2 - Business Plans

Question 1

Definition of business plan

Answer 1

• Written document that provides detailed description of an existing business or potential business
• Documents past or future performance, current status, future goals, and ways to achieve goals

Question 2

Purpose of a business plan

Answer 2

• Continuous document that is revised when changes in environment occur (living, working document)
• “Road map” for implementation and evaluation of the business
• Not generally done in a short amount of time, typically takes between 2 weeks to 6 months

Question 3

Reasons for developing a business plan

Answer 3

• Helps to define/develop goals for the business
• Provides opportunity to define or review marketplace
• Reviews goals, progress, and performance of an existing business
• Outlines roles and responsibilities of key employees
• Assists in decision making/planning for changes
• Keeps the business “on track” and focused as business grows
• Essential for obtaining financing

Question 4

What to do in preparation of writing a business plan?

Answer 4

• Determine idea/purpose of the business
• Start planning ahead (at least 6 months before implementation)
• Determine who the audience is

Question 5

Common mistakes w/ writing a business plan

Answer 5

• Ignoring the competition
• Too many ideas
• Reliance on a specific customer group
• Putting off what should be done today
• Being overly optimistic
• Copying a sample plan

Question 6

What is an executive summary?

Answer 6

• Overview of key points
• Should be short and concise (no more than 2 pages)
• Includes highlights from all sections
• Description of what the business is about
• General summary of the type of business and products/services
• Easiest to write this part last b/c you have to write all the other sections in order to summarize them

Question 7

Describe the contents of organizational structure

Answer 7

• Names and positions of key personnel
• Duties and responsibilities of key personnel
• Reporting and decision-making structure

Question 8

What is a marketing plan?

Answer 8

• Determines who the customers are and what their needs are
• Outlines most effective methods for promoting the business/ service
• How you will effectively distribute products/ services
• “4 P’s” of marketing = product/ service, price, place, and promotion

Question 9

Describe human resource planning

Answer 9

• Provide info on short-terms plans (recruitment, training, retention)
• Include long-term plans for employee development and training
• Provide info on any consultants who may be involved in the development of the HR plan
• Brief job descriptions of key people

Question 10

Describe an operational plan

Answer 10

• Describes physical aspects of the business (physical location, equipment required)
• Inventory requirements/ investments
• Suppliers
• Generally projected for the next 3-5 years
• Explains daily operations of the business (location, hours of operation, processes involved in the delivery of the business or service)

Question 11

What are Pro-Forma statements?

Answer 11

• Projected/ estimated financial statements
• Based on projections of future performance
• Conservative but must be realistic
• Used to project financial impact of a plan
• • Determines if financing will be required to make the plan successful

Question 12

What are the forms of ownership?

Answer 12

• Sole proprietorship -> owned and operated by 1 person
• Partnership -> more than 2 owners (2 or more partners)
• Corporation

Question 13

Advantages of sole proprietorship

Answer 13

• Easy and inexpensive to start
• Direct control over all decisions
• Limited working capital required to start
• Tax advantages if operates at a loss (can deduct loss on personal taxes)

Question 14

Disadvantages of sole proprietorship

Answer 14

• Unlimited liability (personal assets pay off any debt; taxed at personal rate is business does well)
• May be difficult raising capital required to start (higher risk to investors)
• Business ends when owner leaves or dies (no continuity in the business)

Question 15

Advantages of partnership

Answer 15

• Easy to start w/ limited legal requirements (partnership agreement recommended)
• Easy to start w/ expenses equally shared between all partners
• Equal sharing in management decisions, profits, and assets

Question 16

Disadvantages of partnership

Answer 16

• Unlimited liability (business debts paid off w/ personal assets from each partner)
• May be difficult to find a trustworthy partner
• Partnership dissolves if 1 person leaves business or dies (no continuity in business/ taxation may occur)

Question 17

Advantages of corporation

Answer 17

• Limited liability (liability of investors is limited to personal investments)
• Ownership transferrable to another owner (has continuity)
• Separate legal entity from the owner(s) and shareholders
• Tax advantages as taxes may be lower for incorporated businesses

Question 18

Disadvantages of corporation

Answer 18

• Closely regulated
• Expensive (costs involved to incorporate, lawyer fees)
• Corporate documents required, shareholder/ director meetings, reporting to government required
• Possibility of conflict between director/ owner and shareholders

Question 19

Steps to consider when starting a new business

Answer 19

• Type of business (sole proprietor, partnership, corporation)
• Registering the business (federal or provincial)
• Preparation of Business Plan
• Financial (loans, line of credit, credit cards)
• Licenses and permits (provincial, regional, professional)
• Location!
• Employees
• Advertising/ marketing
• Professional support