Transcript Introduction to Entrepreneurship

FM20731 – Entrepreneurship
The Business Plan: Marketing
The Business Plan: Legal & Operations
Week 7 – November 16, 2004
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Business Plan: Marketing Recap
• How the company will compete
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Description of product(s) and/or services
Competitive Analysis
Pricing structure
Credit policy
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Business Plan: Marketing
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Competitive advantage
Profile target market
Site analysis
Promotional plan
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Competitive Advantage
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Differentiates company from competition
Reason why you will succeed
Sustainable?
Examples:
• Quality
• Selection
– Better product or service • Service level
– Common strategy
• Speed/Turnaround time
• Price
• Location
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Market Segmentation
• Break target market(s) into groups
– Similar needs
– Sell more effectively to each
– Allows for price discrimination!
• A good thing!
• Startup can easier serve a specific segment
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Common Segmentation Methods
• Geographic
• Demographic
• Benefit
– Purpose product is purchased
• Usage rate
• Psychographic
– E.g. zoo-goers more likely to have a family
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Common Marketing Mistakes
• Fail to develop sustainable comp. advtge.
– “Cheap Hamburgers”
• Focus on product/service, not benefit
– “Domino’s Sells Pizza”
• Ill-defined target market
– “Everything to Everybody”
• Underestimate competition
– “No Other Business is like Ours”
• Pricing without knowing demand
– “Cut Prices to Make More Money”
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Location
• Describe ideal location
– Include required and desirable criteria
• If retail or service business
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Where will it be?
Demographic data
Traffic counts & speed of traffic
Accessibility
Nearby businesses
• Complementary?
• Detrimental?
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Location: Manufacturing?
• Available labor
• Proximity issues
– Close to customers?
– Close to raw materials?
– Close to shipping?
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Utility access and rates
Tax rates
Environmental regulations
Quality of life
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Location: Wholesaling?
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Financial stability of community
Financial health of retail outlets
Existing wholesalers
In city or outside?
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Location: Incubators
• Provide startups with:
– Affordable rent
– Services
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Financial assistance
Access to office machinery
Access to conference rooms
Consulting
• Usually government sponsored
– Economic development
• Careful! They may want equity
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Promotions
• What type(s) will you use?
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Internet
Direct mail
Catalogs
Direct selling
Telemarketing
Direct-response ads through mail
Broadcast
Print media
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Promotions
• Promotional goals
– What do you want to achieve?
– Specific and measurable
• How else will you know if you are successful?
– This is the first step
• Promotions budget
– “All you can afford” is not effective
– “Objective and task” is better
• I.e. meet established goals
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Will You Have a Sales Force?
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How large?
How experienced?
Supervision methods
Compensation plan
Performance evaluation
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Advertising
• Type
– Informative: explains products/services
– Persuasive: compares to competition
– Reminder: sustain awareness
• A/k/a maintenance advertising
• Media
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Which will be most effective?
Reach the most customers in target market
Frequency
Seen by customer when most effective
Image conveyed by media
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Advertising
• When
– Schedule for a year at a time
• Produces most consistent and effective
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Publicity & Public Relations
• Publicity
– Company info released as news
– Increase awareness of company
– Free placement
• May be expensive to generate
• Public relations
– Activities to create good impression
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Teams
Present Test Marketing results
Management & Personnel
• Qualifications should be included
– Owner(s)
– Key employees
• Job descriptions
– Unfilled critical roles
• Establish wages as necessary for financials
– Consider pay regulations
• E.g. minimum wage
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Other Details if necessary
• Benefits
– Vacation, sick days, 401K, etc.
– Health, disability, life insurance
• Work schedule
– If must be coordinated
– If must cover time periods
• Organizational Chart
– If more than a few employees
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Employment Regulations: Federal
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Occupational Safety and Health Act
Civil Rights Act
Americans with Disabilities Act
Immigration
– Immigration Reform and Control Act
– Immigration Act of 1990
• Family and Medical Leave Act
– 50 or more employees
• Unions
– National Labor Relations Act
– Taft Hartley Act
• Workers’ Compensation
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Employment Regulations: State
• Be aware of state laws also
• May be more stringent than federal
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The Legal Section
• Organizational form
• Taxes
• Other legal issues
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Org. Form: Sole Proprietorship
• A company owned by one person
• Business finances are co-mingled with personal
• Taxes
– Regular 1040
– Schedule C – Business Expenses
• Benefits
– Simple!
– Fully controlled by the owner
– Taxed once
• Drawbacks
– Full personal liability!
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Organizational Form: Partnership
• A company owned by two or more persons
• Most popular business form
– Pooled money, time, other resources
• Most difficult
– Like living together
• Create a Partnership Agreement!
• Taxes
– Partnership has its own tax return
– “Flows through” to individual 1040s
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Types of Partnerships
• General Partnership
– “Standard” Partnership
• Limited Partnership
– Non-managing partners don’t have liability
• LLC (Limited Liability Company)
– A Partnership with liability protection
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Partnerships
• Benefits
– Simpler than a corporation
– Shared workload
– Taxed once
• Drawbacks
– Shared decisions
– Can be personally liable, depending on type
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Organizational Form: Corporations
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Exists as an independent entity
Owned by shareholders
Managed by Board of Directors
Must hold regular meetings
Corporate Taxes
– Corporate income is taxed
– Salaries and dividends are taxed (again)
– Income and loss does not “flow through”
• Unless “S” Corp
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Double Taxation
Partnership/Sole Prop.
• Company Profit: $150K
• Company Taxes: $0
• Personal Income: $150K
• Personal Taxes: $50K
• “Take-home”: $100K
Corporation
• Company Profit: $150K
• Company Taxes: $25K
• Personal Income: $125K
• Personal Taxes: $41K
• “Take-home”: $84K
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Corporate Structure
Chairman
Board of Directors
CEO
CFO
CTO
CIO
EVP
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Corporations
• Benefits
– No personal liability
– Easier to raise money through sale of stock
• Drawbacks
– More complicated
– Double Taxation (depending on type)
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Other Legal Issues
• Contracts
– Key employees
– Suppliers
– Customers
• Intellectual Property
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Patents
Copyrights
Trademarks
Trade Secrets
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Insurance: Worker’s Compensation
• Pays income, etc.
• Losses must be due to job-related accidents
• May not be required for small companies
– Depends on state
• Determined by:
– Job risk
– Overall payroll
– Safety record
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Insurance: Property
• Reimbursement if property lost or damaged
• Typical examples:
– Vehicle
– Fire, flood, earthquake
– Theft
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Insurance: Liability
• Due to injury to customers/emp’ees
• Typical examples:
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Employee liability
Worker’s comp
Directors & Officers (D&O)
Premises and operations
Professional liability
Product liability
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Insurance: Key Executive
• Life insurance policy for key personnel
• Company is beneficiary
• May be required by certain investors
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Supplier Types
• Producers
– Manufacturers, farmers, processors
• Wholesalers/Distributors
– Buy and resell goods
• Brokers
– Bring together buyers and sellers
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Supplier Considerations
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Costs
Delivery schedules
Credit terms
Minimum order quantities
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Finding Suppliers
• Yellow Pages
• Thomas Register
– In any regular library
– Lists companies by industry
• Encyclopedia of Associations
– Find trade associations
• Internet search
• Trade publications/websites
• Other businesses
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Homework for Two Weeks
• Read “The Business Plan: Startup Costs and
Financing”, pp. 209-222
• Read “The Business Plan: Projected
Financial Statements”, pp. 233-250
• Work on Marketing section
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Next Classes
• November 23
– Trip to Stitch, possibly Viv Pickle
– Meet in classroom
• November 30
– Startup Costs and Financing
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