Part 3 Developing the New Venture Business Plan

Part 3 Developing the New Venture Business Plan CHAPTER 9 The Location Plan Longenecker • Moore • Petty • Palich © 2008 Cengage Learning. All rights reserved. Power. Point Presentation by Charlie Cook The University of West Alabama

Looking AHEAD After you have read this chapter, you should be able to: 1. Describe the five key factors in locating a brick-andmortar startup. 2. Discuss the challenges of designing and equipping a physical facility. 3. Understand both the attraction and the challenges of creating a home-based startup. 4. Understand the potential benefits of locating a startup on the Internet. © 2008 Cengage Learning. All rights reserved. 2

Locating the Brick-and-Mortar Startup • Brick-and-Mortar Store Ø The traditional physical store from which businesses have historically operated. • The Importance of the Location Decision Ø High cost of constructing a physical location. Ø Effect of poor location on eventual success of the firm. Ø Type of business affects the importance of business location to customers. © 2008 Cengage Learning. All rights reserved. 3

9 -1 Location Options for the Startup © 2008 Cengage Learning. All rights reserved. 4

9 -2 Five Key Factors in Determining a Good Business Location © 2008 Cengage Learning. All rights reserved. 5

Key Factors in Selecting a Good Location • Customer Accessibility ØCustomer convenience (high traffic) ØAccess by targeted customers (niche market) ØAvoidance of shipping costs (local markets) • Business Environment Conditions ØClimate-related factors ØBusiness environment factors Presence of established competitors Regulations, Tax legal requirements and restrictions structure, exemptions, and incentives © 2008 Cengage Learning. All rights reserved. 6

Key Factors in Selecting a Good Location • Availability of Resources ØNearness to raw materials ØAvailability of a suitable labor supply ØAccess to adequate and reliable transportation • Personal Preference of the Entrepreneur ØFamiliarity with home community environment ØSupport of entrepreneur by the community ØDesire for a particular lifestyle ØContribution to the community © 2008 Cengage Learning. All rights reserved. 7

Key Factors in Selecting a Good Location • Site Availability and Costs Ø Difficulty of locating a good site Business incubator: shared space, services, and management assistance for new businesses Ø Buying: large costs for and commitment required to purchase site outright. Ø Advantages of leasing: Avoids a large cash outlay. Allows the owners to postpone committing to the site before the business becomes a success. © 2008 Cengage Learning. All rights reserved. 8

Other Factors in Selecting a Location • Neighbor Mix Ø Who’s next door? • Security and Safety Ø How safe is the neighborhood? • Services • Past Tenants’ Fate Ø What happened to them? • The Life-cycle Stage of the Area Ø Is the site in the embryonic, mature, or declining stage? Ø Is there municipal trash pickup? © 2008 Cengage Learning. All rights reserved. 9

Designing and Equipping the Physical Facilities • Design Requirement Challenges Ø Physical facilities should be of adequate size and accommodation; not too large or too luxurious. Ø Considerations: Age/condition Heating/air Lighting of building Fire hazards conditioning Entrances and exits and restroom facilities Ø The ideal building meets the functional requirements of the business and projects the appropriate image to customers and the public at large. © 2008 Cengage Learning. All rights reserved. 10

9 -3 Small Business Owners Choose Buying over Leasing Source: Richard Breeden, “Small Businesses Favor Buying over Leasing, ” Wall Street Journal, February 24, 2004, p. B 11. © 2008 Cengage Learning. All rights reserved. 11

Equipping the Physical Facilities • Manufacturing Equipment ØGeneral purpose equipment Serves many functions in the production system – Low purchase cost – Flexible production – Good resale value ØSpecial-purpose equipment Are designed to serve specialized functions in the production process – Low labor cost – High hourly output – Limited resale value © 2008 Cengage Learning. All rights reserved. 12

Retail Store and Office Equipment • Retail • Office Equipment ØDisplay racks Ø Computers ØSales counters Ø Fax machines ØCash registers/ Ø Copiers and printers POS systems Ø Telephone systems • Image Ø Filing cabinets ØLuxury/utilitarian customer furnishings ØLighting ØDisplays ØSignage © 2008 Cengage Learning. All rights reserved. 13

Locating the Startup in the Entrepreneur’s Home • Home-Based Business ØA business that maintains its primary facility in the residence of its owner • Attraction of a Home-Base Business ØLow start-up and overhead costs ØConvenience for family and lifestyle ØTechnology Advances in office equipment allow home-based business to compete with commercial sites. © 2008 Cengage Learning. All rights reserved. 14

9 -4 Entrepreneurs’ Reasons for Operating a Home-Based Business Source: “Home-Based Business: The Hidden Economy, ” The Small Business Advocate, Vol. 19, No. 2 (Spring 2000), p. 6; and http: //www. perfectsystem. co. uk, accessed June 20, 2007. © 2008 Cengage Learning. All rights reserved. 15

Home-Based Businesses • Challenges ØBusiness image of a home-based business Professional image is difficult to maintain in a home environment. ØLegal considerations Local laws and zoning ordinances prohibit many types of home-based businesses. ØFamily and business conflicts The need to observe regular business hours and establish spatial boundaries (specific work areas) to avoid distractions. © 2008 Cengage Learning. All rights reserved. 16

9 -5 The Challenges of Home-Based Businesses © 2008 Cengage Learning. All rights reserved. 17

Locating the Startup on the Internet • E-Commerce Ø The paperless exchange of business information via the Internet. • Internet Ø A huge, loosely connected computer network that links smaller networks all over the world. • World Wide Web (WWW) Ø A system of Internet servers accessible with browsers, which navigate via hypertext links. © 2008 Cengage Learning. All rights reserved. 18

Benefits of E-Commerce to Small Firms • Provides the opportunity to compete with larger firms in larger markets. • Helps with cash flow problems by compressing the sales cycle. • Build better customer relationships through better service. ØElectronic Customer Relationship Marketing (e. CRM) An electronically based system that emphasizes customer relationships. © 2008 Cengage Learning. All rights reserved. 19

E-Commerce Business Models • Business Model ØA group of shared characteristics, behaviors, and goals that a firm follows in a particular business situation. © 2008 Cengage Learning. All rights reserved. 20

9 -6 E-Commerce Business Models © 2008 Cengage Learning. All rights reserved. 21

Types of Customers Served • Business-to-Business (B 2 B) Model Ø A business model based on selling to business customers electronically. • Business-to-Consumer (B 2 C) Model Ø A business model based on selling to final customers electronically. • Auction Sites Ø Web-based businesses offering participants the ability to list products for bidding. © 2008 Cengage Learning. All rights reserved. 22

9 -7 Selling Your Item on e. Bay Step 1: Register as an e. Bay member, then click the “Sell” link at the top of any page. Step 2: Gather information and digital pictures for your item description. Step 3: Write your title and item description. Step 4: Pre-pack your item to determine its shipping weight (but don’t seal it yet). Step 5: Choose the methods of payment you will accept; Pay. Pal is the fastest and safest. Source: http: //www. e. Bayuniversity. com, accessed December 20, 2006. © 2008 Cengage Learning. All rights reserved. 23

9 -8 Top 10 Online Auction Sites 1. e. Bay 2. Ubid 3. Bidz. com 4. Yahoo auctions 5. MSN auctions 6. Amazon. com 7. Auctionweiser 8. Auction Addict 9. Auction-warehouse 10. Auctonet. com Source: http: //www. auctions. nettop 20. com, accessed December 2006. © 2008 Cengage Learning. All rights reserved. 24

Degree of Online Presence • Content/Information-Based Model Ø A business model in which the Web site provides information but not the ability to buy or sell products and services. • Transaction-Based Model Ø A business model in which the Web site provides a mechanism for buying or selling products or services. 24/7 E-Tailing: electronic retailing providing roundthe- clock access to products and services © 2008 Cengage Learning. All rights reserved. 25

Key TERMS • brick-and-mortar store • business model • enterprise zones • business-to-business (B 2 B) model • business incubator • general-purpose equipment • special-purpose equipment • home-based business • zoning ordinances • e-commerce • Electronic Customer Relationship Marketing (e. CRM) © 2008 Cengage Learning. All rights reserved. • business-to-consumer (B 2 C) model • 24/7 e-tailing • auction sites • content/information-based model • transaction-based model 26