© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

PowerPoint Presentation by Charlie Cook, The University of West AlabamaPowerPoint Presentation by Charlie Cook, The University of West Alabama

The Location PlanThe Location Plan

PART 3 Developing the New Venture Business Plan

PART 3 Developing the New Venture Business Plan

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1.1. Describe the five key factors in locating a brick-and-Describe the five key factors in locating a brick-and-mortar startup.mortar startup.

2.2. Discuss the challenges of designing and equipping a Discuss the challenges of designing and equipping a physical facility.physical facility.

3.3. Understand both the attraction and the challenges of Understand both the attraction and the challenges of creating a home-based startup.creating a home-based startup.

4.4. Understand the potential benefits of locating a startup Understand the potential benefits of locating a startup on the Internet.on the Internet.

Looking AheadAfter studying this chapter, you should be able to:Looking AheadAfter studying this chapter, you should be able to:

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Locating the Brick-and-Mortar Startup

• Brick-and-Mortar StoreBrick-and-Mortar Store The traditional physical store from which businesses The traditional physical store from which businesses

have historically operated.have historically operated.

• The Importance of the Location DecisionThe Importance of the Location Decision High cost of constructing a physical location.High cost of constructing a physical location. Effect of poor location on eventual success of the Effect of poor location on eventual success of the

firm.firm. Type of business affects the importance of business Type of business affects the importance of business

location to customers.location to customers.

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Exhibit 9.1 Location Options for the Startup

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Exhibit 9.2 Five Key Factors in Determining a Good Business Location

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Other Factors in Selecting a Location

• Neighbor MixNeighbor Mix Who’s next door?Who’s next door?

• Security and SafetySecurity and Safety How safe is the How safe is the

neighborhood?neighborhood?

• ServicesServices Is there municipal trash Is there municipal trash

pickup?pickup?

• Past Tenants’ FatePast Tenants’ Fate What happened to them?What happened to them?

• The Life-cycle Stage of The Life-cycle Stage of the Areathe Area Is the site in the embryonic, Is the site in the embryonic,

mature, or declining stage?mature, or declining stage?

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Selecting a Good Location

• Customer AccessibilityCustomer AccessibilityCustomer convenience (high traffic) Customer convenience (high traffic)

Access by targeted customers (niche market) Access by targeted customers (niche market)

Avoidance of shipping costs (local markets)Avoidance of shipping costs (local markets)

• Business Environment ConditionsBusiness Environment ConditionsClimate-related factors Climate-related factors

Business environment factorsBusiness environment factors Presence of established competitorsPresence of established competitors

Regulations, legal requirements and restrictionsRegulations, legal requirements and restrictions

Tax structure, exemptions, and incentivesTax structure, exemptions, and incentives

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Selecting a Good Location (cont’d)

• Availability of ResourcesAvailability of ResourcesNearness to raw materialsNearness to raw materials

Availability of a suitable labor supplyAvailability of a suitable labor supply

Access to adequate and reliable transportationAccess to adequate and reliable transportation

• Personal Preference of the EntrepreneurPersonal Preference of the EntrepreneurFamiliarity with home community environmentFamiliarity with home community environment

Support of entrepreneur by the community Support of entrepreneur by the community

Desire for a particular lifestyleDesire for a particular lifestyle

Contribution to the communityContribution to the community

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Key Factors in Selecting a Location

• Site Availability and CostsSite Availability and CostsDifficulty of locating a good siteDifficulty of locating a good site

Business incubator:Business incubator: shared space, services, and shared space, services, and management assistance for new businessesmanagement assistance for new businesses

Buying: large costs for and commitment required to Buying: large costs for and commitment required to purchase site outright.purchase site outright.

Advantages of leasing:Advantages of leasing: Avoids a large cash outlay.Avoids a large cash outlay.

Allows the owners to postpone Allows the owners to postpone committing to the site before committing to the site before the business becomes a success.the business becomes a success.

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Designing and Equipping the Physical Facilities

• Design Requirement ChallengesDesign Requirement Challenges Physical facilities should be of adequate size and Physical facilities should be of adequate size and

accommodation; not too large or too luxurious.accommodation; not too large or too luxurious. Considerations:Considerations:

Age/condition of buildingAge/condition of building Fire hazards Fire hazards Heating/air conditioningHeating/air conditioning Entrances and exits Entrances and exits Lighting and restroom facilitiesLighting and restroom facilities

The ideal building meets the functional requirements The ideal building meets the functional requirements of the business and projects the appropriate image to of the business and projects the appropriate image to customers and the public at large.customers and the public at large.

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Exhibit 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. B11. Copyright 2004 by Dow Jones & Company, Inc. Reproduced with permission of Dow Jones & Company, Inc. in the format Textbook via Copyright Clearance Center.

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Equipping the Physical Facilities

• Manufacturing EquipmentManufacturing EquipmentGeneral purpose equipmentGeneral purpose equipment

Serves many functions in Serves many functions in the production systemthe production system

– Low purchase costLow purchase cost

– Flexible productionFlexible production

– Good resale valueGood resale value

Special-purpose equipmentSpecial-purpose equipment Are designed to serve specialized functions Are designed to serve specialized functions

in the production processin the production process– Low labor costLow labor cost

– High hourly outputHigh hourly output

– Limited resale valueLimited resale value

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Retail Store and Office Equipment

• RetailRetailDisplay racksDisplay racksSales countersSales countersCash registers/Cash registers/

POS systemsPOS systems

• Business ImageBusiness ImageLuxury/utilitarianLuxury/utilitarian

customer furnishingscustomer furnishingsLightingLightingDisplaysDisplaysSignageSignage

• Office EquipmentOffice Equipment ComputersComputers Fax machinesFax machines Copiers and printersCopiers and printers Telephone systemsTelephone systems Filing cabinetsFiling cabinets

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Locating the Startup in the Entrepreneur’s Home

• Home-Based BusinessHome-Based Business A business that maintains its primary facility in the A business that maintains its primary facility in the

residence of its ownerresidence of its owner

• Attraction of a Home-Based BusinessAttraction of a Home-Based Business Low start-up and overhead costsLow start-up and overhead costs Convenience for family and lifestyleConvenience for family and lifestyle TechnologyTechnology

Advances in office equipment and Advances in office equipment and connectivity allow home-based business connectivity allow home-based business to compete with commercial sites.to compete with commercial sites.

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Exhibit 9.4 Some Common Reasons for Starting a Home-Based Business

Source: Adapted from “Potential Reasons for Starting a Home Based Business,” http://www.perfectsystem.co.uk, accessed January 13, 2009.

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The Challenges of Home-Based Businesses

• Business ImageBusiness ImageA professional business image is difficult to maintain in A professional business image is difficult to maintain in

a home environment.a home environment.

• Legal ConsiderationsLegal ConsiderationsLocal laws and zoning ordinances prohibit many types Local laws and zoning ordinances prohibit many types

of home-based businesses.of home-based businesses.

• Family and Business ConflictsFamily and Business ConflictsThe need to observe regular business hours and The need to observe regular business hours and

establish spatial boundaries (specific work areas) to establish spatial boundaries (specific work areas) to avoid distractions.avoid distractions.

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Exhibit 9.5 The Challenges of Home-Based Businesses

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Locating the Startup on the Internet

• E-CommerceE-Commerce The paperless exchange of business information via The paperless exchange of business information via

the Internet.the Internet.

• Benefits of E-Commerce to StartupsBenefits of E-Commerce to Startups Allows for competition with larger firms in larger Allows for competition with larger firms in larger

markets.markets. Helps with cash flow problems by compressing the Helps with cash flow problems by compressing the

sales cycle.sales cycle. Builds better customer relationships through better Builds better customer relationships through better

service.service. Electronic Customer Relationship Marketing (eCRM)Electronic Customer Relationship Marketing (eCRM)

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Factors Affecting the E-Commerce Choice

• Technical LimitationsTechnical Limitations Website development and Website development and

maintenance costsmaintenance costs Insufficient bandwidthInsufficient bandwidth Upgrading softwareUpgrading software Integration of e-commerce Integration of e-commerce

with brick-and-mortar with brick-and-mortar operationsoperations

Customer access to the Customer access to the Internet and connectivity Internet and connectivity limitationslimitations

• Non-Technical LimitationsNon-Technical Limitations Privacy of customer Privacy of customer

transactionstransactions Customer information Customer information

securitysecurity Inability of customers to Inability of customers to

touch or try on productstouch or try on products

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E-Commerce Business Models

• Business ModelBusiness ModelA group of shared characteristics, behaviors, and A group of shared characteristics, behaviors, and

goals that a firm follows in a particular business goals that a firm follows in a particular business situation.situation.

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Exhibit 9.6 Basic E-Commerce Business Models

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Types of Customers Served

• Business-to-Business (B2B) ModelBusiness-to-Business (B2B) Model Sells to business customers electronically.Sells to business customers electronically. Facilitates outsourcingFacilitates outsourcing

• Business-to-Consumer (B2C) ModelBusiness-to-Consumer (B2C) Model Electronic retailing to final customers; resulting in Electronic retailing to final customers; resulting in

disintermediation (bypassing middlemen).disintermediation (bypassing middlemen). Advantages ofAdvantages of 24/7 E-Tailing: 24/7 E-Tailing:

User convenience in all-hours access to products and servicesUser convenience in all-hours access to products and services Immediate completion of transactionsImmediate completion of transactions

• Auction SitesAuction Sites Web-based businesses offering participants the ability to list Web-based businesses offering participants the ability to list

products for bidding.products for bidding.

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Exhibit 9.7 Selling Your Item on eBay

Step 1: Register as an eBay member, which is free of charge.

Step 2: Sign up to accept electronic payments, which is required.

Step 3: Research your items and rules of play; eBay provides information for both.

Step 4: Create a listing for the item to be offered for sale.

Step 5: Check your listing to see how bidding is going.

Step 6: Wrap up your sale with the buyer.

Source: Adapted from http://pages.ebay.com/help/sell/sell-getstarted.html, accessed January 5, 2009.

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Exhibit 9.8 Top 10 Online Auction Sites

1. eBay

2. uBid

3. Bidz.com

4. Overstock.com

5. Amazon

6. OnlineAuction.com

7. WeBidz Auctions

8. Auction-Warehouse

9. ePier

10. It’s Gotta Go

Source: http://www.auctions.nettop20.com, accessed January 5, 2009.

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Nature of Online Presence

• Content-Based ModelContent-Based Model The Web site provides information but not the ability The Web site provides information but not the ability

to buy or sell products and services.to buy or sell products and services.

• Information-Based ModelInformation-Based Model The website provides information about a business, The website provides information about a business,

its products, and other related matters but doesn’t its products, and other related matters but doesn’t charge for its use.charge for its use.

• Transaction-Based ModelTransaction-Based Model The Web site provides a mechanism for buying or The Web site provides a mechanism for buying or

selling products or services.selling products or services.

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Internet-Based Businesses and the Part-Time Startup Advantage

• Advantages of Part-Time StartupAdvantages of Part-Time Startup Income keeps flowing, not interrupted if venture failsIncome keeps flowing, not interrupted if venture fails Flexibility and lower costs of launching startupFlexibility and lower costs of launching startup Reduces risk of transition to entrepreneurial lifeReduces risk of transition to entrepreneurial life

• Disadvantages of Part-Time StartupDisadvantages of Part-Time Startup Need to find suitable location for growing venture.Need to find suitable location for growing venture. Involvement with startup conflicts with personal lifeInvolvement with startup conflicts with personal life Risk of failure of startup after leaving present jobRisk of failure of startup after leaving present job

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Key Terms• brick-and-mortar storebrick-and-mortar store• enterprise zonesenterprise zones• business incubatorbusiness incubator• general-purpose equipmentgeneral-purpose equipment• special-purpose equipmentspecial-purpose equipment• home-based businesshome-based business• zoning ordinanceszoning ordinances• e-commercee-commerce• Electronic Customer Relationship Electronic Customer Relationship

Marketing (eCRM)Marketing (eCRM)

• business modelbusiness model• business-to-business (B2B) business-to-business (B2B)

modelmodel• business-to-consumer (B2C) business-to-consumer (B2C)

modelmodel• 24/7 e-tailing24/7 e-tailing• disintermediationdisintermediation• auction sitesauction sites• content/information-based content/information-based

modelmodel• transaction-based modeltransaction-based model