Humber College - Small Enterprise Management Assignment Chapters 4 & 5

This assignment solution addresses key concepts from Chapters 4 and 5 of a Small Enterprise Management course, focusing on franchising and business planning. Chapter 4 explores franchising's characteristics, advantages, disadvantages for franchisors and franchisees, different types of franchising (trade name, business format, and product name), and the benefits of purchasing assets over shares in a business. It also contrasts market-based and income-based valuation approaches. Chapter 5 delves into the benefits of a written business plan, reasons why entrepreneurs might neglect planning, the importance of the executive summary, and common mistakes made in business plan creation. The assignment provides detailed answers to the questions outlined in the assignment brief, supported by relevant references.

Running Head: SMALL ENTERPRISE 0
Management of small Enterprise

SMALL ENTERPRISE 1
Chapter 4
Answer 1- Franchising is the substitute to the business ownership through which one party
that is franchisee grants the privilege of leading as distinct owner. However, franchisee is
required to operate as per the certain terms and methods specified by other party that is
franchisor. It brings both restriction and benefits that differs it from the other independent
ownership (Gaul, 2015).
Answer 2- Franchising provides several advantage and disadvantages for franchisor as well
as franchisee. For a franchisor, it can benefit from the continuous royalties. It also increases
the value of the brand. However, the biggest disadvantage for the franchisor is the legal
regulation. In order to successfully establish the business enterprise, franchisors are required
to work with the experienced franchise lawyer. For a franchise, the biggest advantage is the
established brand. It possesses the established brand that is easily recognized by the
consumers. For the franchise, its business also get benefit from the franchisor continued
support and training. The disadvantage of buying a franchise
Answer 3-The franchisee that tends to provide only the right of use trade name is known as
trade name franchisee. Soft drink bottlers are the example of this franchisee. As compare to
this, when a franchise ensures to provide the legal right for using the on-going assistance
relationship and guidance and the marketing system, is known as business format franchise.
Outlets of fast food are the example of such franchise. As compare to both, in the product
name franchise, manufacturer provides the license to franchisee for distributing as well as
selling the specific product by using the franchisor trade name, trademark, and logo.
Answer 4- It is beneficial to purchase the asset rather than buying the shares because by
purchasing the asset liability remains only with the seller company rather than transferring to
the buyer. In case of asset, it can only pick the right asset and leave the unwanted asset with
the seller. However, in case of buying the share, the biggest disadvantage is that buyer
becomes the sole shareholder of the company. Therefore, it is beneficial to purchase the asset
rather than buying the shares (Ramya & Mohamed, 2016).
Answer 5- The income approach includes the valuation method that tends to convert the
future anticipated economic benefits into the one-dollar amount. As compare to this, market
valuation approach make use of the transactional data for determining the company’s value.

SMALL ENTERPRISE 2
In income approach, it is represented by the pre-tax profit, after tax profit and EBIT. As
compare to this, market approach involves the public company transaction, private company
transaction by using the current market data. From the both approaches, income approaches is
easier because it is easy to sue and calculate as compare to the market approach. In market
approach, it also required to know the feasibility of the various data (Trugman, 2016).
Chapter 5
Answer 1- A written business plan provides several benefits of the new venture. It is the best
and effective way to test whether the idea of starting business if feasible or not. There are
times when the idea of business plan is discarded at the stage of market analysis in order to
move to new idea. Besides this, written business plan helps the owner to pay attention to the
financial or operational objectives such as market plan or budgeting. It is true that various
new ventures require the money for buying property or new equipment, therefore, in such
condition business plans helps in knowing how much money they are required to borrow. In
addition to this, the review of business plan also assist in seeing what goal has been achieved
and what directions are required for the growth of the company. Business plan is used by
investor, entrepreneur, and person, which conduct partnership business (Watson &
McGowan, 2018).
Answer 3- It is true that many entrepreneurs neglect the business plan, as they believe that a
plan does not predict the future. Things change that result in wasting the time. They also
believe that various decisions are made instantly due to which written documents are of no
use. The main reason for not writing a business plan is that it takes away from the business.
Some thinks that spending weeks on writing a business plan has no proof of putting the
impact on the success of the company. I would personally neglect due to the changing
business environment and government policies (Burns, 2016).
Answer 4- Executive summary is too important in the business plan as it helps in highlighting
the summary of business and provides a brief snapshot of plan with spending, sales and
profit. It also helps the reader to know the potential source of fund. Besides this, customer
can also gain the documents regarding product and service, facilities as well as people who
are involved in the business. Bankers, financiers, investors, CEOs, lenders and managers are
busy persons; executive summary helps in knowing the most of the information in short
(Ward, 2019).

SMALL ENTERPRISE 3
Answer 5- An entrepreneur makes various mistakes in a business plan. The first and foremost
mistake is a poor written business plan. Punctuations, spelling, and grammar are some
common mistakes made by an entrepreneur in business plan. Besides this, if business plan is
written perfectly then presentation is required to be match. This peeves the investor more
than the missing numbers, incorrect units, and missing table of content (Magloff, 2019).
It is true that every business plan has product, services, customers, marketing and sales,
operations, competitors and customers. Therefore, it must cover all these things. Several
entrepreneurs does the mistake of including these in their business plan. Besides this, detailed
business plan is also one such common mistake made by the entrepreneur.

SMALL ENTERPRISE 4
References
Bradley, G. (2016). Benefit Realisation Management: A practical guide to achieving benefits
through change. United Kingdom: Routledge.
Burns, P. (2016). Entrepreneurship and small business. Palgrave Macmillan Limited.
Gaul, C. (2015). What makes a franchisee successful: attitudes and pre-requisites of
profitable franchise partners. The International Business & Economics Research
Journal (Online), 14(2), 387.
Magloff, L. (2019). What is an executive summary business plan. Retrieved from:
https://smallbusiness.chron.com/executive-summary-business-plan-2587.html
Ramya, N., & Mohamed Ali, S. A. (2016). Factors affecting consumer buying
behavior. International journal of applied research, 2(10), 76-80.
Trugman. (2016). Understanding business valuation: A practical guide to valuing small to
medium sized businesses. John Wiley & Sons.
Ward, S. (2019). The most common business plan mistakes. Retrieved form:
https://www.thebalancesmb.com/the-7-most-common-business-plan-mistakes-
2948003
Watson, K., & McGowan, P. (2018). Emergent perspectives toward the business plan among
nascent entrepreneur start-up competition participants. Journal of Small Business and
Enterprise Development.