We rise by lifting

others
By ROBERT INGERSOLL
 CAPSULE OF YESTERDAY’S ACTIVITIES

 Curriculum Guide of subject Entrepreneurship

 Discussion of “Should you be your own Boss”-focus on the reasons to
start up a business
 Define what is entrepreneurship and activities involved
 Socio-Economic benefits of entrepreneurship
 Define who is an entrepreneur
 Perks and risk of being an entrepreneur
 Roles of an entrepreneur
 Explore Ideas and Opportunities (through your activity)
 Sources of business ideas
 How we are going to assess business opportunities
 How to make our Goals a SMART GOALS
 4 Functions of the business (Production, Management, Marketing and
Finance)
 Factors in economic decision making
DEVELOPING A BUSINESS PLAN
Why Business Plan is important
Parts of the business plan
What goes into a Business Plan
 LOoK BeFoRe U LeAp
Tony worked for a local automobile dealership as a
technician for over 20 years. He always received very
high customer service ratings. One day, Tony decided
that because he was such a good technician, he could
make more money working on his own. At a local
print and signage shop, he had business cards printed
and a sign made that read “Tony the Technician”. He
quit his job at the dealership on Friday, put his sign
up Sunday, and was open for business Monday.
 QUESTION

What do you think are Tony’s chances for

success? Discuss what advice you would have
given only if he had talked to you about his idea
first.
BUSINESS
PLAN Is a written document
that describes all the
Once you have settled on a steps necessary for
business idea, it is time to
start making plans for the opening and operating a
business
successful business.
 Business Plan
 Describe what your business  Provides detailed financial
will produce, how will you information that shows
produce it and who will buy how your business will
your product or service succeed in earning a profit
 Explains who will run your  Describes plans for future
business and who will supply
growth of your business
it with goods
 States how your business will
win over customers from Note: Writing a solid
competitors and what your business plan is critical
business will do to keep because the plan can
customers
make or break your
business
 PURPOSES OF A BUSINESS PLAN

1. A business plan explains the idea behind your business and

spells out how your product or service will be produced and
sold
2. A business plan sets specific objectives and describes how
your business expects to achieve them.
3. A business plan describes the backgrounds and experience of
the leadership team of the business.
 Our objective at this juncture is to
prepare parts of the business plan …

Think of a business that you want to establish

Deliberate as a group
10 Minutes
Give your business a name
Basic Elements of the business plan
The content of the business plan for a small,
home based, single-owner business will differ
from a business plan for a large corporation
with offices in many cities. But regardless of
the business, all business plans serve the same
basic purposes. They should contain the same
three basic components---- introductory
materials, the main body and the appendix
(supporting documents)
Preliminaries

Title Table of
Page Contents

Executiv
Stateme e
nt of the
purpose summar
y
Parts of the Main Body
Introduction

Marketing

Financial Management

Operations

Concluding Statement
 Part 1: Introduction
 a detailed description of the business and its
goals (Short term and long term)
 The ownership of the business and the legal
structure
 The skills and experience you bring to the
business
 The advantages you and your business have
over your competitors.
the advantages that you may include are:
O Performance
O Quality
O Reliability
O Distribution
O Price
O Promotion
O Public image or reputation
Legal Structure/ Type of Ownership

1. Sole Proprietorship is a business with

one owner who operates the business on
his or her own or employ employees. A
sole proprietor can work as an
independent contractor or operate a small
business. Sole proprietors own businesses
in many industries. Many home-based
businesses are operated by sole
proprietors. or more persons
 Partnership is a non-incorporated business
that is created between two or more
people. In a partnership, your financial
resources are combined with those of your
business partner(s), and put into the
business. You and your partner(s) would
then share in the profits of the business
according to any legal agreement you have
drawn up.
There are three classification of partnerships:
1) general partnership (partner divide
responsibility, liability and profit or loss
according to their agreement), 2) limited
partnership (with at least one general
partner, there are one or more limited partner
who have limited liability to the extent of their
investment), and
3) limited liability partnership (all of the
partners have limited liability of the business
debts; it has no general partners).
A corporation is a legal entity that is
separate and distinct from its owners.
Corporations enjoy most of the rights and
responsibilities that an individual possesses
and has the right to enter into contracts, loan
and borrow money, sue and be sued, hire
employees, own assets and pay taxes.
A cooperative is owned and controlled by an
association of members. It can be set up as a
for-profit or as a not-for-profit organization. This
is the least common form of business, but can
be appropriate in situations where a group of
individuals or businesses decide to pool their
resources and provide access to common
needs, such as the delivery of products or
services, the sale of products or services,
employment, and more.
 ACTIVITY: (20 MINUTES)

1. Short description about the business (one paragraph with at

least three sentences)
2. Prepare 2 smart goals for the business
3. Ownership and structure
4. List the skills and experiences you have for the business
5. At least two competitive advantages
Part 2: MARKET ANALYSIS/MARKET
RESEARCH
 Overall market (consumer/customer)
 Competitive Factors ( impact of the following:

competitors, buyers, suppliers, substitute or

alternative products)
 Other Market Influences (technological
changes, government influences, social
factors, unexpected disturbances)
 Marketing Orientation (Business Philosophy)
 Marketing Strategy
 Contingency Plans (alternative plans)
WHAT IS MARKETING?
Marketing may be defined as a social and
managerial process by which individuals and
groups obtain what they need and want
through creating and exchanging products
and value with others.
Other authors would define marketing as the
managerial process of producing, pricing,
distributing and promoting products to satisfy
the needs, wants and demands of their
respective markets.
Important terms in Marketing
Needs are states of self deprivation felt by
humans. Needs also stand for Natural
essential elements designed for survival.

Wants are forms of human needs shaped

by culture and individual personality. These
pertain to the preferences of people
regarding their survival requirements.
Demands are simply needs and wants that are
backed up by consumer purchasing power. No
matter how strong the need or want of the
market for the product, if they do not have the
money to buy such product , marketers
normally will not make the product available.

Markets are simply customers and consumers

of a business. Technically, customers are the
buyers of the product while consumers are end
users of the product.
Markets are characterized by:
1. Groups of people
2. With money to buy; and
3. Willingness to spend this money they
have.

Without these characteristics, target group

could not be considered a market.
Products are bundles of attributes and benefits
designed to be offered to buyers to satisfy
their needs, wants and demands. Products
may be termed goods, if they are tangible and
services if generally intangible.

Customer Value is technically defined as the

difference between what the customer gains
from the product and what the customer loses
from the costs of acquiring such product.
Customer satisfaction is the extent to which
product tends to meet the expectations the
buyers of a product which they bought to fulfill
their need and want.

Quality originally refers to the product’s

freedom from defects.

Exchange is known as the act of obtaining a

desired object from someone by offering
something in return.
Transactions refer to an agreement
between two parties where both parties
give up something to receive something
else. Usually the determining factor before
transaction is consummated between a
buyer and seller in the agreement on the
price of the product
 Market Research
O Is a system for collecting, recording and
analyzing information about the customers,
competitors, products and services.
 Identify your market
Customer are the people or organization who
buy the product or services companies offer.
Note:
Before establishing your new enterprise, you will
have to determine who your primary customers
are and whether these customers are willing to
buy your product or service
Understanding people needs and wants will
allow you to identify business opportunities
 Geographic data
MARKET SEGMENTATION Demographics data
Since the market are often
too large it is impossible to Psychographics data
please every one in the
market Segmenting a target Used based data
market helps you develop a
product/service that will meet
specific customer needs

Sample Customer Profile for a Sporting Goods Store

• Individual 23 to 52 years of age

• Participates in sports
• Wants good quality sports equipment
• Looks for good prices
• Lives in Dagupan or near Metro Dagupan
• Average household income of P250,000 year.
 Secondary
Primary 1. Publication

2. Books
1. Survey

2. Observation { 3. Information on

websites
3. Focus Group 4. Trade

Magazines and
journals
5. Newspaper

articles and
Where to get data? statistics
To identify the target market for your product or service,
you will need to answer the following questions :
1. Who is my potential market? Are my customers
individuals or companies?
2. If my customers are individuals, how old they
are? How much money they earn? Where they
live? How do they spend their money?
3. If my customers are companies, what industries
are they in? Where are those companies located?
4. What needs or wants will my product or service
satisfy?
5. How many potential customers live in the area
in which I want to operate?
6. What is the demand for my products or services?
7. Where do these potential customers currently
buy the products or services I want to sell them?
8. What price are they willing to pay for my
products or services?
9. What can I do for my customers that other
companies are not already doing for them?
Identify your target market and prepare a customer
profile. Use the guide question given
(15 minutes only)
 Know you Competition
Direct Competition
Indirect Competition
 Competitors analysis
1. Make a list of your competitors
2. Summarize the products and prices offered by
your competitors.
3. List each competitor’s strengths and weaknesses
4. Find out the strategies and objectives of your
competitors
5. Identify the threats to your business from the
competition.
 Competitors Analysis
Competit Price Location Facility Strength Weakness Strategy
or
Standard 80 Excellent Good Excellent Car wash Target a
Car Wash location not easily different
accessible market
Clay Car 65 Fair Good Low price Location Target a
wash different
market
Ray’s 65 Good Fair Low price Facility Target a
Wash and different
Go market
Royal Car 100 Fair Excellent Excellent Location, Offer
Wash facility high price lower
prices,
better
service,
more
convenien
t location
PREPARE YOUR GROUP’S
COMPETITORS ANALYSIS
 T S
P U
U T
O
OF
O N
A TI
N T
S E
E
PR
 Overview of the Previous Topics
• What would you do?- focus on Business ethics
• Look Before U Leap- focus on importance of planning
• Definition of the business plan
• Why we need to prepare a business plan
• Basic elements of the business plan
• Preliminaries of the business plan
• Introduction/ the business
• Factors to consider in identifying competitive edge of the enterprise
• Legal structures of the business (sole, partnership, corporation and
cooperative)
• Market analysis/market research
• Important terms in marketing
• Identifying target market
• Market segmentation strategies
• Market profiling (activity)
• Competition (direct& indirect)
• Competitors analysis
• Product Management (branding, labeling,
packaging)
• Pricing (objectives, factors and strategies)
• Promotion (strategies)
• Locating business
• Finance (financial statements)
 Product Management
Consumers buy a product because it meets their
needs. However, there is much more to a product
than consumers may realize.
The many aspects of a product that a business must
spend time developing and managing includes:
Branding
Packaging
Labeling
positioning
“You have to make your product stand out
from all the others in the market”
Brand is the name, symbol or design used to
identify your product.
Package is the box, container, or wrapper in
which the product is placed.
Label is where information about the
product is given on the package.
 PRICING
The PRICE is the actual amount a
customer pays for product or service.

Note: The price must be low enough to

encourage customer to buy from you, not
from your competitors but high enough
that revenues exceed expenses.
 Things to consider in setting PRICE
OBJECTIVES
1. Return on Investment (ROI) is the
amount earned as a result of the investment
and usually expressed as a percentage.
Ex. You invested P5000 in your smoothie
business, you want your business to have 15%
return then you have to price your product in a
way that you will earn P750, since
P5000x.15=P750
2. Market Share is another consideration when
setting pricing objectives. Market share is a
business percentage of the total sales
generated by all companies in the same
market. The total market for a product must be known
in order for a market share to be determined.
Example: If Jana’s community is spending P1,750,000 a
year on fast food and Jana’s store sells products
amounting of P192,500, their market share will be 11%
Amount of Sales/ Total Market = Market Share
P192,500/1,750,000= 11%
(your objective in pricing your product depends on
target market share)
 Determine a Price for a Product

• Demand –Based Pricing

– Pricing that is determined by how much
customers are willing to pay for the product. This
is determine through survey.
• Cost based pricing
- is determined by using the whole sale cost of an
item as the basis for the price charged
You can either mark up or mark down your price.
 Price a Service or an Idea
When setting the price for a service, it is important consider not only the
cost of any items used in providing the service but also the amount of
time and anything that is included with service.
1. Time based Pricing- the price to charge for the
services can be determined by the amount of time it takes
to complete the service. A service provided must decide
whether there will be a separate charge for the material or
materials will be included.
2. Bundling- services are bundled, or combined under
one charge, rather than making the customer pay for each
individual part of the service.
 Pricing Strategies
1. Introductory Price
 Price Skimming
Market Penetration Pricing
2 Discount Price
 Cash discounts (cash basis)
Quantity discount (volume)
Trade Discounts (Patrons)
Seasonal Discount (out of season products)
3. Psychological Price
Prestige pricing -selling at a high price in order to create a
feeling of superior quality and social status. The customer believe
that the higher the price the higher the quality of goods.

Odd/even Pricing- customer have this feeling that when price

ends with odd number it sounds like cheaper compared to an
even
Price Linings - offering different level of prices for a specific
category based on their features and quality.
Promotional Pricing - this is offering lower price for limited
period of time. This is temporarily since it will return to normal
when promotion ends.
Multiple Unit Pricing- pricing items in multiple (like just
bundles) like 100 for 3.
 What Would you do?
You are looking for a vendor to supply your new
business with a computer, a printer, and a copy
machine. You have contacted several vendors offers
you “special” deal if you accept his quote before the
end of the day. In addition to a competitive price for
the equipment, he is offering you tickets to an PBA
game in a private stadium suite. He wants you to
agree to the deal without signing a contract and has
asked that you pay him in cash. What would you do?
 PROMOTION STRATEGIES
Advertising is a form of promotion designed to use
TRIMP formula (TV, Radio, Internet, Mobile and Print Media)

Advertising keeps your product in the public’s eye by creating

a sense of awareness. Advertising should help business
convey a positive image.
Once you choose the message, you will need to decide which
advertising medium to use. To choose the medium, you will
have to consider cost and effectiveness in reaching your
target audience
• Online advertising has become widely used by
the business. Online technology lets
businesses interact with customers through
online chat rooms, blogs, and newsletters.
Types of Online Advertising
Banner Ad – A graphic image or animation displayed with in a
rectangular box across the top or down the side of the web page
Floating Ad- An ad that moves across the screen or floats above the
page content
Wallpaper Ad- An ad that changes the background of the page being
viewed
Trick Banner – A banner ad that looks like a dialog box with buttons,
often n appearing like an error message or an alert
Pop Ad- A new window that opens in front of the current one,
displaying and advertisement
Paying for Online Advertising
Cost Per Mil (CPM) – the charge is based on the
exposure of the message to specific audience.
CPM are prices per thousand viewers reached
with the message.
Cost per click (CPC) – the charge based on the
number of clicks on the advertisements.
Cost per Action (CPA)- the charge based on the
user completing a form for newsletters, or taking
some action that will lead to sale.
• Sales Promotions these are
promotions that heavily relies on promotional
gimmicks (buy one take one, holiday sale,
midnight sales, volume sales, eat all you can
Direct Selling designed to use person to
person selling techniques. This is recommended
for technical and expensive products that
require an expert or specialist to explain the
product mechanics.
• Public Relations is a promotion that
generate public awareness through publicities,
interviews, press conference, free product
endorsements, sponsorship and etc.
 A. Brand Name, Package, label
B. Identify pricing strategy to use

C. Develop a simple advertising

campaign
(TV advertisement with jingle)
d. Prepare simple tag line

Activity
PRESENTATION OF
OUTPUTS
 CHECKPOINT

What are some factors you should

consider when selecting a site for your
business?
 What Went Wrong??
Jim Teal opened Jimmy T’s Rib House, and within the first
ten months, he was making profits. One day a commercial
realtor advised Jim that a restaurant four times the size of
the current space was on the market. The realtor said he
could get Jim a good deal on the lease if he liked it.
Jim knew the city where the building was located had no
other barbeque rib restaurant. He researched and verified
the population numbers and demographics for the
geographical area. It was in a good neighborhood, on a
main road, just off the freeway. He even did a traffic flow
study, and the numbers were terrific. He leased the
building, and the grand opening went well.
Then the business began to drop off.
Although there was a plenty of traffic, Jimmy
T’s was on the wrong side of the street.
Customers coming west from the freeway exit
could not cross the center island, and there was a
“NO U Turn” sign at the corner, When Jim tried
to improve visibility and signs to attract more
freeway traffic, he found that city ordinances
prevented it. After six months, Jim took his loss
and closed the new restaurant
 Think Critically…
1. What questions about location should Jim
have asked the realtor before assuming the
lease?
2. Who else should Jim have questioned about
the location?
 FINANCING BUSINESS
Financing needs will vary depending on the size
and type of business you start.

The first thing a first time entrepreneur should

do is to prepare the start up cost and personal
financial statement.
 Startup Cost
Itemizing your startup cost is an important part of
determining how much money you need to start your
business. This includes (but not limited to)
Equipment and supplies, such as computers, printers,
telephone and paper
Furniture and Fixtures such as desk and chairs
Vehicles such as delivery truck
Remodeling such as electrical and plumbing expenses
Legal and accounting fees
Licensing fees
Sample Startup Cost
Personal Financial Statement

In order to determine if you have the resources

you need to finance your business, begin by
assessing your Net worth.
Net worth is the difference between what
you own (assets) and what you owe (liabilities).
It is also called equity.
To know your net worth you have to prepare
your personal financial statement
Sample
There are two types of financing available to the
business – equity and debt financing
When obtaining financing, you must consider your
company’s DEBT TO EQUITY RATIO or the relation
between the money you have borrowed and the
money you have invested in the business (equity).
This ratio measures how much money a company
can safely borrow over time.
The formula
TOTAL LIABILITIES ÷TOTAL EQUITY
 A high ratio indicates that a business is mostly
financed through debt, while low ratio indicates
that a business is primarily financed through
equity.

Note:Investors normally look into this and prefer

low debt to equity ratios (LDER). HDER
indicates that a company may not be able to
generate enough cash to meet its debt
obligations.
Equity Capital is a money invested in a
business in return for a share in the profits of
the business.

Debt Capital is money loaned to a business

with understanding that the money will be
repaid, usually with interest.
 Bank loans may be secured or
unsecured
Secured loans. Loans that are backed by
collateral. Collateral is property that the
borrower forfeits if she defaults on the loan.

Unsecured loans. Loans that are not guaranteed

with collateral. These loans are made only to
banks most creditworthy customers.
Pro Forma Financial Statements

The financial statements you prepare for your

business plan are pro forma financial statements
and are based on projections.
The cash flow, income statement and balance
sheet all tell you something about the condition
of your business.
 CASH FLOW STATEMENT
is an accounting report that describes the way
cash flows into and out of your business over a
period of time. Because it deals with actual cash
coming in and going out of a business, it shows
how much money you have available to pay your
bills and whether you have enough money
operating your business.
Cash receipts include cash sales, collected
accounts receivable, tax refunds and fund from bank
loans and investors

Cash Disbursement may include payments

for cost of goods (what you pay to manufacturers or
wholesalers to get the product to sell), accounts
payable, rent, salaries, taxes, office supplies, utilities,
insurances, advertising, loans and other expenses.
Formula:
Cash receipts – Cash disbursements= Net Cash Flow
Note: You should prepare monthly pro forma
cash flow statements for first year and annual
statements for the second and third year.

Many entrepreneurs prepare two types of cash

flow statement – for best scenario (high cash
receipts and low disbursements) or worst
scenario (lower cash receipts and higher
disbursements)

sample
 Income Statement
Shows the business revenues and expenses
incurred over a period of time and the resulting
profit or loss. For this reason it is sometimes
called profit/loss statement.

While cash flow statement deals with actual cash

coming in and going out, the income statement
shows revenues that you have not yet received
and the expenses that you have not yet paid.
 The following are the parts of pro
forma income statement
Revenue – the value of the goods/services a business sells to the
customer (revenue=quantity x price)
Cost of good sold – the cost of inventory a business sells during a
particular period of time
Gross Profit – the difference between revenue and cost of goods sold
Operating expenses – expenses necessary for the operation of the
business
Net income before taxes – amount remaining after the cost of goods
sold and operating expenses are deducted from revenue
Net income/loss after tax – amount remaining after payment of taxes.

sample
 Balance Sheet
Is a financial statement that list what a business
owns, what it owes and how much it is worth at
a particular point in time. It is based on the
accounting equation:
ASSETS = LIABILITIES + OWNER’S EQUITY
Assets are items of value owned by the business
Current Assets, often referred as the liquid
assets because it can be converted to cash
easily. It includes cash, inventory, unused
supplies, stock, bonds and etc. Another special
type of current asset is account receivables (A/R)
Fixed Assets also referred as illiquid assets
because they cannot be converted into cash
easily.
Reduction in Assets
Some customers fail to pay for the
merchandise they purchased on credit. The
amount a company estimates it will not receive
from customers is known as allowance for
uncollectible accounts. This amount is
subtracted from the assets (A/R).
The lowering of an asset’s value to reflect its
current worth is called depreciation. It is
deducted to fixed assets.
Liabilities
Longer-term liabilities are debts that are
payable over a year or longer

Current liabilities are debts due to paid in full in

less than one year.

Sample
 Activity
Prepare a Forma Financial Statements for your
business
Pre start up cost
Cash Flow
Income Statement
Balance Sheet
SYNTHESIS
Earning while
Learning
Enjoying while
Working