Entrepreneurship 110 The Business Plan

Sections in a Business Plan

Cover Page

Table of Contents

Business Overview/Executive Summary

Management

Market Research

Marketing (the 4 Ps)

Suppliers

Employees

Operations

Financial

Appendix (Your resume, a flyer, survey)

Marketing – The 4 Ps

The 4 Ps are:

◦ Price

◦ Promotion

◦ Place

◦ Product

An Entrepreneur must

have an intense

understanding of each as it

applies to his or her

business.

An entrepreneur must also

have an intense

understanding of how each

of these pieces work

together.

Activity – The Dragon’s Den

As you watch the following clips, take notes as to

how well each entrepreneur knows or

understands the 4P’s of their venture idea

Dragon’s Den

Atomic tea

Hillberg and Berk

Gourmet Dog Food

http://www.youtube.com/watch?v=63usX

n-4oQo&feature=related

Price is the process of determining what to charge for your product or service.

It should reflect what the customers are willing and able to pay.

It is assumed a profit is to be made.

It includes determining the:

◦ cost of production (time, labor, ingredients, packaging, advertising, etc),

◦ the state of supply and demand, and

◦ the amount of profit to be made.

Price

Assignment:

Complete the assignment using the

textbook.

This assignment will not be passed in, but

marked together.

Area Wal-Mart cut costs by…

Wages

Health Benefits

Overtime

Rubbermaid and similar suppliers

Outsourcing

Charity Donations

Security

It has been determined that Wal-Mart is able to make so much PROFIT because they

are able to cut costs so much.

Remember: Profit = Sales – Costs

Complete the chart below, explaining how Wal-Mart cut

costs in each areas:

Wal-Mart Case Study Assignment

Price and the Law

The Competition Act protects customers in Canada from:

1. Price Fixing -

Businesses are not allowed to decide as a group what to charge

consumers for a specific product.

It is illegal because if prices get driven as high as possible so that every

producer is guaranteed to make a profit consumers might be gouged.

It also goes against the competiveness and free will of our economy.

2. Retail Price Management –

No company (supplier) can force another, independent company

(retailer) to charge a particular price for a product it has provided.

A company can suggest a price (MSRP)

This is an attempt by producers of products to protect their own

reputation as well as the dignity of the consumer.

Prior to laws that enacted MSRPs, retailers were free to charge wildly

different prices for the same product —- not just among different

outlets, but to different customers at the same outlet.

3. Deceptive Pricing Strategies:

A. Double Ticketing - prohibits the supply of a product at a price that exceeds the lowest of two or more prices. In other words, where two or more prices are clearly shown on a product, it must be supplied at the

lower price .

B. Bait and Switch - occurs when a product is advertised at allow price

to attract (bait) customers to the store, then staff try to push the

customer into to buying a more expensive item. Occurs when a product

is advertised at a bargain price, but is not available for sale in reasonable

quantities

C. False Sale Price - refers to the practice by some stores of advertising

a regular price as a sale price.

Promotion

Letting people know about products and services in a positive way so they will want to make a purchase.

Promotion is used to tell potential customers about:

1. How to use a product or service and what it is used for

2. The quality of a product or service

3. Where the product or service is available

4. New products that are on the market

5. Etc.

YouTube - Commercial - The Wait

Which of the above 5 is this commercial being used for?

There are THREE MAJOR REASONS to use promotion. They

are to INFORM customers about products, to REMIND

customers of the product, and to PERSUADE customers to buy.

For example:

1. To Inform: A TV commercial airs 10 times a day before product

is released.

2. To Remind: A pizza restaurant gives away free refrigerator

magnets with delivery information.

3. To Persuade: A company uses labels to emphasize that

products are “new and improved,” “concentrated,” “extra

strength,” etc.

Which is the following an example of?

YouTube - TV Commercial

There are Six TYPES OF PROMOTION used to help sellers get their message to customers.

1. ADVERTISING – paying to use the media to promote product (newspapers, TV, radio, magazines, billboards, etc.).

2. PUBLICITY - Free promotion (press releases or news reports describing how the company sponsored events or donated to a cause.)

3. SALES PROMOTION - Special things done to get customers interested in trying products or to come into a store (coupons, contests, rebates, free samples, displays, etc.)

4. PERSONAL SELLING - A salesperson assists each customer (a shoe salesperson helps a customer select the proper shoe size. A college student goes door to door selling children’s books.)

5. ENDORSEMENT – When a famous person is paid to promote a product or service (Tiger Woods and NIKE; Tiger Woods and ONSTAR).

YouTube - Gatorade Moon Shot Commercial

Other Tiger Endorsements

J.T. for Pepsi

J.T. for Sony

6. Product Placement

Using brand-name products as props: the practice of placing brand-name items as props in, e.g. movies, television shows, or music videos as a form of promotion. The assumption is that people will subconsciously want the product and make purchases.

Does it work? Does this make you hungry?

YouTube - Oreo dunking

Worksheet - Jane’s Market

Complete and we will go over together

Place

Place

It is the mechanism through which

goods and/or services are moved from

the manufacturer/ service provider to

the user or consumer.

You must decide what “channel” you will

use to get your product/service to your

customers.

Channel #1 Wholesalers

Break down 'bulk' into smaller packages

for resale by a retailer.

Provide storage facilities

Take on the some of the marketing

responsibilities

Channel #2 Agents

Mainly used in international markets

Agent will typically secure an order for a

producer and will take a commission

Channel #3 Retailers

Retailers will have a much stronger personal relationship with the consumer.

The retailer will hold several other brands and products. A consumer will expect to be exposed to many products

The retailer will give the final selling price to the product.

Retailers often have a strong 'brand' themselves

Channel #4 Internet

The main benefit of the Internet is that

products reach a wider audience

Start-up costs are low.

Use e-commerce technology (for

payment, shopping software, etc)

Assignment - Newtown

Please read the handout and complete.

Product

Life Cycle of a Product Introduction

◦ Need for some level of immediate profit

◦ Product is promoted

◦ Limited number of products available

◦ Most products that fail, do so during this stage

Growth

◦ Competitors arrive with very similar products

◦ Products make more profit

Maturity

◦ The products that were the most successful during the earlier stages spend the longest time here.

◦ Sales “stabilize”

◦ Price wars might occur

◦ Competition is fierce

Decline

◦ There is likely a “downturn” in the market

◦ Often, more innovative products are introduced, OR consumer tastes have changed

◦ There may be intense price cuts

The Life Cycle of a Business

All ventures go through a life cycle, or a

series of stages that begin when the

business idea is initially conceived.

An entrepreneur must recognize these

stages in order to anticipate and address

the problems that can occur within each

one.

1. Pre-Startup Stage

Preparations for launching the business are

made.

Generating ideas, doing research and

identifying/solving problems.

At this stage you need to review

resources, consider how best to allocate

them, and write a business plan.

2. Development Stage

Research is complete.

Finalize your business plan, complete your market testing, review the results, and made arrangements to get the funds you need.

Business opens/starts

Goal is to reach the break-even-point. Breaking even is not as easy as it may sound; you must manage your resources well in order to do so.

Break Even Point:

Total monthly revenue = Total monthly costs

◦ Revenue = money that comes into the business from sales

◦ Costs = all the money paid out by the business (i.e. wages, loan payments, etc.)

3. Growth Stage

Passed the break-even point and now

making a profit:

◦ Total revenue > Total Costs

May wish to expand your business:

◦ new products/services

◦ another location, etc.If this is the case, you

should really write a new business plan.

4. Comfort Stage

Venture is secure growing (although at slower rate of

approx. 10% per year.)

Enjoying the benefits of success – a comfortable income

and enjoyable lifestyle.

Assets (anything that a business or entrepreneur owns

that has a cash value) of the business are worth more

than the liabilities (a debt; a sum of money the

entrepreneur owes).

This can be a dangerous stage for the entrepreneur

who forgets that growth and change are essential to

future success.

5. Turnaround Stage

If you reach this stage, your venture is in financial trouble.

The financial records reflect losses for more than two years.

Your competition is attracting customers away from your business.

If you want to save the business, you must act now (eliminating nonproductive people, products and services – no matter how difficult this seems).

Liquidation (the sale of assets in order to raise funds) may be another option to generate cash.