

Setting Objectives Setting Objectives And Determining And Determining

Actions To Actions To Achieve Those Achieve Those

Objectives.Objectives.

Page 4: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Criteria For PlanningCriteria For PlanningBe PreparedBe Prepared

Be PatientBe Patient

Know When To Get HelpKnow When To Get Help

Form Support SystemForm Support System

Know Power Of Vertical Know Power Of Vertical

IntegrationIntegration

Never Rest On LaurelsNever Rest On Laurels

Keith Brofsky/Getty Images

Page 5: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Planning & OtherPlanning & OtherManagerial FunctionsManagerial Functions

PlanningPlanning

OrganizingOrganizing

StaffingStaffing

LeadingLeading

ControllingControlling

Page 6: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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PlanningPlanningProvides Internally:Provides Internally:

1)1)Course Of ActionCourse Of Action

2)2)Bases For ChangeBases For Change

3)3)Means To DelegateMeans To DelegateJavier Pierini/Getty Images

Page 7: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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PlanningPlanningProvides Externally:Provides Externally:

1)1) Interest From Interest From Investors/LendersInvestors/Lenders

2)2) Guide Owner/Managers Guide Owner/Managers In Operations In Operations

3)3) Give Direction/Motivation Give Direction/Motivation To Employees To Employees

4)4) Attracts Customers & Attracts Customers & Prospective EmployeesProspective Employees

Ryan McVay/Getty Images

Page 8: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Reasons ToReasons ToNeglect PlanningNeglect PlanningDay-To-Day Activities Get In WayDay-To-Day Activities Get In WayFear Of What It Might RevealFear Of What It Might RevealLack Of Planning Knowledge Lack Of Planning Knowledge Feeling Future Cannot Feeling Future Cannot

Be Planned ForBe Planned ForRequires:Requires:Original ThinkingOriginal ThinkingTimeTime

To DifficultTo DifficultJason Reed/Getty Images

Page 9: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Types Of PlanningTypes Of PlanningStrategic- Before Starting Strategic- Before Starting

BusinessBusinessBusiness Plan to Attract:Business Plan to Attract:

o InvestorsInvestors

o FinanciersFinanciers

o Prospective EmployeesProspective Employees

Operational- Continuous Operational- Continuous Before & After Business Before & After Business StartsStarts

Jim Arbogast/Getty Images

Page 10: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 10

Strategic PlanningStrategic Planning

Comprehensive Comprehensive Long-TermLong-Term Direction Direction

To Help Business To Help Business Accomplish Its Accomplish Its

Mission.Mission.

Page 11: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 11

Parts Of Strategic PlanParts Of Strategic Plan

Mission: Long-Term Mission: Long-Term DirectionDirection

Objectives: Short-Term Objectives: Short-Term EndsEnds

Strategies: Means To Strategies: Means To Achieve Objectives ForAchieve Objectives For

Total FirmTotal Firm

Functional AreaFunctional Area

Page 12: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 12

Areas ForAreas ForStrategic PlanningStrategic Planning

Business SelectionBusiness SelectionDetermining MissionDetermining MissionDeciding On Start, Buy, Deciding On Start, Buy,

FranchiseFranchiseChoosing Product/ServiceChoosing Product/ServiceIdentifying Target MarketIdentifying Target MarketPicking Legal StructurePicking Legal StructureShaping Financial NeedsShaping Financial NeedsSelecting LocationSelecting Location

Ryan McVay/Getty Images

Page 13: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 13

SWOT AnalysisSWOT AnalysisStrengthsStrengths WeaknessesWeaknesses

1)1)2)2)3)3)4)4)

1)1)2)2)3)3)4)4)

OpportunitiesOpportunities ThreatsThreats

1)1)

2)2)

3)3)

4)4)

1)1)

2)2)

3)3)

4)4)

Page 14: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 14

Strategic UmbrellaStrategic Umbrella

Page 15: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 15

Setting ObjectivesSetting Objectives

Page 16: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 16

External EnvironmentExternal Environment

ClientsClients

EconomyEconomy

Legal & Legal & Political Political FactorsFactors Changing Changing

DemographicsDemographics

Foreign Foreign CompetitionCompetition

Page 17: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 17

Internal ResourcesInternal Resources(Competitive Edge)(Competitive Edge)

HumanHuman

PhysicalPhysical

FinancialFinancialRoyalty-Free/CORBIS

Page 18: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 18

Mission/StrategyMission/StrategyJohn Smith, General AgentJohn Smith, General Agent

Page 19: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 19

Operational PlanningOperational Planning

Sets Policies, Sets Policies, Procedures, And Procedures, And

Standards For Standards For Achieving Achieving

Objectives.Objectives.

Page 20: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 20

Parts Of Operational PlanParts Of Operational Plan

Polices: Guides For Polices: Guides For Consistent ActionConsistent Action

Methods & Procedures: Methods & Procedures: Manner Of Operating Manner Of Operating

Budgets & Standards: Budgets & Standards: Measures Of Control For Measures Of Control For ActivitiesActivities

Jules Frazier/Getty Images

Page 21: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 21

Areas OfAreas OfOperational PlanningOperational Planning

• Choosing Choosing LocationLocation

• Planning Planning FacilitiesFacilities

• Developing Developing Sources Of Sources Of SupplySupply

• Planning HR Planning HR NeedsNeeds

• Setting Up Legal Setting Up Legal StructureStructure

• Determining Determining Approach To Approach To MarketMarket

• Establishing Establishing Record SystemRecord System

• Setting Up Setting Up ScheduleSchedule

Page 22: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 22

Financial PlanningFinancial Planning

$Estimating Estimating Income/ExpenseIncome/Expense

$Estimating Initial Estimating Initial InvestmentInvestment

$Locating Sources Locating Sources Of Funds Of Funds

Royalty-Free/CORBIS

Page 23: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 23

Income And ExpensesIncome And Expenses

Net ProfitNet Profit

ExpensesExpensesVariableVariable

FixedFixed

Page 24: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 24

Estimating Estimating AnnualAnnual Income/Expense/Net ProfitIncome/Expense/Net Profit

Page 25: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 25

Sources Of FundsSources Of FundsA

FEDERAL RESERVE NOTE

THE UNITED STATES OF AMERICATHE UNITED STATES OF AMERICA

L70744629F

12

1212

12

L70744629F

ONE DOLLARONE DOLLAR

WASHINGTON, D.C.

TH I S N O TE IS L E G A L T E N D E R

F O R A L L D E B T S , P U B L I C A N D P R IV A T E

S E R I E S

1 9 8 5

H 293 Your Own FundsYour Own Funds

A

FEDERAL RESERVE NOTE

THE UNITED STATES OF AMERICATHE UNITED STATES OF AMERICA

L70744629F

12

1212

12

L70744629F

ONE DOLLARONE DOLLAR

WASHINGTON, D.C.

TH I S N O TE IS L E G A L T E N D E R

F O R A L L D E B T S , P U B L I C A N D P R IV A T E

S E R I E S

1 9 8 5

H 293 Funds From Funds From Others Others

A

FEDERAL RESERVE NOTE

THE UNITED STATES OF AMERICATHE UNITED STATES OF AMERICA

L70744629F

12

1212

12

L70744629F

ONE DOLLARONE DOLLAR

WA SHINGTON, D.C.

TH I S N O TE IS L E G A L T E N D E R

F O R A L L D E B T S , P U B L I C A N D P R IV A T E

S E R I E S

1 9 8 5

H 293 Equity InvestorsEquity InvestorsA

FEDERAL RESERVE NOTE

THE UNITED STATES OF AMERICATHE UNITED STATES OF AMERICA

L70744629F

12

1212

12

L70744629F

ONE DOLLARONE DOLLAR

WA SHINGTON, D.C.

TH I S N O TE IS L E G A L T E N D E R

F O R A L L D E B T S , P U B L I C A N D P R IV A T E

S E R I E S

1 9 8 5

H 293 LendersLenders

Page 26: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Purposes OfPurposes OfBusiness PlanBusiness Plan

Keeps On TargetKeeps On Target

Keeps Creativity Keeps Creativity FocusedFocused

Concentrates Power Concentrates Power On Goal On Goal

Patagonik Works/Getty Images

Page 27: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Plan Should IncludePlan Should Include

A.A.Proposed ProductProposed ProductB.B.Expected MarketExpected MarketC.C.Industry Strengths & Industry Strengths &

WeaknessesWeaknessesD.D.Marketing PoliciesMarketing PoliciesE.E.Operations/Production Operations/Production

MethodsMethodsF.F. Financial AspectsFinancial Aspects

Studios/Getty C Squared Images

Page 28: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Preparing Business PlanPreparing Business Plan

Business Current StatusBusiness Current Status

Where Would Business Where Would Business Like To Be- Objective Like To Be- Objective

What Will It Take To Get What Will It Take To Get Business To Objective- Business To Objective- StrategyStrategy

Owner Should PrepareOwner Should Prepare

Create Action StepsCreate Action Steps

Monica Lau/Getty Images

Page 29: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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ComponentsComponentsOf Business PlanOf Business Plan

I.I. Cover SheetCover SheetII.II. Executive Executive

SummarySummaryIII.III. Table Of Table Of

ContentsContentsIV.IV. HistoryHistoryV.V. Description Description

Of BusinessOf BusinessVI.VI. Definition Of Definition Of

MarketMarket

VII.VII.Description Of Description Of Products & Products & ServicesServices

VIII.VIII.Management Management StructureStructure

IX.IX. Objectives & Objectives & GoalsGoals

X.X. Financial DataFinancial Data

XI.XI. AppendixesAppendixes

Page 30: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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6 - 30

Outline OfOutline OfExecutive SummaryExecutive Summary

Page 31: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Writing The PlanWriting The PlanBe HonestBe HonestUse The Third PersonUse The Third PersonUse Transitional WordsUse Transitional WordsAvoid RedundanciesAvoid RedundanciesUse Short, Simple WordsUse Short, Simple WordsUse VisualsUse Visuals

Page 32: ****************** Chapter 6 Planning, Organizing, and Managing a Small Business McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc

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Preparation For PresentationPreparation For Presentation

Adequacy Of Research & Adequacy Of Research & DevelopmentDevelopment

Validity Of ResearchValidity Of Research

Understanding Of BusinessUnderstanding Of Business

Financial ProjectionsFinancial Projections

Priority Of ObjectivesPriority Of Objectives

Ability To “Make It Happen”Ability To “Make It Happen”


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