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CHAPTER OUTLINE AND TEACHING NOTES
A. All planning should to be formalized into a
business plan.
1. A BUSINESS PLAN is a formal plan
prepared to serve as a tool for attract-
ing the other components of the busi-
B. Purposes of the Plan
1. The business plan keeps your think-
ing on target and concentrates your
power on reaching your goal.
2. The plan can be a money-raising tool
REAL WORLD EXAMPLE 6.5
Some businesses never revise their business plans. How-
ever, Craig Knour, CEO of Associated Business Systems, esti-
mates he has revised his plan about 120 times, since founding
the company in 1997.
C. The business plan should include a de-
tailed analysis of:
1. The proposed product.
2. The expected market for it.
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CHAPTER OUTLINE AND TEACHING NOTES
5. Operations or production methods
D. It should answer questions such as:
1. Is the business formation package
complete?
2. Would it be attractive to potential in-
vestors?
5. Can the product be produced effi-
ciently?
6. Can it be marketed effectively?
7. Can the production and marketing of
E. In summary, a properly developed plan
serves as:
1. An effective communication tool to
convey ideas, research findings, and
proposed plans for others
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CHAPTER OUTLINE AND TEACHING NOTES
3. A measuring device by which to
gauge progress and evaluate needed
changes.
VI. PREPARING THE PLAN
Learning Objective 5.
Prepare a sample business plan.
A. Developing a Business Plan
1. Determine where the business is at
present.
B. Who Should Prepare the Plan?
1. If the owner is the only one involved,
he or she should prepare the plan
with the advice of competent advi-
REAL WORLD EXAMPLE 6.6
One business owner sees his business plan like a restau-
rant—solid, consistent, and thorough, with a few grease stains.
4. There are many software packages
C. Developing Action Steps (Chapter 5)
Chapter 06 – Planning, Organizing, and Managing a Small Business
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CHAPTER OUTLINE AND TEACHING NOTES
1. Information can be collected using
the steps discussed in previous chap-
ters, as well as from business associ-
VII. COMPONENTS OF THE PLAN
A. Information that should be included tends
to be standardized; the format to be used
is not.
1. One entrepreneurial consulting firm
have developed a five step approach
to planning:
a. Discovery
B. Cover Sheet: The cover sheet presents
identifying information, such as the busi-
ness name, address, phone number, and
who the principals are.
C. Executive Summary
1. The EXECUTIVE SUMMARY is a
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CHAPTER OUTLINE AND TEACHING NOTES
2. Lenders often evaluate the worth of
the plan on the basis of this sum-
mary.
3. This part outlines the entire business
plan, its major objectives, how these
D. Table of Contents:
Should be written concisely, in outline
form, using alphabetical and numeric
headings and subheads.
E. History of the (Proposed) Business
1. Provide background information on
F. Description of the Business
1. This definition should describe what
customer needs the business intends
to meet.
2. It is helpful to distinguish between the
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CHAPTER OUTLINE AND TEACHING NOTES
3. These perceptions should be closely
aligned and compatible.
REAL WORLD EXAMPLE 6.7
The description of the business section should analyze the
G. Definition of the Market
1. This is one of the most important—
and most difficult—parts of the plan to
H. Description of the Product(s)
1. Describe the firm’s existing or
planned products and the status of
any ongoing research and develop-
I. Management Structure
1. Describe the management structure,
especially the expertise of the team.
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CHAPTER OUTLINE AND TEACHING NOTES
J. Objectives and Goals
1. Outline what the business plans to
K. Financial Data
1. One important purpose of the busi-
2. The plan should show prospective in-
vestors:
a. Why they should provide funds.
REAL WORLD EXAMPLE 6.8
When a restaurant owner analyzed the restaurant’s real
costs and profit, a problem was uncovered. The product cost
for the most popular menu items was only slightly less than
the menu price.
3. Assumptions have to be made about
L. Appendixes
1. Include the firm’s organizational
structure, shown in an organization
chart.
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CHAPTER OUTLINE AND TEACHING NOTES
VIII. PRESENTING THE PLAN
A. Presenting the business plan is almost as
important as preparing it.
B. Writing the Plan
1. Suggestions:
a. Be honest.
2. The plan should be printed on stand-
ard letter-size paper, with copies for
outsiders attractively bound.
3. Most business plans can be pre-
C. The Written/Oral Presentation
1. The business owner should conduct
the oral presentation in person.
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CHAPTER OUTLINE AND TEACHING NOTES
4. The amount of detail in the market
data and financial projections needed
REAL WORLD EXAMPLE 6.9
J. Presper Eckert, one of the inventors of the first digital
computers, tried to get IBM to invest in his new company. The
IBM president rejected the business plan, stating that the mar-
ket for computers would be too small.
IX. IMPLEMENTING THE PLAN
A. Use a lawyer to help acquire the charter.
B. Obtain the funds and put them in a check-
X. SAMPLE BUSINESS PLAN
The appendix for this chapter contains a sam-
ple business plan for a new attraction in Mo-
Chapter 06 – Planning, Organizing, and Managing a Small Business
LEARNING OBJECTIVES REVISITED
1. Tell why planning is so important—yet so neglected—in small businesses.
● Planning is one of the key managerial functions and since everything else depends on it, it
2. Explain the role of strategic and operational planning, and give some examples.
● Strategic planning consisting of setting the company’s mission, establishing the objectives,
and determining strategies.
● Examples:
○ Selecting the type of business to enter
3. Explain the role of financial planning, and give some examples of it.
● Financial planning involves:
○ Estimating income and expenses
Chapter 06 – Planning, Organizing, and Managing a Small Business
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4. Tell why a business plan is needed and what purpose it should serve.
● The research and analysis involved in writing a business plan helps the entrepreneur focus
5. Prepare a sample business plan.
● The plan should include:
○ Cover sheet
○ Executive summary
○ Table of contents
KEY TERMS USED IN THIS CHAPTER
Budgets are detailed plans, expressed in monetary terms, of the results expected from officially recog-
nized programs for a given future period.
A business plan is a formal plan prepared to serve as a tool for attracting the other components of the
business formation package, including people and money.
Chapter 06 – Planning, Organizing, and Managing a Small Business
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Fixed expenses do not vary with output, but remain the same.
Human resources planning is the process of converting the business’ plans and programs into an effec-
tive work force.
Net profit is the amount of revenue (sales) over and above the total amount of expenses (costs) of doing
business.
Objectives are the purposes, goals, and desired results for the business and its parts.
Operational planning sets policies, procedures, and standards for achieving objectives.
Physical resources are the buildings, tools and equipment, and service and distribution facilities that are
needed to carry on the business.
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NOTES FOR DISCUSSION QUESTIONS
1. Explain why planning is so badly needed by small businesses. Why is it so often neglected?
Planning is essential because, before taking action, managers must know where they are going
and how to get there. Outsiders who invest or lend money need to know what a firm’s chances of success
2. Explain the two overall categories of planning. What are the essential differences between the
two?
The two overall categories of planning are strategic planning and operational planning. Strategic
3. Explain each of the following: policies, methods and procedures, budgets, and standards.
Policies are general statements that serve as guides to managerial decision making and supervi-
sory activities. They are guides to action and exist so that managers can delegate work and employees will
4. In planning to operate the business, what are the factors that must be planned for? Explain each.
The eight factors are given below.
(1) Choosing location: The type of business to be operated influences most location decisions.
The location chosen relates to access to customers, suppliers, employees, utilities, and
transportation, as well as compliance with zoning regulations and other laws.
Chapter 06 – Planning, Organizing, and Managing a Small Business
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5. What is involved in financial planning?
Financial planning involves (1) estimating income and expenses, (2) estimating initial invest-
ment, and (3) locating sources of funds. Income can be estimated by studying the market. Expenses can
6. What is the purpose of a business plan? Explain.
An effective business plan investigates in detail the feasibility of an idea. It is used to obtain loans
7. How can a business plan be useful even to a prospective business owner who does not need out-
side capital?
The business plan is useful whether or not the business owner needs outside capital. It defines and
clarifies production, marketing, and management of the firm. It provides standards that are used in the
Chapter 06 – Planning, Organizing, and Managing a Small Business
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8. What should the business plan include?
The business plan should include a cover sheet, executive summary, table of contents, history of
9. Who should prepare the plan? Why? Why should the writer get help from outside professionals
and business people?
The prospective owner is the best person to write the business plan if he or she is the only one in-
Chapter 06 – Planning, Organizing, and Managing a Small Business
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BONUS EXERCISES
6.1 The Model Business
One option is to have the students—individually or in small groups—go into the field and locate a
business that can be used as their “model business.” It should be explicitly understood that the students
will establish an effective rapport with the owner(s) of the model firm by telling them “up front” what
6.2 Test Your Planning Skills
This exercise is designed to let students use the planning principles discussed in this chapter. Use
6.3 Career SWOT Analysis
SWOT analysis, the key tool in the strategic planning process, can also be applied to career plan-
6.4 Writing a Business Plan
This exercise lets students evaluate what information is needed in a well-prepared business plan.
You can use Handout 6-C: Writing a Business Plan on page 6.34 for this exercise.
HANDOUT 6-A
Test Your Planning Skills
Anise Terrisian, General Manager at Spinnacle Electronics’ Pricedale Facility, has just named
Chapter 06 – Planning, Organizing, and Managing a Small Business
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Your committee will set the exact dates for the drive, which is to be held in three or four months.
As chairperson, you have been assigned a team of four other company employees to plan and implement
the project. All members are highly respected, competent people, representing a true cross section of the
INSTRUCTIONS:
1. Make a list of what you consider the key planning issues to be addressed at this initial planning
meeting.
2. Of the items on your list, which two or three do you believe are the most crucial? Why?
Chapter 06 – Planning, Organizing, and Managing a Small Business
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HANDOUT 6-B
Career SWOT Analysis
SWOT analysis, the key tool in the strategic planning process, can also be applied to career plan-
ning. A SWOT analysis focuses on the internal and external environments, examining strengths and
weaknesses in the internal environment and opportunities and threats in the external environment. Use the
figure on page 131 in the text as a starting point and conduct an analysis of your career planning.
1. STRENGTHS:
• What advantages do you have?
• What do you do well?
2. WEAKNESSES:
• What could you improve?
3. OPPORTUNITIES:
• Where are the good opportunities facing you?
4. THREATS:
• What obstacles do you face?
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HANDOUT 6-C
Writing a Business Plan
One of Mike McNeely’s favorite pastimes as a teenager was taking his old car apart and putting it
back together again. After graduation, Mike started working as a mechanic for his Uncle Larry’s auto re-
pair shop. Many of the customers have specifically asked Mike to work on their cars, because they know
he is knowledgeable and honest.
It’s been ten years since Mike started his job. Now he is considering opening his own auto repair
shop. He saved up some money and he thinks his rich Uncle Buck will lend him the rest. He has started
writing a business plan and so far has:
• A description and appraisal of the market area