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FOREWORD

This module is an innovative tool produced to meet the standards of the Most Essential
Learning Competencies of the K to the 12 curriculums in providing our teachers and learners relevant
and localized content. It serves as a supplementary material to current K t o12 resources where
contextualization is a priority.

This module is a compilation of knowledge from different resources dedicated to our learners
who are the central figure of the educative process. They are the author’s inspiration in putting this
endeavor into fruition amidst the challenges in times of pandemic assuring that content is rightfully
delivered. Every activity in this module is carefully designed bearing in mind the best interest of the
learners. May this module be of great value in addressing the need of the learners to become a young
entrepreneur in helping the economy of the country.

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Table of Contents
Foreword
Introduction
QUARTER 1
Lesson 1. Career Opportunities in Entrepreneurship .............................................................................. 7
Define Entrepreneurship
Qualities of an Entrepreneur ................................................................................................ 8
Disciplined
Confidence
Open minded
Competitive
Creativity
Determination
Strong people skills
Strong work ethic
Passion
Activity ............................................................................................................................... 10
Importance of an entrepreneur ......................................................................................... 12
Functions of an entrepreneur ............................................................................................ 13
Risk bearing functions
Administrative and decision-making function
Distributive functions
Test Yourself ....................................................................................................................... 15
Jobs opportunities for entrepreneurship as a career ......................................................... 15
What kind of education I need?
What are the different careers in Entrepreneurship?
Test Yourself ....................................................................................................................... 17
Remembering what you’ve learned? ................................................................................. 18
Lesson 2. Recognizing a potential market ............................................................................................ 19
Setting up a small business ................................................................................................ 19
Who can start a business?
How can I arrange my capital?
How can I select the line of right business for me?
What is the right location of my business?
How to select your business workforce?
Test Yourself ....................................................................................................................... 21
Importance of potential market ......................................................................................... 22
Value Proposition ............................................................................................................... 22
Understanding a value proposition
Requirements of a value proposition
How to develop a value proposition?
7 Proven templates for writing a value proposition that work
Activity ................................................................................................................................ 29
What to sell: How to select the right product for your business ........................................ 30
Activity ................................................................................................................................ 32
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 Writing a detailed lesson plan............................................................................................. 34
Executive Summary
Opportunity
Execution
Company overview and Team
Financial Plan
Appendices
Activity ................................................................................................................................ 55
Remembering what you’ve learn? ..................................................................................... 57
Lesson 3. Recognizing the importance of marketing mix in the development of marketing strategy .. 58
Marketing mix defined ....................................................................................................... 58
4P’s of Marketing mix ........................................................................................................ 59
Product
Price
Place
Promotion
Test yourself ....................................................................................................................... 63
7P’s of Marketing mix ........................................................................................................ 65
People
Process
Physical Evidence
Developing a Brand Name ................................................................................................. 69
Activity ................................................................................................................................ 71
Remembering what you’ve learn? ..................................................................................... 79
QUARTER 2
Lesson 4. Demonstrate understanding of the 4M’s of Operation .......................................................... 80
4M’s of Operation ............................................................................................................... 80
Method
Manpower
Machines
Materials
Test Yourself ....................................................................................................................... 88
Developing a Product Description....................................................................................... 89
Writing effective Product Description
Activity ................................................................................................................................ 93
Creating a Product Prototype ............................................................................................. 94
Why Prototype?
Building your product’s first prototype
Activity ................................................................................................................................ 98
Testing the Product Prototype .......................................................................................... 100
Activity .............................................................................................................................. 102
Validating the service description of the product with potential customers to determine its
market acceptability ......................................................................................................... 103
Activity .............................................................................................................................. 105
Select/pinpoint potential suppliers or raw materials and other inputs necessary for the
production of the product or service ................................................................................ 106
Activity .............................................................................................................................. 111
Value/Supply Chain in relation to the business enterprise ............................................... 112
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 Value Chain vs. Supply Chain
Value Chain
Supply Chain
Activity .............................................................................................................................. 114
Test Yourself ..................................................................................................................... 117
Recruit the qualified people for one’s business enterprise ............................................... 119
The Recruitment Process
Activity .............................................................................................................................. 126
Developing the Business Model ........................................................................................ 127
The Traditional approach to a business model
The 9 building blocks of a business model canvass
Activity .............................................................................................................................. 133
Forecast the revenue of the business ............................................................................... 134
Activity .............................................................................................................................. 140
Test Yourself ..................................................................................................................... 140
Forecast the cost to be incurred ....................................................................................... 141
Activity .............................................................................................................................. 142
Compute for Profit ............................................................................................................ 144
What is Profit?
How to calculate Profit?
Gross Profit
Limitations of using Gross Profit
Activity .............................................................................................................................. 149
Remembering what you’ve learned? ............................................................................... 150
Lesson 5. Manifest understanding of starting and operating a simple business ........................152
Presentation of Business Plan ........................................................................................... 152
Activity .............................................................................................................................. 155
Implementation of Business Plan...................................................................................... 157
Identify the reason for keeping business record ............................................................... 158
Perform Bookkeeping Task ............................................................................................... 160
What is Bookkeeping?
Activity .............................................................................................................................. 166
Identify where there is a profit or loss for a business ....................................................... 169
Understanding Profit and Loss (P&L)
Why do Profit and Loss Statements matter?
Activity .............................................................................................................................. 172
Balance Sheet ................................................................................................................... 173
Importance of Balance Sheet
Activity .............................................................................................................................. 176
Cash Flow Statement ........................................................................................................ 178
Activity .............................................................................................................................. 182
Generate an overall report on the activity ........................................................................ 184
Activity .............................................................................................................................. 184
Remembering what you’ve learned? ............................................................................... 188
References

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 INTRODUCTION
To make a living we need to earn. We may be engaged in
different activities through which we earn a livelihood for our
family. What will you do to make a livelihood for your family? Will you apply in a company or
organization to earn a living or you would like to start having your own business to earn for a living?
The activity of setting up a business or businesses, taking on financial risk in the hope of profit is
called entrepreneurship (Oxford Dictionaries). Can you give different work from the members of
your family that earns a living? Sir Wacks and his wife Ma’am Mary Eresa Venzon is a Teacher that
teaches in school, a lawyer works in a law firm, an accountant practices in an accounting firm, a
doctor in a government and private hospital, a waiter serves in a restaurants, Mang Jun is a
utility/guard that works at New Cabalan Senior High School. These are the different examples of
people who are employed to earn through wages or salaries given by their employers. This is what
we called a wage-employment. On the contrary, a store owner, online selling, doctor and dentist
having their own clinics. These are an example of what we called a self-employed. A President/CEO
who works in a business concern to earn for their living like Lucio Tan’s Philippine Airlines and
Philippine National Bank, Henry Sy and his Family who owns biggest mall in Asia, Ms. Mylene
Abiva of Felta Multi Media, Inc., and other popular and known people earn money by running their
own business. They are several self-employed individuals who create jobs not just for themselves
but for others. They may be termed as “Entrepreneurs”, a person who organizes and operates a
business or business, taking on greater than normal financial risk to do so.
From this lesson you will learn in detail about the subject entrepreneurship. What is the
importance and its function? You will learn the different qualities of an entrepreneur and their ability
to set up a small-scale business that may be useful in the future especially in these times of pandemic.

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 QUARTER 1

Lesson 1. Career Opportunities in

CONTENT STANDARDS:
Entrepreneurship
The learner demonstrates
understanding of key concepts,
underlying principles, and core
Objectives: In this lesson, student will be able to:
competencies in
Entrepreneurship
1. Explain the concept of entrepreneurship;
PERFORMANCE STANDARDS:
2. Describe the essential qualities of a successful entrepreneur;
The learner independently
creates/provides a quality and 3. Recognize the importance of being an entrepreneur;
marketable product and/or 4. Identify the functions of an entrepreneur;
service in Entrepreneurship as
5. Explore the job opportunities for entrepreneurship as a career
prescribed in the TESDA
Training Regulation.

The activity of setting up a business or businesses, taking

on financial risk in the hope of profit is called ENTREPRENEURSHIP
entrepreneurship (Oxford Dictionaries). It is an act of being DEFINED

an entrepreneur which define as a person who organizes and operates a business or businesses, taking
on greater than normal financial risk to do so. It can also be defined as “one who undertakes
innovations, finance and business
acumen in an effort to transform
innovations into economic goods”.
This makes form part of creating a
new business opportunity that they
willingly undertake conception,
organization, and management of a
productive activity with all the
possibility of taking risk and seeks
profit as a compensation.

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As an entrepreneur you must be a creative innovator who accepts risk in losing profit by investing
your capital. He should know how to generate business and job opportunity, easy to think of a
solution and know how to value its customers. As an entrepreneur you need to possess some qualities
to be successful. Let us now know about the qualities of a successful entrepreneur. There may be
many qualities needed to successfully run an enterprise. However, the following qualities are
considered important.

1. Disciplined
QUALITIES OF AN ENTREPRENEUR These individuals are focused on making
their businesses work and eliminate any
hindrances or distractions to their goals. They have overarching strategies and outline the tactics to
accomplish them. Successful entrepreneurs are disciplined enough to take steps every day toward
the achievement of their objectives.
2. Confidence
The entrepreneur does not ask questions
about whether they can succeed or
whether they are worthy of success. They
are confident with the knowledge that
they will make their businesses succeed.
They exude that confidence in everything
they do.
3. Open Minded
Entrepreneurs realize that every event and
situation is a business opportunity. Ideas
are constantly being generated about workflows and efficiency, people skills and potential new
businesses. They have the ability to look at everything around them and focus it toward their goals.
4. Self-Starter
Entrepreneurs know that if something needs to be done, they should start it themselves. They set the
parameters and make sure that projects follow that path. They are proactive, not waiting for someone
to give them permission.

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5. Competitive
Many companies are formed because an entrepreneur knows that they can do a job better than
another. They need to win at the sports they play and need to win at the businesses that they create.
An entrepreneur will highlight their own company’s track record of success.
6. Creativity
One facet of creativity is being able
to make connections between
seemingly unrelated events or
situations. Entrepreneurs often come
up with solutions which are the
synthesis of other items. They will
repurpose products to market them to
new industries.
7. Determination
Entrepreneurs are not thwarted by
their defeats. They look at defeat as an opportunity for success. They are determined to make all of
their endeavors succeed, so will try and try again until it does. Successful entrepreneurs do not
believe that something cannot be done.
8. Strong people skills
The entrepreneur has strong communication skills to sell the product and motivate employees. Most
successful entrepreneurs know how
to motivate their employees, so the
business grows overall. They are
very good at highlighting the benefits
of any situation and coaching others
to their success.
9. Strong work ethic
The successful entrepreneur will
often be the first person to arrive at
the office and the last one to leave.
They will come in on their days off to
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make sure that an outcome meets their expectations. Their mind is constantly on their work, whether
they are in or out of the workplace.
10. Passion
Passion is the most important trait of the successful entrepreneur. They genuinely love their work.
They are willing to put in those extra hours to make the business succeed because there is a joy their
business gives which goes beyond the money. The successful entrepreneur will always be reading
and researching ways to make the business better. Successful entrepreneurs want to see what the
view is like at the top of the business mountain. Once they see it, they want to go further. They know
how to talk to their employees, and their businesses soar as a result.

Entrepreneurial competencies refer to the characteristics

of an entrepreneur. It requires certain qualities or
characteristics for establishing and running a business
enterprise. In your own words, explain the different
qualities you need to acquire to become a successful
entrepreneur.

1.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

2.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

3.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

4.______________________________________________________________________________
_______________________________________________________________________________

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_______________________________________________________________________________
______________________________________________________________

5.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

6.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

7.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

8.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

9.______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

10._____________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________

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The role of entrepreneurship and
an entrepreneurial culture in
IMPORTANCE OF AN ENTREPRENEUR
economic and social development
has often been underestimated.
Over the years, however, it has become increasingly apparent that entrepreneurship does indeed
contribute to the economic development. Transforming ideas into economic opportunities is the crux
of entrepreneurship. History shows that economic progress has been significantly advanced by
pragmatic people who are entrepreneurial and innovative, able to exploit opportunities and willing
to take risks. Entrepreneurs produce solutions that fly in the face of established knowledge, and they
always challenge the status quo. They are risk-takers who pursue opportunities that others may fail
to recognize or may even view as problems or threats. Whatever the definition of entrepreneurship,
it is closely associated with change, creativity, knowledge, innovation, and flexibility-factors that
are increasingly important sources of competitiveness in an increasingly globalized world economy.
Thus, fostering entrepreneurship means promoting the competitiveness of businesses.

Its importance can be expressed in the form mentioned below: 1) Provides employment to the
people. People often hold a view that all those who do not get employed anywhere jump into
entrepreneurship, but in reality, now a days most of the business are set by those who have other
options available with them. 2) Contributes towards research and development system. Almost
2/3rd of all innovations is due to the entrepreneurs. Without the boom of inventions, the world would
have been a much dry place to live in. Inventions provide an easier way of getting things done
through better and standardized technology. 3) Creates wealth for the nation and for the
individuals as well. All individuals who search business opportunities usually, create wealth by
entering entrepreneurship. The wealth created by them plays a significant role in the development of
the nation. The entrepreneurs contribute to the economy, in the form of products, and services Their
ideas, thoughts, and inventions are also of a great help to the nation.

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 An entrepreneur frequently has to wear many hats. He has to
FUNCTIONS OF AN perceive opportunity, plan, organize resources, and oversee
ENTREPRENEUR production, marketing, and liaison with officials. Most
importantly he has to innovate and bear risk.

The main functions of an entrepreneur are grouped in three categories:

1. Risk bearing functions,
2. Administrative and decision-making functions, and
3. Distributive functions (responsibility of the organizer).

1. Risk Bearing Function

It is the most important and specific function of an entrepreneur. Every business involves some
amount of risk. The production of goods and services is always related to future demands. The future
demand is uncertain and unpredictable because it is influenced by the changes in fashion or taste and
liking of the consumers. The price structure, value of money, climatic conditions and government
policies are some other important factors that affect the demand of a commodity. All these factors
are variable and as such an exact estimation of future demand is a difficult exercise to work out.
Since this unpredictable task is undertaken by the entrepreneur; he has to bear the risk. If his
estimations prove to be wrong, then in the entire business sphere, no other factor of production shares
the loss incurred by the entrepreneur. It is the main reason why the entrepreneur becomes entitled
for the surplus that is remaining with him from the sale proceeds of the product, after distributing
the shares to other factors. This surplus is termed as profit of the business.

2. Administrative and Decision-Making Functions

a. Conceiving the Idea of Business
The entrepreneur conceives the idea of a business which suits their nature, skill and resources. They
make a thorough (intensive and extensive) study of the condition of market and business prospects.
After making a thorough study of economic viability, they decides the business that they has to start.
b. Estimation of Details of Business and Implementation of the Same
After arriving at a conclusion about the nature of business, the entrepreneur works out the details of
business, i.e., what, how and when to produce and from where the resources are to be arranged. With

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all these estimations, they make an all-out effort to give a practical shape to his plans, organizes
various factors of production and sets them to function in proper harmony.
c. Supervision and Control of Business Activities
The entrepreneur has to supervise and control the day-to-day business activities to accomplish the
business objectives. For this they properly coordinate between various factors of production. As the
risk (success or failure) of business operations directly affect the economy, they keep a vision and
control on the business affairs and avoids unnecessary expenditures. They are required to take a
numerous decision and has to get these decisions properly implemented.
d. Innovation
Innovation is one of the most important functions of an entrepreneur. An entrepreneur uses
information, knowledge, and intuition to come up with new products, new methods of reducing costs
of a product, improvement in design or function of a product, discovering new markets or new ways
of organization of industry. Through innovation, an entrepreneur converts a material into a resource
or combines existing resources into new and more productive configurations. It is the creativity of
an entrepreneur that results in invention (creation of new knowledge) and innovation (application of
knowledge to create the new products, services, or processes).

3. Distributive Functions
The entrepreneur organizes different factors of production and sets them to work. It, therefore,
becomes his responsibility to make proper allocation of funds for each factor of production, i.e., each
factor of production must be properly remunerated. The remuneration here refers to an important
decision as to what should be the share of each factor of production in the sale proceeds of the entire
product. The remuneration should be just and equitable and the payment to each factor should be
commensurate, so that each factor is fully satisfied. If the factors of production remain dissatisfied,
they will not be able to deliver their best to the entrepreneur. So, it is the entrepreneur, who has to
ultimately suffer. Hence, it is very essential for the entrepreneur to perform distributive functions
with extreme care and caution.

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 Which of the following statement is TRUE and which are FALSE?
Write your answer in the space provided.

___________1. Entrepreneur is not a risk-taker.

___________2. Entrepreneur plays the role of a business leader
___________3. Entrepreneur plays the role of an innovator
___________4. Entrepreneur promotes capital formation
___________5. Entrepreneur creates large-scale employment opportunities
___________6. Entrepreneur promotes unbalanced regional development
___________7. Entrepreneur reduces concentration of economic power
___________8. Entrepreneur does not help in wealth creation and distribution.
___________9. Entrepreneur contributes to the increase of gross national product
___________10. Entrepreneurial initiatives improve the general standard of living.

JOB OPPORTUNITIES The challenging field of entrepreneurship focuses on

developing and implementing modern techniques in a
FOR ENTREPRENEURSHIP business environment, to efficiently run an organization,
AS A CAREER manage employees, develop new products, and improve the
overall delivery of goods and services to customers around
the world. Most of the businesses that exist today started out as entrepreneurial activities, with
ambitious individuals capitalizing on a novel business idea they had.

WHAT KIND OF Several colleges offer traditional on-campus and online degrees in
EDUCATION DO entrepreneurship including Bachelor’s, Master’s and Doctoral degrees.
I NEED? Students can specialize in an area such as industrial management,
establishing new ventures and arranging finance, international business
management, strategy development, marketing, venture capital, mergers and acquisitions and
technological innovation. The core curriculum includes subjects such as microeconomics,
entrepreneurship theory, economics of technological change and organizational theory.
The field of entrepreneurship presents unique opportunities, each
WHAT ARE THE with its individual challenges and benefits. A career in
DIFFERENT CAREERS IN entrepreneurship can be made in virtually any field, depending on
ENTREPRENEURSHIP? your interests. Entrepreneurship graduates can find work as
commercial bankers, franchise operators, research and
development executives and business consultants. Most entrepreneurs, however, remain self-
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employed, preferring to be their own bosses. Over the recent years, opportunities have also been
growing in IT and engineering, presenting a varied set of growing prospects to entrepreneurship
majors.

How long does it take to start a career in entrepreneurship?

The amount of time it takes to make it as an entrepreneur depends on the field you choose to venture
into. Since entrepreneurs can exist in any sector of the economy, there is a vast and almost never-
ending list of paths to choose from. Therefore, you cannot define a single timeframe for careers in
entrepreneurship.

What are the requirements for a career in entrepreneurship?

The first thing you need to do is find the right business idea and get education according to it. You
will then need to make a business plan and define your target market. Once you have established
these, you should start networking and selling your idea into your targeted market.

How much can I make with a career in entrepreneurship?

The salary figures for entrepreneurs vary according to the field they venture into and how well their
idea sells in the market. If your idea is unique and useful, you might end up making a lot of money.

Reference: Careers in Entrepreneurship, Entrepreneurship Careers. (n.d.). Retrieved July 21, 2020, from
http://www.excite.com/education/business/entrepreneurship/careers

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 1. Define Entrepreneurship.
_________________________________________________________________________
_________________________________________________________________________
_____________________________________________________________
2. State the importance of entrepreneur.
_________________________________________________________________________
_________________________________________________________________________
_____________________________________________________________
3. Choose one of the qualities of an entrepreneur that you think best describes you. Explain.
_________________________________________________________________________
_________________________________________________________________________
_____________________________________________________________

4. Explain the various functions of an entrepreneur.

_________________________________________________________________________
_________________________________________________________________________
_____________________________________________________________

5. What are the factors that you would like to consider in putting up your own business?
_________________________________________________________________________
_________________________________________________________________

1. Entrepreneurship is an activity of setting up a business and taking

financial risk to earn profit.

2. An entrepreneur is a person who organizes and operates a business.

3. Successful entrepreneurs are disciplined enough to take steps every

day toward the achievement of their objectives.

4. The entrepreneur has strong communication skills to sell the product

and motivate employees.

5. Entrepreneurship provides employment, contributes development to the economy of the

country and creates wealth to individuals.

6. Entrepreneur conceives the idea of a business which suits their nature, skills, and resources.

7. Innovation is one of the most important functions of an entrepreneur

8. Commercial bankers, Franchise operators, Research and Development executives and

Business consultants are among the career pathway in studying entrepreneurship

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 QUARTER 1

CONTENT STANDARDS: Lesson 2. Recognizing a potential market

The learner demonstrates K to 12 CG Code: (TLE_ICTAN11/12PC-Ia-1)
understanding of key
concepts, underlying
Objectives: In this lesson, student will be able to:
principles, and processes
of developing a business
plan 1. Analyze the market need;
2. Determine the possible product or services that will meet the need;
PERFORMANCE
3. Screen the proposed solution/s based on viability, profitability, and customer
STANDARDS:
The learner independently
requirements;
or with his/her classmates 4. Select the best product or service that will meet the market need; and
presents an acceptable 5. Finalized an acceptable detailed business plan.
detailed business plan

You have learned that in entrepreneurship a person SETTING UP A

(entrepreneur) who set up a business must recognize its SMALL BUSINESS
financial risk. One must make their business work by
eliminating any hindrances or distractions to
their goals. They must overarch strategies and
outline the tactics to accomplish them.
Successful entrepreneurs are disciplined enough
to take steps every day toward the achievement
of their objectives. If you possess the quality of
an entrepreneur to perform a business venture
you may now start having your small business.
But before you start your business let us study
various factors required to be considered while
setting up any small business.

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 Anyone can start a small business unit. He may be an existing
WHO CAN START A entrepreneur or a new one, having a business background or not
BUSINESS?
educated or uneducated from rural area or urban area.

The entrepreneur has to analyze and find out the amount and the
HOW CAN I
duration of finance required as well as the duration for such ARRANGE MY
finance is needed in the business. The entrepreneur requires CAPITAL?
money to buy machinery, building, raw material, pay wages to
labor, etc. Money spent on buying machinery, building, equipment, etc. is known as fixed capital.
On the other hand, money spent on buying raw materials and paying wages and salaries, rent,
telephone and electricity bills,
etc. is known as working capital.
The entrepreneur has to arrange
for both fixed as well as working
capital for his business. The
finance can be raised by self-
contribution or by borrowing
from banks and other financial
institutions. Money can also be
borrowed from friends and
relatives.

The process of launching a business begins when the entrepreneur

HOW CAN I SELECT
THE LINE OF RIGHT start thinking about a line of business, which can be undertaken by
BUSINESS FOR ME? him. He may consider business opportunities as per the market
demand. He may go for an existing product or a new product. But
before taking any step he has to ascertain the profitability of the business and the amount of capital
investment. Having estimated the profitability and risk involved, the entrepreneur has to decide which
line of business could be desirable to pursue.

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Special care should be taken while selecting the location of the
business. An entrepreneur can start business in his own premises WHAT IS THE RIGHT
LOCATION OF MY
or in a rented premise. It can be located at a marketplace or in a BUSINESS?
commercial complex or in an industrial estate. While deciding
the location, the entrepreneur should consider various factors like sources of supply of raw material,
nearness to the market, availability of labor, transportation, banking and communication facilities,
etc. Factories should be preferably located near the source of raw material and at a place that is well
connected with rail and road transport facility. A retail business should be started near residential
area or in a marketplace.

An entrepreneur cannot run the business alone. He has to employ

HOW TO SELECT
YOUR BUSINESS people to help him. Skilled and Semi-skilled workers have to be
WORKFORCE? recruited particularly for manufacturing work. Before starting the
business, the entrepreneur must find out whether he will be able to
get the right type of employees for the activities involved.

Which of the following statements are True and which are False?
1. ____________A capital is needed in setting up a business.
2. ____________A business can be started in his residence or rented premises.
3. ____________An entrepreneur should have its business far away from the location of
customers.
4. ____________There is no need for a business to have its workforce.
5. ____________A business can only be run by individuals.
6. ____________Only the rich people can have a business.
7. ____________Sole proprietorship is run by many people.
8. ____________Skilled workers are needed to have a successful business.
9. ____________A retail business should be started near residential area or in a marketplace.

10. ____________ The entrepreneur requires money to buy machinery, building, raw materials
and pay wages.

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IMPORTANCE OF Now that you’re familiar on how to set up your small business. It is
POTENTIAL now time for you to identify and recognize your potential market by
MARKET
studying its definition and importance. A potential market is the part of
the market you can capture in the future. It includes the demographic groups of customers that will
purchase your product or services in the future who might become your regular customers from the
expansion of your business. A target customer that make up its share in the available market is to
be set by every business owner. The best ways to grow your business is to identify your potential
market that you can begin to target. The potential market allows you to:
1. Identifying new customers to ensure the future of your business.
2. Think proactively about ways for your business to grow and change.
3. Show the potential of your business to investors or collaborators.
4. Increase your profit.
5. Create a strategic plan when there will be changes in the economy or market.

In identifying your potential markets, you are not just increasing your share for today but ensuring
the increase of your profit in the future. If you are an ambitious entrepreneur with a promising
product, you probably can’t wait to show it to potential customers. But before you go into “sales
mode,” you might want to sit down at your desk, take a look at your value proposition and do some
research.

A value proposition refers to the value a company promises to deliver VALUE

PROPOSITION
to customers should they choose to buy their product. A value
proposition is part of a company's overall marketing strategy. The value proposition provides a
declaration of intent or a statement that introduces a company's brand to consumers by telling them
what the company stands for, how it operates, and why it deserves their business. A value proposition
can be presented as a business or marketing statement that a company uses to summarize why a
consumer should buy a product or use a service. This statement, if worded compellingly, convinces
a potential consumer that one particular product or service the company offers will add more value or
better solve a problem for them than other similar offerings will.

21
 A value proposition stands as a promise by a company to a customer
UNDERSTANDING A or market segment. The proposition is an easy-to-understand reason
VALUE PROPOSITION why a customer should buy a product or service from that business.
A value proposition should clearly explain how a product fills a
need, communicate the specifics of its added benefit, and state the reason why it is better than similar
products on the market. The ideal value proposition is to-the-point and appeals to a customer's
strongest decision-making drivers.

A company's value proposition communicates the number one REQUIREMENTS OF

A VALUE
reason why a product or service is best suited for a customer
PROPOSITION
segment. Therefore, it should always be displayed prominently
on a company's website and in other consumer touch points. It also must be intuitive, so that a
customer can read or hear the value proposition and understand the delivered value without needing
further explanation. Value propositions that stand out tend to make use of a particular structure. A
successful value proposition typically has a strong, clear headline that communicates the delivered
benefit to the consumer. The headline should be a single memorable sentence, phrase, or even a
tagline. It frequently incorporates catchy slogans that become part of successful advertising
campaigns. Often a sub headline will be provided underneath the main headline, expanding on the
explanation of delivered value and giving a specific example of why the product or service is superior
to others the consumer has in mind. The subheading can be a short paragraph and is typically between
two and three sentences long. The subheading is a way to highlight the key features or benefits of
the products and often benefits from the inclusion of bullet points or another means of highlighting
standout details. This kind of structure allows consumers to scan the value proposition quickly and
pick up on product features. Added visuals increase the ease of communication between business
and consumer. In order to craft a strong value proposition, companies will often conduct market
research to determine which messages resonate the best with their customers.

A good value proposition should allow companies to increase their

HOW TO DEVELOP conversion rates which in turn lift revenue. However, the value
A VALUE
proposition creation process is not something that can be hastily
PROPOSITION?
done. It should loosely follow a series of actions that flesh out what
the company can offer to customers.

22
1. Understand the benefits customers receive
To start creating a value proposition, leaders need to understand how they create value.
Therefore, the benefits the company provides to the consumers should be listed. Everything from
the product’s use, customer service, delivery processes, and any other component should be on
the list. The benefits the company and its products and services provided to consumers should be
something each employee should be able to pinpoint easily.

2. Connect benefits to the value

Once leaders have a complete grasp on the benefits offered, they should then link these benefits
to the value the company creates for customers.

- How do the benefits help the customer?

- Does the product address a problem or need?
- Does the buying process significantly reduce the purchase time?
- How can customers expect to benefit from what the company offers?

3. Target your audience

Every businesses product is not for every consumer. Leaders need to sharpen the focus and
decide who is the target segment for the product or service. This information can include
location, demographics, income, occupation, hobbies, and many other factors. Knowing who the
audience is will help leaders decide which benefits should be mentioned and which might be best to
leave out. It also creates a way to better link benefits to value.

4. Differentiate the Product and Service

This might be one of the most critical components of all. At this point, leaders need to work with
their teams to see how they are different from competitors. This step revolves around the question
of why consumers should pick this company over someone else’s. It is a good idea to look at
direct competitors and note what they do similarly, and how the company either does it better or
more efficiently. Consumers need to know why they should look over another brand for someone
else’s.

23
5. Put everything into a clear and easy to read sentence
Through research and analysis, leaders should emerge with an idea of what to include in their
value proposition. The purpose of this statement is not to become a long and arduous read, but
it should quickly inform customers of who the company is. Customers should be able to read
over the value proposition in five seconds to get a feel for the benefits and value the business
offers. If the statement cannot be whittled down to a sentence, then leaders should go back to the
drawing board to cut out features that may not be needed.

6. Place it everywhere
Once the leader and the team agree on a value proposition, then leaders need to work with
marketing to get this statement as many places as possible. It should be included in a website,
logos, email newsletter signatures, on a company brochure, and everywhere possible.

7. Test its effectiveness

Leaders need to assess how the value proposition is adding in increasing revenue and bringing
in new customers. Also, leaders should be aware of how the value proposition is changing the
perception of the company.
- Have conversions increased?
- Are more people visiting the website?
- Are more email newsletters being opened?
- How are competitors responding?

7 PROVEN TEMPLATES FOR WRITING A VALUE PROPOSITION THAT WORK

You already know that getting your value proposition right is critical to your business model. You
can have the best features, the most perfectly executed presentation, the most stunning price, but no
one will ever know of it if they don’t get past your high-level value proposition. Here are among the

24
7 proven templates that are designed to help you create a clear, compelling value proposition in
minutes.

1. Geoff Moore's Value Positioning Statement

Probably the most popularized - in his seminal book Crossing the Chasm - Geoff Moore suggests a
specific template for outlining your value positioning. In addition to the first part below, Moore also
introduces a second statement focused on competitive positioning.
Template
For ____________ (target customer)
who ____________ (statement of the need or opportunity)
our (product/service name) is ____________ (product category)
that (statement of benefit) ____________ .
Sample(s)
For non-technical marketers
who struggle to find return on investment in social media
our product is a web-based analytics software
that translates engagement metrics into actionable revenue metrics.
2. Venture Hacks' High-Concept Pitch
In Made to Stick, Dan and Chip Heath point to how high-concept pitches such as 'Jaws on a
spaceship' (Alien) and 'Die Hard on a bus' (Speed) convince movie executives to invest vast sums of
money in a project on the basis of almost no information. In Pitching Hacks Nivi and Navel from
Venture Hacks share examples of this technique applied to startups.
Template
[Proven industry example] for/of [new domain].
Sample(s)
Flickr for video.
Friendster for dogs.
The Firefox of media players.
3. Steve Blank's XYZ

25
Steve Blank writes that a Value Proposition is a ten-dollar phrase describing a company’s product
or service. It’s the “what are you building and selling?" He suggests the following format for
creating a value proposition statement that other people understand.
Template
“We help X do Y doing Z”.
Sample(s)
We help non-technical marketers discover return on investment in social media by turning
engagement metrics into revenue metrics.
4. Vlaskovits & Cooper's CPS
In their Cheat Guide to Customer Development Cooper and Vlaskovits use what they call a
Customer-Problem-Solution presentation.
Template
Customer: ____________ (who your customer is).
Problem: ____________(what problem you're solving for the customer).
Solution: ____________ (what is your solution for the problem).
Sample(s)
Customer: I believe my best customers are small and medium-sized business (SMB) markets.
Problem: Who cannot easily measure campaign ROI because existing solutions are too expensive,
complicated to deploy, display a dizzying array of non-actionable charts.
Solution: Low cost, easy to deploy analytics system designed for non-technical marketers who
need actionable metrics.
5. Dave McClure's Elevator Ride
In his How to Pitch a VC presentation Dave McClure presents a 3-step check list for creating
positioning statements.

Template
• Short, simple, memorable; what, how, why.
• 3 keywords or phrases
• KISS (no expert jargon)
Sample(s)
• "Mint.com is the free, easy way to manage your money online."

26
6. David Cowan's Pitchcraft
Although a more elaborative one David Cowan shares some useful guidelines in Practicing the Art
of Pitchcraft. I've put together a summary.
Template
1. Highlight the enormity of the problem you are tackling.
2. Tell the audience up front what your company sells.
3. Distill the differentiation down to one, easy-to-comprehend sentence.
4. Establish credibility by sharing the pedigree of the entrepreneurs, customers, or the
investors.
Sample(s)
One person dies of melanoma every 62 minutes.
We offer a dermatoscope app for iPhone that enables people to easily diagnose their skin,
leveraging patented pattern recognition technology trusted by the World Health Organization.

7. Eric Sink's Value Positioning

Eric Sink writes that marketing is somewhat like an iceberg - the part sticking out of the water is
highly visible. For this Eric suggests the following format for positioning.
Template
Superlative ("why choose this product").
Label ("what is this product").
Qualifiers ("who should choose this product").
Sample(s)
The easiest operating system for netbook PC's.
The most secure payment gateway for mobile e-commerce.

27
 Think of a possible product/service that you want to introduce
in the market. Using the template above choose and write at
least 3 design templates to help you create a clear, compelling
value proposition.

Value Proposition 1.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________________________

Value Proposition 2.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

Value Proposition 3.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
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WHAT TO SELL: HOW key question often asked by start-up entrepreneurs is what to sell in the
TO SELECT THE RIGHT business. What products or services could you sell that will make you
PRODUCT FOR YOUR money? The selection of the right product or service is critical. In fact,
BUSINESS
the choice of a product or service for your business can make or break
your business. Choose a
product that requires
significant production
capital when you have
none and couldn’t find
any, and your business is
compromised from the
start. Offer a service that a
hundred other
entrepreneurs offer in your
locality and you may find
it hard to get noticed above your competitors. Or select a product with an extremely specialized
market yet you do not know how to reach the potential customers, and your business can go kaput.
Your products or services define your business. Your products are your business! If you want to turn
your business into an income-generating machine, the first step is to choose the right product or
services to sell. With the right products, you even stand a better chance at keeping your customers.
The idea is to keep your customers forever by continually offering them a valuable product or
service, thereby diminishing your costs of reaching and appealing to them. Wise product selection
is therefore critical to your business success.

How do you choose the right product to sell? Here are a few questions to help you narrow your focus
and hopefully select the product that will work for you:

1. What are your primary considerations for choosing a particular product?

Make a list of your selection criteria, and what you think are important to you in identifying what
business to engage in. There are a myriad reasons for selecting a product, and these reasons can
include: financial benefit to your business, relatively low investment requirements, positive return

29
on investment, fit with present strategy, feasible to develop and produce, easy to source and procure,
relatively low risk, and time to see intended results.
2. Can you meet the needs of the customer and solve a specific problem?
Your product must address a need or an opportunity. You need to know how your products or
services can assist customers. It must have a real value that customers can recognize, want and need.
Include in your product information and sales materials how your products can benefit the customers,
e.g. help reduce time, effort and expense.

3. How capable are you to produce the product?

Just as an athlete needs to know his physical condition before he enters a race, you must also know
if you have the time, resources and capability to produce your product. Many entrepreneurs make
the mistake of going forward with a business idea only to find that they cannot afford the manpower
required, or do not have the resources to outsource the product development. As a result, many
experience slippage in release dates making the mistake of launching half-finished web sites. You
must also evaluate at the onset how you can scale up the production if there is a strong demand for
the product.

4. What is the size of your potential reachable market?

You need to at least get an idea of the size of your market. Know who are likely to use or benefit
from your products. If you are selling an information product on how to sell at Lazada or Shoppe,
define who will be your potential customers you think will be interested in your product. Many small
and home business entrepreneurs view market research as an unnecessary and expensive cost but
understanding who and how big your market can pay off in the long run.

5. Would you need to comply with government rules and regulations?

New laws or government rules and regulations can impact your product. Some products can be sold
immediately without the need for government approval. Others, however, require permits, licenses
and approval from the government.

30
6. If a similar product exists, can your product be superior in its functionality, presentation or
marketing?
This entails knowing and understanding your Unique Selling Proposition. Your unique selling
proposition is the one thing that makes that your product different than any other. It’s the one reason
they think consumers will buy the product even though it may seem no different from many others
just like it. It may be that the product has a lower price or more convenient packaging, or it may taste
or smell better, or last longer.

7. What barriers must be overcome for a potential new product entry?

Barriers to entry include high research and development expenditure, high presence of start-up or
sunk costs, and international trade restrictions such as tariffs and quotas. Patents are likewise
important barriers for many small and home-based businesses, where your competitor may hold legal
protection for an integral component of your product and hence may prevent you from manufacturing
your product. Other barriers to entry include predatory pricing of competitors that will force you to
operate at a loss, high advertising and marketing costs to compete with established brands in the
industry, and the cost advantages enjoyed by your competitor that allows them to set lower prices.

8. What are the potential sales, growth, profits, and time for payback?
Before starting your business, run your numbers first. Get a clear idea of your cost structure, how
much sales you need to have to breakeven and post a profit, and what your return on investment will
be.

To succeed as an entrepreneur, you must develop the ability

to select and offer the right products or services to your
customers in a competitive market. More than any other
factor, your ability to make this choice will determine your
success or failure. Using the guided questionnaire below
analyze your prepared product/services to begin with.

1. What particular product do you think will be visible and be accepted by consumer in the market
today? Explain.

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_______________________________________________________________________________
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______________________________________________________________________________

2. In meeting the need of the customers, what specific activity plan will you do to improve it?
_______________________________________________________________________________
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_______________________________________________________________________________
_______________________________________________________________________________

3. How capable are you to produce the product?

_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

4. What are your potential market?

_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

5. Enlist the different government permit you need to comply for you to open a business. How will
you comply to each of their requirements?
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

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6. What barriers needed for you to overcome for a potential new product entry?
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

A business plan is a document that describes your business in terms

WRITING A DETAILED of what it does, the products and services it offers, your business
BUSINESS PLAN strategy and business goals, and your action plan outlining how
you plan to achieve your goals and earn money.
The main purposes of a business plan are to:
• Show the future financial performance of the company and its economic situation for the
owners and investors.
• Help identify risk that may affect the growth of the company and its economic situation for
the owners and investors.
• Help make predictions about market trends, competitor behavior, customer requirements and
define and prioritize key business objectives.
• Serve as a key resource for developing budgets

Writing a business plan shouldn’t be complicated. In this step-by-step guide you will quickly and
easily write a business plan that will get the results you want. You don’t have to have a business or
accounting degree to put together a great business plan. This guide will show you how to get your
plan done step-by step without any of the complexity or frustration. The following are the six
components of a Business Plan.

1. Executive Summary. The executive summary of your business plan introduces your company,
explains what you do, and lays out what you’re looking for from your readers. Structurally, it is the
first chapter of your business plan. And while it’s the first thing that people will read, I generally
advise that you write it last.

Why? Because once you know the details of your business inside and out, you will be better prepared
to write your executive summary. After all, this section is a summary of everything else you’re going
33
to write about. Ideally, the executive summary can act as a stand-alone document that covers the
highlights of your detailed plan. In fact, it’s very common for investors to ask for only the executive
summary when they are evaluating your business. If they like what they see in the executive
summary, they’ll often follow up with a request for a complete plan, a pitch presentation, and more
in-depth financials.

Because your executive summary is such a critical component of your business plan, you’ll want to
make sure that it’s as clear and concise as possible. Cover the key highlights of your business, but
don’t into too much detail. Ideally, your executive summary will be one to two pages at most,
designed to be a quick read that sparks interest and makes your investors feel eager to hear more.

The critical components of a winning executive summary:

One sentence business overview

At the top of the page, right under your business name, include a one-sentence overview of your
business that sums up the essence of what you are doing. This can be a tagline, but is often more
effective if the sentence describes what your company actually does. This is also known as your
value proposition.

Problem
In one or two sentences, summarize the problem you are solving in the market. Every business is
solving a problem for its customers and filling a need in the market.
Solution
This is your product or service. How are you addressing the problem you have identified in the
market?
Target market
Who is your target market, or your ideal customer? How many of them are there? It’s important here
to be specific. If you’re a shoe company, you aren’t targeting “everyone” just because everyone has
feet. You’re most likely targeting a specific market segment such as “style-conscious men” or
“runners.” This will make it much easier for you to target your marketing and sales efforts and attract
the kinds of customers that are most likely to buy from you.

34
Competition
How is your target market solving their problem today? Are there alternatives or substitutes in the
market? Every business has some form of competition and it’s critical to provide an overview in
your executive summary.

Company overview and team

Provide a brief overview of your team and a short explanation of why you and your team are the
right people to take your idea to market. Investors put an enormous amount of weight on the team—
even more than on the idea—because even a great idea needs great execution in order to become a
reality.

Financial summary
Highlight the key aspects of your financial plan, ideally with a chart that shows your planned sales,
expenses, and profitability. If your business model (i.e., how you make money) needs additional
explanation, this is where you would do it.

Funding requirements
If you are writing a business plan to get a bank loan or because you’re asking angel investors or
venture capitalists for funding, you must include the details of what you need in the executive
summary. Don’t bother to include terms of a potential investment, as that will always be negotiated
later. Instead, just include a short statement indicating how much money you need to raise.

Milestones and traction

The last key element of an executive summary that investors will want to see is the progress that
you’ve made so far and future milestones that you intend to hit. If you can show that your potential
customers are already interested in—or perhaps already buying—your product or service, this is
great to highlight. You can skip the executive summary (or greatly reduce it in scope) if you are
writing an internal business plan that’s purely a strategic guide for your company. In that case, you
can dispense with details about the management team, funding requirements, and traction, and
instead treat the executive summary as an overview of the strategic direction of the company, to
ensure that all team members are on the same page.

35
2. Opportunity. There are four main chapters in a business plan—opportunity, execution, company
overview, and financial plan. The opportunity chapter of your business plan is where the real meat
of your plan lives—it includes information about the problem that you’re solving, your solution, who
you plan to sell to, and how your product or service fits into the existing competitive landscape.
You’ll also use this section of your business plan to demonstrate what sets your solution apart from
others, and how you plan to expand your offerings in the future.

People who read your business plan will already know a little bit about your business because they
read your executive summary. But this chapter is still hugely important because it’s where you
expand on your initial overview, providing more details and answering additional questions that you
won’t cover in the executive summary.

The problem and solution

Start the opportunity chapter by describing the problem that you are solving for your customers.
What is the primary pain point for them? How are they solving their problems today? Maybe the
existing solutions to your customer’s problem are very expensive or cumbersome. For a business
with a physical location, perhaps there aren’t any existing solutions within reasonable driving
distance. Defining the problem, you are solving for your customers is far and away the most critical
element of your business plan and crucial for your business success. If you can’t pinpoint a problem
that your potential customers have, then you might not have a viable business concept.

To ensure that you are solving a real problem for your potential customers, a great step in the
business planning process is to get away from your computer and actually go out and talk to potential
customers. Validate that they have the problem you assume they have, and then take the next step
and pitch your potential solution to their problem. Is it a good fit for them?
Once you have described your target market’s problem, the next section of your business plan should
describe your solution. Your solution is the product or service that you plan on offering to your
customers. What is it and how is it offered? How exactly does it solve the problem that your
customers have? For some products and services, you might want to describe use cases or tell a story
about a real user who will benefit from (and be willing to pay for) your solution.

36
Target market
Now that you have detailed your problem and solution in your business plan, it’s time to turn your
focus toward your target market: Who are you selling to? Depending on the type of business you are
starting and the type of plan you are writing, you may not need to go into too much detail here. No
matter what, you need to know who your customer is and have a rough estimate of how many of
them there are. If there aren’t enough customers for your product or service, that could be a warning
sign.

Market analysis and market research

If you are going to do a market analysis, start with some research. First, identify your market
segments and determine how big each segment is. A market segment is a group of people (or other
businesses) that you could potentially sell to. Don’t fall into the trap, though, of defining the market
as “everyone.” The classic example is a shoe company. While it would be tempting for a shoe
company to say that their target market is everyone who has feet, realistically they need to target a
specific segment of the market in order to be successful. Perhaps they need to target athletes or
businesspeople who need formal shoes for work, or perhaps they are targeting children and their
families.

TAM, SAM, and SOM

A good business plan will identify the target market segments and then provide some data to indicate
how fast each segment is growing. When identifying target markets, a classic method is to use the
TAM, SAM, and SOM breakdown to look at market sizes from a top-down approach as well as a
bottom-up approach.
Here are some quick definitions:

• TAM: Your Total Available or Addressable Market (everyone you wish to reach with your
product)
• SAM: Your Segmented Addressable Market or Served Available Market (the portion of
TAM you will target)
• SOM: Your Share Of the Market (the subset of your SAM that you will realistically reach—
particularly in the first few years of your business)

37
Once you have identified your key market segments, you should discuss the trends for these markets.
Are they growing or shrinking? Talk about the market’s evolving needs, tastes, or other upcoming
changes to the market.

Your ideal customer

When you have your target market segments defined, it’s time to define your ideal customer for each
segment. One way to talk about your ideal customer in your plan is to use your “buyer persona” or
“user persona.” A buyer persona is a fictitious representation of your market—they get a name,
gender, income level, likes, dislikes, and so on. While this may seem like additional work on top of
the market segmentation that you have already done, having a solid buyer persona will be an
extremely useful tool to help you identify the marketing and sales tactics you’ll need to use to attract
these ideal customers.

Key customers
The final section of your target market chapter should discuss key customers. This section is really
only required for enterprise (large) companies that have very few customers. Most small businesses
and typical startups can skip this and move on. But if you selling to other businesses (B2B), you may
have a few key customers that are critical to the success of your business, or a handful of important
customers that are trend leaders in your space. If so, use this final portion of your target market
chapter to provide details about those customers and how they are important to your business’s
success.

Competition
Immediately following your target market section, you should describe your competition. Who else
is providing solutions to try and solve your customers’ pain points? What are your competitive
advantages over the competition? Most business plans use a “competitor matrix” to easily compare
their features against their competition. The most important thing to illustrate in this section of your
business plan is how your solution is different or better than other offerings that a potential customer
might consider. Investors will want to know what advantages you have over the competition and
how you plan on differentiating yourself. One of the biggest mistakes entrepreneurs make in their
business plans is stating that they don’t have any competition.

38
The simple fact is that all businesses have competition. Competitors may not always come in the
form of “direct competition,” which is when you have a competitor offering a similar solution to
your offering. Often times, you may be dealing with “indirect competition,” which is when
consumers solve their problem with an entirely different kind of solution.

For example, when Henry Ford was first marketing his cars, there was very little direct competition
from other car manufacturers—there weren’t any other cars. Instead, Ford was competing against
other modes of transportation—horses, bikes, trains, and walking. On the surface, none of these
things look like real direct competition, but they were how people were to solving their transportation
problems at that time.

Future products and services

All entrepreneurs have a vision of where they want to take the business in the future if they are
successful. While it’s tempting to spend a lot of time exploring future opportunities for new products
and services, you shouldn’t expand too much on these ideas in your business plan. It’s certainly
useful to include a paragraph or two about potential future plans, to show investors where you are
headed in the long term, but you don’t want your plan to be dominated by long-range plans that may
or may not come to fruition. The focus should be on bringing your first products and services to
market.

3. Execution
Now that you’ve completed the opportunity chapter, you’re going to move on to the execution
chapter, which includes everything about how you’re actually going to make your business work.
You’ll cover your marketing and sales plans, operations, how you’ll measure success, and the key
milestones that you expect to achieve.

Marketing and sales plan

The marketing and sales plan section of your business plan details how you plan to reach your target
market segments (also called target marketing), how you plan on selling to those target markets,
what your pricing plan is, and what types of activities and partnerships you need to make your
business a success. Before you even think about writing your marketing plan, you must have your

39
target market well-defined and have your buyer persona(s) fleshed out. Without truly understanding
who you are marketing to, a marketing plan will have little value.

Your positioning statements

The first part of your marketing and sales plan is your positioning statement. Positioning is how you
will try and present your company to your customers. Are you the low-price solution, or are you the
premium, luxury brand in your market? Do you offer something that your competitors don’t offer?
Before you start working on your positioning statement, you should take a little time to evaluate the
current market and answer the following questions:

• What features or benefits do you offer that your competitors don’t?

• What are your customers’ primary needs and wants?
• How are your competitors positioning themselves?
• How do you plan on differentiating from the competition? In other words, why should a
customer choose you instead of someone else?
• Where do you see your company in the landscape of other solutions?
Once you’ve answered these questions, you can then work on your positioning strategy and define
it in your business plan. Don’t worry about making your positioning statement very long or in-depth.
You just need to explain where your company sits within the competitive landscape and what your
core value proposition is that differentiates your company from the alternatives that a customer might
consider.

You can use this simple formula to develop a positioning statement:

For [target market description] who [target market need], [this product] [how it meets the need].
Unlike [key competition], it [most important distinguishing feature].
For example, the positioning statement for LivePlan, our business planning product, is: “For the
businessperson who is starting a new company, launching new products or seeking funding or
partners, LivePlan is software that produces professional business plans quickly and easily. Unlike
[name omitted], LivePlan creates a real business plan, with real insights—not just cookie-cutter, fill-
in-the-blank templates.”

40
Pricing
Once you know what your overall positioning strategy is, you can move on to pricing. Your
positioning strategy will often be a major driver of how you price your offerings. Price sends a very
strong message to consumers and can be an important tool to communicate your positioning to
consumers. If you are offering a premium product, a premium price will quickly communicate that
message to consumers. Deciding on your price can feel more like an art than a science, but there are
some basic rules that you should follow:

• Covering your costs. There are certainly exceptions to this, but for the most part, you should
be charging your customers more than it costs you to deliver your product or service.
• Primary and secondary profit center pricing. Your initial price may not be your primary
profit center. For example, you may sell your product at, or even below, your cost, but require
a much more profitable maintenance or support contract to go along with the purchase.
• Matching the market rate. Your prices need to match up with consumer demand and
expectations. Price too high and you may have no customers. Price too low and people may
undervalue your offering.
You can approach your pricing strategy in different ways. Here are a few ways that you can think
about your pricing and come up with the right strategy for your business:

• Cost-plus pricing. You can establish your pricing based on several factors. You can look at
your costs and then mark up your offering from there. This is usually called “cost-plus
pricing” and can be effective for manufacturers where covering initial costs is critical.
• Market-based pricing. Another method is to look at the current landscape of competitors
and then price based on what the market is expecting. You could price at the high-end or low-
end of the market to establish your positioning.
• Value pricing. Yet another method is to look at a “value pricing” model where you
determine the price based on how much value you are providing to your customer. For
example, if you are marketing lawn care to busy professionals, you may be saving your
customers 1 hour/week. If that hour of their time is valued at P50/hour, your service could
charge P30/hour.

41
Promotion
With pricing and positioning taken care of, it’s time to look at your promotion strategy. A promotion
plan details how you plan on communicating with your prospects and customers. Remember, it’s
important that you’ll want to measure how much your promotions cost and how many sales they
deliver. Promotional programs that aren’t profitable are hard to maintain in the long term.

Packaging
If you are selling a product, the packaging of that product is critical. If you have images of your
packaging, including those in your business plan is always a good idea.
Be sure the packaging section of your plan answers the following questions:

• Does your packaging match your positioning strategy?

• How does your packaging communicate your key value proposition?
• How does your packaging compare to your competition?

Advertising
Your business plan should include an overview of the kinds of advertising you plan to spend money
on. Will you be advertising online? Or perhaps in traditional, offline media? A key component to
your advertising plan is your plan for measuring the success of your advertising.

Public relations
Getting the media to cover you—PR—can be a great way to reach your customers. Getting
a prominent review of your product or service can give you the exposure you need to grow your
business. If public relations if part of your promotional strategy, detail your plans here.

Content marketing
A popular strategy for promotion is engaging in what is called content marketing. Content marketing
is what Business plans is all about. It’s when you publish useful information, tips, and advice—
usually made available for free—so that your target market can get to know your company through
the expertise that you deliver. Content marketing is about teaching and educating your prospects on
topics that they are interested in, not just on the features and benefits that you offer.
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Social media

These days, having a social media presence is essentially a requirement for the vast majority of
businesses. You don’t need to be on every social media channel, but you do need to be on the ones
that your customers are on. More and more, prospects are using social media to learn about
companies and to find out how responsive they are.

Strategic alliances
As part of your marketing plan, you may rely on working closely with another company in a form
of partnership. This partnership may help provide access to a target market segment for your
company while allowing your partner to offer a new product or service to their customers. If you
have partnerships already established, it’s important to detail those partnerships in your business
plan.

Operations
The operations section is how your business works. It’s the logistics, technology, and other nuts and
bolts. Depending on the type of business you are starting, you may or may not need the following
sections. Only include what you need and remove everything else.

Sourcing and fulfillment

If your company is buying the products it is selling from other vendors, it’s important to include
details on where your products are coming from, how they get delivered to you, and ultimately how
you deliver the products to the customer—that’s sourcing and fulfillment. If you are sourcing
products from manufacturers overseas, investors are going to want to know about your progress
working with these suppliers. If your business is going to be delivering products to your customers,
you should describe your plans for shipping your products.

Technology
If you are a technology company, it’s critical for your business plan to describe your technology and
what your “secret sauce” is. You don’t have to give away trade secrets in your business plan, but you
do need to describe how your technology is different and better than other solutions out there. At a
high level, you will want to describe how your technology works. You don’t need to go into
43
excruciating detail here, though—if an investor is interested in more detail they will ask for it, and
you can provide that information in your appendix.
Remember, your goal is to keep your business plan as short as possible, so too much detail here
could easily make your plan much too long.

Distribution
For product companies, a distribution plan is an important part of the complete business plan. For
the most part, service companies can skip this piece and move on. Distribution is how you will get
your product into the hands of your customers. Every industry has different distribution channels
and the best way to create your distribution plan is to interview others in your industry to figure out
what their distribution model is.

Here are a few common distribution models that you may consider for your business:

Direct distribution
Selling directly to consumers is by far the most simple and most profitable option. You could
consider passing the savings of selling directly on to your customers or you could simply increase
your profit margins. You will still need to cover the logistics of how you will get your products to
your customers from your warehouse, but a direct distribution model is usually fairly simple.

Retail distribution
Most large retailers don’t like the hassle of dealing with thousands of individual suppliers. Instead,
they prefer to buy through large distribution companies that aggregate products from lots of suppliers
and then make that inventory available to retailers to purchase. Of course, these distributors take a
percentage of the sales that pass through their warehouses.

Manufacturers’ representatives
These are typically salespeople who work for a “ripping” agency. They often have relationships with
retailers and distributors and work to sell your products into the appropriate channel. They typically
work on commission and it’s not uncommon for a rep to be necessary for getting a new company
access to a distributor or retailer.

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OEM
This stands for “original equipment manufacturer.” If your product is sold to another company that
then incorporates your product into their finished product, then you are using an OEM channel.
A good example of this is car parts suppliers. While large auto manufacturers do build large
components of their cars, they also purchase common parts from third-party vendors and incorporate
those parts into the finished vehicle. Most companies use a mixture of distribution channels as part
of their plans, so don’t feel that you need to be limited to a single channel. For example, it is very
common to both sell direct and via distributors—you can purchase an iPhone directly from Apple,
or go into a Target store and get one there.

Milestones and metrics

A business plan is only a document on paper without a real path to get the work done, complete with
a schedule, defined roles, and key responsibilities. While the milestones and metrics section of your
business plan may not be long, it’s critical that you take the time to look forward and schedule the
next critical steps for your business. Investors will want to see that you understand what needs to
happen to make your plans a reality and that you are working on a realistic schedule.

Start with a quick review of your milestones. Milestones are planned major goals. For example, if
you are producing a medical device, you will have milestones associated with clinical testing and
government approval processes. If you are producing a consumer product, you may have milestones
associated with prototypes, finding manufacturers, and first-order receipt.

Traction
While milestones look forward, you will also want to take a look back at major accomplishments
that you have already had. Investors like to call this “traction.” What this means is that your company
has shown some evidence of early success. Traction could be some initial sales, a successful pilot
program, or a significant partnership. Sharing this proof that your company is more than just an
idea—that it has actual evidence that it is going to be a success—can be critically important to
landing the money you need to grow your business.

45
Metrics
In addition to milestones and traction, your business plan should detail the key metrics that you will
be watching as your business gets off the ground. Metrics are the numbers that you watch on a regular
basis to judge the health of your business. They are the drivers of growth for your business model and
your financial plan. For example, a restaurant may pay special attention to the number of table turns
they have on an average night and the ratio of drink sales to food sales. An online software company
might look at churn rates (the percentage of customers that cancel) and new signups. Every business
will have key metrics that it watches to monitor growth and spot trouble early, and your business
plan should detail the key metrics that you will be tracking in your business.

Key assumptions and risks

Finally, your business plan should detail the key assumptions you have made that are important for
your business’s success. Another way to think about key assumptions is to think about risk. What
risks are you taking with your business? For example, if you don’t have a proven demand for a new
product, you are making an assumption that people will want what you are building. If you are
relying on online advertising as a major promotional channel, you are making assumptions about the
costs of that advertising and the percentage of ad viewers that will actually make a purchase.
Knowing what your assumptions are as you start a business can make the difference between
business success and business failure. When you recognize your assumptions, you can set out to
prove that your assumptions are correct. The more that you can minimize your assumptions, the more
likely it is that your business will succeed.

4. Company overview and team

In this chapter, you’ll review the structure of your company and who the key team members are.
These details are especially important to investors as they’ll want to know who’s behind the company
and if they can convert a good idea into a great business.

Team
The old adage is that investors don’t invest in ideas, they invest in people. Some investors even go
as far as to say that they would rather invest in a mediocre idea with a great team behind it than a
blockbuster idea with a mediocre team. What this really means is that running a successful business
all comes down to getting the work down. Can you actually accomplish what you have planned? Do
46
you have the right team in place to turn a good idea into a great business that will have customers
banging down your doors? The company overview and team chapter of your business plan is where
you make your best case that you have the right team in place to execute on your idea. It should show
that you have thought about the important roles and responsibilities your business needs in order to
grow and be successful.

Include brief bios that highlight relevant experiences of each key team member. It’s important here
to make the case for why the team is the right team to turn an idea into a reality. Do they have the
right industry experience and background? Have members of the team had entrepreneurial successes
before? A common mistake novice entrepreneur make in describing the management team is giving
everyone on the team a C-level title (CEO, CMO, COO, and so on). While this might be good for
egos, it’s often not realistic. As a company grows, you may require different types of experience and
knowledge. It’s often better to allow for future growth of titles rather than to start everyone at the
top with no room for future growth or change. Your management team doesn’t necessarily need to
be complete in order to have a complete business plan. If you know that you have management team
gaps, that’s O.K. In fact, investors see the fact that you know you are missing certain key people as
a sign of maturity and knowledge about what your business needs to succeed. If you do have gaps in
your team, simply identify them and indicate that you are looking for the right people to fill certain
roles.

Finally, you may choose to include a proposed organizational chart in your business plan. This isn’t
critical and can certainly live in your business plan’s appendix. At some point, as you explore funding
options, you may be asked for an “org chart,” so it’s good to have one. Beyond raising money, an
org chart is also a useful planning tool to help you think about your company and how it will grow
over time. What key roles will you be looking to fill in the future and how will you structure your
teams to get the most out of them? An org chart can help you think through these questions.

Company overview
The company overview will most likely be the shortest section of your business plan. For a plan that
you intend to just share internally with your business partners and team members, skip this section
and move on. For a plan that you will share with people outside of your company, this section should
include:
47
 • Mission statement
• Intellectual property
• A review of your company’s legal structure and ownership
• The business location
• A brief history of the company if it’s an existing company

Mission statement
Don’t fall into the trap of spending a day or more on your mission statement. An hour or two should
be plenty of time. Avoid putting together a long, generic statement about how your company is
serving its customers, employees, and so on. Your company mission should be short—one or two
sentences at most—and it should encompass, at a very high level, what you are trying to do. Frankly,
your mission statement and your overall value proposition might even be the same thing. Here at
Palo Alto Software (makers of Bplans), our mission statement is this: “We help people succeed in
business.” It’s simple and encompasses everything we do from the types of products that we build
to the kind of marketing that we do.

Intellectual property
This mostly applies to technology and scientific ventures, so just skip this if you don’t need to discuss
your patents and other intellectual property. But, if you have intellectual property that is proprietary
to your business and helps your business defend itself against competitors, you should detail that
information here. If you have patents or are in the patent application process, this is the place to
highlight those patents. Equally important to discuss is technology licensing—if you are licensing
core technology from someone else, you need to disclose that in your business plan and be sure to
include details of the financial relationship.

Business structure and ownership

Your company overview should also include a summary of your company’s current business
structure. Are you an LLC? A C-corp? An S-corp? A sole proprietor? In a partnership? Be sure to
define provide a review of how the business is owned as well. Does each business partner own an
equal portion of the business? How is ownership divided? Potential lenders and investors will want
to know the structure of the business before they will consider a loan or investment.
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Company history
If you are writing a business plan for an existing company, it’s appropriate to include a brief history
of the company and highlight major historical achievements. Again, keep this section short—no
more than a few paragraphs at most. This section is especially useful to give context to the rest of
your plan and can also be very useful for internal plans. The company history section can provide
new employees with a background on the company so that they have a better context for the work
that they are doing and where the company has come from over the years.

Location
Finally, the company overview section of your business plan should describe your current location
and any facilities that the company owns. For businesses that serve consumers from a storefront, this
information is critical. Also, for businesses that require large facilities for manufacturing,
warehousing, and so on, this information is an important part of your plan.

5. Financial plan
Last, but certainly not least, is your financial plan chapter. This is often what entrepreneurs find most
daunting, but it doesn’t have to be as intimidating as it seems. Business financials for most startups
are less complicated than you think, and a business degree is certainly not required to build a solid
financial forecast. That said, if you need additional help, there are plenty of tools and resources out
there to help you build a solid financial plan. A typical financial plan will have monthly sales and
revenue forecast for the first 12 months, and then annual projections for the remaining three to five
years. Three-year projections are typically adequate, but some investors will request a five-year
forecast. Following are details of the financial statements that you should include in your business
plan, and a brief overview of what should be in each section.

Sales forecast
Your sales forecast is just that—your projections of how much you are going to sell over the next
few years. A sales forecast is typically broken down into several rows, with a row for each core
product or service that you are offering. Don’t make the mistake of breaking down your sales forecast
into excruciating detail. Just focus on the high-level at this point.
For example, if you are forecasting sales for a restaurant, you might break down your forecast into
these groups: lunch, dinner, and drinks. If you are a product company, you could break down your
49
forecast by target market segments or into major product categories. Your sales forecast will also
include a corresponding row for each sales row to cover Cost of Goods Sold, also known as COGS
(also called direct costs). These rows show the expenses related to making your product or delivering
your service. COGS should only include those costs directly related to making your products, not
regular business expenses such as rent, insurance, salaries, etc. For restaurants, it would be the cost
of ingredients. For a product company, it would the cost of raw materials. For a consulting business,
it might be the cost of paper and other presentation materials.

Personnel plan
Your personnel plan details how much you plan on paying your employees. For a small company,
you might list every position on the personnel plan and how much will be paid each month for each
position. For a larger company, the personnel plan is typically broken down into functional groups
such as “marketing” and “sales.” The personnel plan will also include what is typically called
“employee burden,” which is the cost of an employee beyond salary. This includes payroll taxes,
insurance, and other necessary costs that you will incur every month for having an employee on your
payroll.

Income statement or profit and loss statement

Also known as the income statement, the profit and loss (or P&L) is where your numbers all come
together and show if you’re making a profit or taking a loss. The P&L pulls data from your sales
forecast and your personnel plan and also includes a list of all your other ongoing expenses associated
with running your business. You can download a free example of an income statement here.
The P&L also contains the all-important “bottom line” where your expenses are subtracted from
your earnings to show if your business is making a profit each month or potentially incurring some
losses while you grow.
A typical P&L will be a spreadsheet that includes the following:

5. Sales (or income or revenue). This number will come from your sales forecast worksheet
and includes all revenue generated by the business.
6. Cost of goods sold (COGS). This number also comes from your sales forecast and is the
total cost of selling your product. For service businesses, this can also be called the cost of
sales or direct costs.
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 7. Gross margin. Subtract your COGS from your sales to get this number. Most profit and loss
statements also show this number as a percentage of total sales (gross margin / sales = gross
margin percent)
8. Operating expenses. List all of your expenses associated with running your business,
excluding the COGS that you already detailed. You should also exclude taxes, depreciation,
and amortization. However, you do include salaries, research and development (R&D)
expenses, marketing expenses, and other expenses here.
9. Total operating expenses. This is the sum of your operating expenses.
10. Operating income. This is also known as EBITDA, or earnings before interest, taxes,
depreciation, and amortization. This is a simple calculation where you just subtract your total
operating expenses and COGS from your sales.
11. Interest, taxes, depreciation, and amortization. If you have any of these expense streams,
you will list them below your operating income.
12. Total expenses. Add your operating expenses to interest, taxes, depreciation, and
amortization to get your total expenses.
13. Net profit. This is the all-important bottom line that shows if you’ve made a profit, or taken
a loss, during a given month or year.

Cash flow statement

The cash flow statement often gets confused with the profit and loss statement, but they are very
different and serve very different purposes. While the P&L calculates your profits and losses, the
cash flow statement keeps track of how much cash (money in the bank) that you have at any given
point. The key to understanding the difference between the two statements is understanding the
difference between cash and profits. The simplest way to think about it is when you make a sale. If
you need to send a bill to your customer and then your customer takes 30 or 60 days to pay the bill,
you don’t have the cash from the sale right away. But, you will have booked the sale in your P&L
and shown a profit from that sale the day you made the sale.

A typical cash flow statement starts with the amount of cash you have on hand, adds new cash
received through cash sales and paid invoices, and then subtracts cash that you have paid out as you
pay bills, pay off loans, pay taxes, etc. This will then leave you with your total cash flow (cash in
51
minus cash out) and your ending cash starting cash + cash in – cash out = ending cash). Your cash
flow statement will show you when you might be low on cash, and when it might be the best time to
buy new equipment. Above all, your cash flow statement will help you figure out how much money
you might need to raise or borrow to grow your company. Since an operating business can’t run out
of cash without having to close its doors, use your cash flow statement to figure out your low cash
points and consider options to bring in additional cash.

Balance sheet
The last financial statement that most businesses will need to create as part of their business plan is
the balance sheet. The balance sheet provides an overview of the financial health of your business.
It lists the assets in your company, the liabilities, and your (the owner’s) equity. If you subtract the
company’s liabilities from assets, you can determine the net worth of the company. Instead of
providing additional detail on the balance sheet here, I’ll refer you to this article on building and
reading balance sheets. You can also download this balance sheet example to help you get started.

Use of funds
If you are raising money from investors, you should include a brief section of your business plan that
details exactly how you plan on using your investors’ cash. This section doesn’t need to go into
excruciating detail about how every last dollar will be spent, but instead, show the major areas where
the investors’ funds will be spent. These could include marketing, R&D, sales, or perhaps purchasing
inventory.

Exit strategy
The last thing that you might need to include in your financial plan chapter is a section on your exit
strategy. An exit strategy is your plan for eventually selling your business, either to another company
or to the public in an IPO. If you have investors, they will want to know your thoughts on this. If
you’re running a business that you plan to maintain ownership of indefinitely, and you’re not seeking
angel investment or VC funding, you can skip the exit strategy section. After all, your investors will
want to get a return on their investment, and the only way they will get this is if the company is sold
to someone else. Again, you don’t need to go into excruciating detail here, but you should identify
some companies that might be interested in buying you if you are successful.

52
 6. Appendix
An appendix to your business plan isn’t a required chapter by any means, but it is a useful place to
stick any charts, tables, definitions, legal notes, or other critical information that either felt too long
or too out-of-place to include elsewhere in your business plan. If you have a patent or a patent-
pending, or illustrations of your product, this is where you’d want to include the details.

53
 WRITING A BUSINESS PLAN. Using the sample template
below write the content of Business Plan of your preferred
business.

Sample Cover Page and Table of Contents

[COMPANY NAME]

PHILIPPINE ALLIANCE FOR OPEN EDUCATIONAL RESOURCES, INC.

(PAOER, Inc.)

Your Tagline

BUSINESS PLAN
October 10, 2020

Contact Information
Wilbert C. Venzon
PAOER, Inc.
Email: paoerinc@gmail.com
#544 Sta. Maria St., Ma. Lourdes Subdivision Tabang, Plaridel
3400 Bulacan
54
Table of Contents
Executive Summary ................................................................................................................................
Opportunity ..................................................................................................................................................
Expectations .................................................................................................................................................
Opportunity ...........................................................................................................................................
Problem & Solution ...................................................................................................................................
Target Market ...............................................................................................................................................
Competition ..................................................................................................................................................

Execution ...............................................................................................................................................
Marketing & Sales .........................................................................................................................................
Operations ....................................................................................................................................................
Milestones & Metrics....................................................................................................................................

Company ................................................................................................................................................
Overview .......................................................................................................................................................
Team .............................................................................................................................................................
Financial Plan .........................................................................................................................................
Forecast ........................................................................................................................................................
Financing.......................................................................................................................................................
Statements ...................................................................................................................................................
Appendix................................................................................................................................................
Profit and Loss Statement .............................................................................................................................
Balance Sheet ...............................................................................................................................................
Cash Flow Statements...................................................................................................................................

55
 1. A company's value proposition tells a customer the
number one reason why a product or service is best
suited for that particular customer.
2. A value proposition should be communicated to
customers directly, either via the company's website
or other marketing or advertising materials.
3. Value propositions can follow different formats, as
long as they are "on brand," unique, and specific to the company in question.
4. A successful value proposition should be persuasive and help turn a prospect into
a paying customer.
5. Anyone can start a small business unit. He may be an existing entrepreneur or a
new one.
6. Special care should be taken while selecting the location of the business.
7. A potential market is the part of the market you can capture in the future.
8. A business model describes how a company creates, delivers and captures value.
It is develop by Alexander Osterwalder to visualize representation of current or
new business generally used by the strategic managers.
9. A business model are composed of 9 building blocks of a business model canvass
namely: Customer segments, value proposition, Channels, Customer relationships,
Revenue Streams, Key resources, Key activities, Key partnership, and cost
structure
10. Evaluate carefully what kind of product/services you should sell in the market.
11. You don’t need to have a business or accounting degree to put together a great
business plan

56
 QUARTER 1

Lesson 3. Recognizing the importance of

marketing mix in the development of marketing
CONTENT STANDARDS: strategy
The learner demonstrates K to 12 CG Code: (TLE_ICTAN11/12EM-Ia-1)
understanding of
environment and market
in one’s locality/town. Objectives: In this lesson, student will be able to:
PERFORMANCE
STANDARDS:
1. Describe the Marketing mix (7P’s) in relation to the business
The learner independently
creates a business vicinity opportunity vis-à-vis:
map reflective of potential
1.1 Product
market in one’s
locality/town. 1.2. Place
1.3. Price
1.4. Promotion
1.5. People
1.6. Process
1.7. Physical evidence
2. Develop a Brand Name

MARKETING MIX Marketing may refer to the process

DEFINED of value exchange that is facilitated
by the 4P’s. The term marketing mix is a foundation model for
businesses, historically centered around the product, price,
place and promotion. The marketing mix has been defined as
the “set of marketing tools that the firm uses to pursue its
marketing objectives in the target market”. Thus, the
marketing mix refers to four broad levels of marketing decision.

57
 A marketing expert named E. Jerome McCarthy created the Marketing 4Ps in
4P’S OF the 1960’s. This classification has been used throughout the world. It is the
MARKETING MIX foundation of the idea of marketing mix. Let us now describe the 4P’s of
Marketing mix.

PRODUCT

A Product is a tangible or intangible item that

is built or produced to satisfy the needs of a
certain group of people. It is in the form of a
service or goods. To ensure the right product,
an entrepreneur must know the demand of
their consumer in the market. They must also
know how to create the right product mix by
expanding and diversifying the depth of your
product line. A product has a certain life cycle that includes the growth phase, the maturity phase
and the sales decline phases. During the product development phase, the entrepreneur must do an
extensive research of the product that they are creating. Another product must be developed to
maintain the progress and its life cycle to gain more profit even there will be changes in the economy.
In developing the right product for your business, you must answer the following questions:
• What does the client want from the service or product?
• How will the customer use it?
• Where will the client use it?
• What features must the product have to meet the client’s needs?
• Are there any necessary features that you missed out?
• Are you creating features that are not needed by the client?
• What’s the name of the product?
• Does it have a catchy name?
• What are the sizes or colors available?
• How is the product different from the products of your competitors?
• What does the product look like?

58
 The Price of the product is the
PRICE
amount that the customer pays for
them to satisfy. It is the important component of a
marketing plan to determine if the business will
gain profit and survive. It gives an impact on the
entire marketing strategy affecting the sales and
demand of the product. If a company is not yet
popular and does not yet make a name in the
market your target customer will unlikely pay a
high price for the product being sold. The value of
the product depends on its price. A low price of the product usually means an inferior good in the
consumers eyes as they may compare your product to your competitor. Making it affordable with
good quality may encourage customer to purchase and share it with others to buy. On the contrary,
a too high price of the product will make the cost outweigh the benefits in customers eyes, and they
will therefore value their money instead of having your product purchased. Be sure to know and
examine your competitors pricing so that you may adjust and benefited to price competition. When
setting the product price, marketers should consider the perceived value that the product offers. There
are three major pricing strategies, and these are:
• Market penetration pricing – It is a pricing strategy where the price of a product is initially
sent low to rapidly reach a wide fraction of the market and initiate word of mouth.
• Market skimming pricing – It is a pricing strategy in which a marketer sets a relatively high
initial price for a product or service at first, then lowers the price over time.
• Neutral pricing -Generally a default strategy to minimize the role of pricing in the marketing
mix, not utilizing price to gain or restrict market share.
Here are some of the important questions that you should ask yourself when you are setting
the product price:
• How much did it cost you to produce the product?
• What is the customers’ perceived product value?
• Do you think that the slight price decrease could significantly increase your market share?
• Can the current price of the product keep up with the price of the product’s competitors?

59
 PLACE
A Place is the position and
distribution channel of the product to make it
accessible to the potential buyers. An
entrepreneur must examine and study the
location of its buyer to easily deliver the
product that the customer needs. An
entrepreneur must also know the nearest
suppliers to reduce the cost of transportation
for the raw materials to be used in making the product or services.
There are many distribution strategies, including:
• Intensive distribution – It mainly means a distribution on a large-scale and displaying the
product in as many ways and places as possible so that the customer sells in high volume due
to large scale distribution.
• Exclusive distribution – It is an agreement between supplier and retailer that grants the
exclusive rights within a specific geographic area to carry the supplier’s product.
• Selective distribution – It is a retail strategy that involves making a product or group of
products available only in certain markets.
• Franchising – An agreement where one party (the franchiser) grants another party (the
Franchisee) the right to use its trademark or trade-name as well as certain business system
and processes, to produce and market a good or service according to certain specifications.
Here are some of the questions that you should answer in developing your distribution
strategy:
• Where do your clients look for your service or product?
• What kind of stores do potential clients go to? Do they shop in a mall, in a regular brick and
mortar store, in the supermarket, or online?
• How do you access the different distribution channels?
• How is your distribution strategy different from your competitors?
• Do you need a strong sales force?
• Do you need to attend trade fairs?
• Do you need to sell in an online store?

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 Promotion is a very
PROMOTION
important component
of marketing as it can boost brand
recognition and sales. It comprises the
various elements like sales
organization, public relations,
advertising, and sales promotion.

Sales Organization – is a part of the

total business organization of a firm.
This unit of the firm is concerned with
distribution of goods or services. It may
be produced by the organization itself or may be purchased from manufacturers for resale.

Public relation – It is the practice of deliberately managing the release and spread of
information between an individual or an organization and the public to generate awareness
and positive responses to products and services of the business.

Advertising – It is the activity or profession of producing advertisement for commercial

products or services. It is a marketing tactic involving paying for space to promote a product,
service, or a cause. The goal of advertising is to reach out people most likely to be willing to
pay for a company’s product or services and entice them to buy.
Sales promotion – It is the process of persuading a potential buyer to buy the product
designed to be used as a short-term tactic to boost sales.

In a contemporary time, there seems to be a shift in focus from offline to the online world. Promoting
a product or services using the social media is beneficial to the business owner to reach out more
customers and suppliers. An extremely good example of this is online social media and managing a
firm's online social media presence.

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In creating an effective product promotion strategy, you need to answer the following
questions:
• How can you send marketing messages to your potential buyers?
• When is the best time to promote your product?
• Will you reach your potential audience and buyers through television ads?
• Is it best to use the social media in promoting the product?
• What is the promotion strategy of your competitors?
Your combination of promotional strategies and how you go about promotion will depend on your
budget.

MULTIPLE CHOICE
Directions: Circle or darken the letter that corresponds to the BEST answer.

1. A manager of Venezia Hotel must make marketing decisions to help it stand out
from its competition. To make these decisions, they must determine all but which of
the following?
o A. What customers want
o B. When customers want their services
o C. How to provide services to customers
o D. How to persuade customers to patronize the hotel
2. Raven Fredric decides that Lighthouse Hotel is going to offer a free Sunday brunch to
weekend guests in an attempt to increase the weekend business. What pricing approach is
he using?
o A. Loss leader
o B. Cost-plus pricing
o C. Customer-based pricing
o D. Yield management
3. When discussing marketing, what does “product” refer to?
o A. The location on which the hotel is built
o B. The hotel’s concept
o C. The hotel’s advertising
o D. The price at which rooms are sold

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 4. Which of the following is not a category into which promotional activities are classified?
o A. Personal selling
o B. Public relations
o C. Point-of-purchase communications
o D. Yield management
5. It can be a meal or some other tangible item that a hotel or restaurant provides to its
guest. It can also be an intangible service or a hotel or restaurant’s concept.
o A. Product
o B. Price
o C. Place
o D. Promotion
6. Is the amount that a hotel charges for its product.
o A. Product
o B. Price
o C. Place
o D. Promotion
7. Is the physical location of a business and the site where the reservation for the hotel is
made.
o A. Product
o B. Price
o C. Place
o D. Promotion
8. Is the decisions made about how to communicate the product, place, and price of the
hotel. It is made up of several promotional activities.
o A. Product
o B. Price
o C. Place
o D. Promotion

9. It is the process of persuading a potential buyer to buy the product designed to be used as
a short-term tactic to boost sales.
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 o A. Sales organization
o B. Advertising
o C. Public relation
o D. Sales promotion
10. It is an agreement between supplier and retailer that grants the exclusive rights within a
specific geographic area to carry the supplier’s product.
o A. Intensive distribution
o B. Exclusive distribution
o C. Selective distribution
o D. Franchising

The 7P’s model is a marketing model that modifies the 4P’s model. It is
generally used in the service industries.
7P’S OF MARKETING
MIX

Here are the additional elements that transition the 4P’s to the
7P’s marketing mix model.

People makes the business run.

PEOPLE Looking for the right person in the

business is one of the important elements in

marketing mix model. They are the employees
who do the work, produce the product, and the
ones who deliver the product or services. A
selection of skilled personnel is needed to
make the business run smoothly and
successful. It is important to hire and train the
right people to deliver superior service to the
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clients. When business finds people, who believe in the product or services that the particular
business creates, it’s highly likely that employees will perform the best they can. They are the internal
competitive advantages a business can have over other competitors which can inherently affect a
business’s position in the market.

Process refers to the

PROCESS
flow of activities or
mechanism that take place when there is
an interaction between customers and the
businesses. It is a systems and processes
of the organization that affects the
execution of the service. A combination
of some consecutive things or objects
that may enable an entrepreneur to
achieve a certain goal in a structured
way. They develop some of the processes
regarding marketing decisions like
marketing segmentation, customer
needs, identification, promotional
campaign designing, and some other
essential process. Example of the
process would be when a customer decides to subscribe to a telecommunication company to install
telephone and internet equipment. The customer will apply by submitting its requirements and pay
the necessary fees. After processing its application, the company then install the telephone and
modem for them to access the internet service. It is now a relationship for a given time that the
customer will be paying monthly, and the company will give its service according to their contract
plan.

TYPES OF 1.Technological processes. The process of creating tangible products is

PROCESS called technological process. The objectives to ensure that the customers feel
the product to be theirs. The manufacturer should ensure that he creates the product that is wanted
by the customers and should also make the products that he as a businessman would want to sell in
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the market. The balance between both would ensure that the technological process would run
smoothly.
2. Electronic processes. Use of receipts or barcodes or forms or other methods of information about
a product of a company that manufactures them is called an electronic process. This also includes
the course which is used to scan with the help of an application using a mobile phone.

3. Direct activities. Direct activities, as the name suggests, is about the reactions of the customers
regarding the process. How did they feel about the process that they just underwent through is known
thereby making any changes if necessary, in order to make the process more smoother. Direct
activities are occurred and recorded in present time

4. Indirect activities. When the interaction does not take place in person and it happens before or
after the product has been bought is termed as an indirect activity.

Processes in something as a tool to create something enormous or

MIXING monumental. For example, the combination of telemarketing and internet
PROCESS marketing is used to promote a certain service or a product to the targeted set
of customers.

1. Workflow. Movement of information or tasks for material from

one participant to the other is termed as workflow. This includes but
CONCEPTS RELATED
is not limited to people and tools procedures that are involved in
TO PROCESS every step of the marketing mix process.

The workflow may be sequential that is the consequent step is begin only when the prior step is
completed or parallel that is multiple steps may occur at the same time. Single workflows may be
combined in multiple ways to have an overall process.

2. Business process reengineering. Business process reengineering commonly abbreviated as BPR

is a means to enhance or improve the effectiveness of the organization along with its productivity. It
consists of starting right from the beginning or from scratch and creating a major business process
along with the application of IT or information technology in order to achieve significant
improvement of performances.

3. Business process management. Business process management is commonly abbreviated as

BPM. It is defined as a discipline which has a mix of different business activities and their flows and
which strives to support the vision and mission of business within and also beyond many boundaries
which one was people customers internal the employee’s external stakeholders as well as external
partners.

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4. Total quality management. Commonly abbreviated as TQM, Total Quality management is
sought in order to improve the quality of the product. Six sigma method was used by Motorola in
order to find out about total quality management.

It consists of methods to improve the processes in the business and thereby reduce the problems in
the output increase the output and thereby maximize the profits.

In the service
PHYSICAL
EVEIDENCE industries, there
should be physical
evidence that the service was delivered. It
pertains on how a business and its products are
perceived in the marketplace. It is the physical
evidence of a business’ presence and
establishment. They are generally market
leaders that establishes a physical evidence that
the customer will go when buying things that
they need. Example of a physical evidence is
when you think of a place where all the things you need are already in that place like SM City
Olongapo Central in Olongapo City is a much-awaited supermall that put excitement to the people
for their spin on shopping, dining and entertainment. The mall is a unique mix of local, national, and
global brands that suit every mall-goer’s need. This physical evidence is where you immediately
know exactly what their presence in the marketplace. So when you think of a branding concept, if
asked of a place to go, you think of a “Mall”, you would probably say of SM because “They got it
all, for You”. This manipulated their customers perception when asked for a different brand it is
already inside in that place.

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 A Brand is name, term,
DEVELOPING A design, symbol, or any other
BRAND NAME
features that identifies one
seller’s good or service as distinction from those of
other sellers. If you are ready to brand yourself or your
business, you need to have a clear understanding of what
developing a brand involves before you really get started.
Your brand-development process should always follow
these steps:

1. Decide what you’re going to brand. Are you branding a product or a service? A company or an
individual? If a product, think of something that you think your target will be interested. It might be
tangible or intangible item that is easy to make and available with the supplier. If it is a service, think
of a demand in the market today. As we are experiencing pandemic what do you think is a possible
service that you could provide to your target market. Are you establishing a company? Who will
compose your team or your workforce? Do they have enough funding to establish your company?
An individual? Are you ready to create your own business alone?

2. Do your research. First, find out everything there is to know about your market. Then, find out
everything there is to know about your product or service. Research and Development is an important
factor to be successful in putting up a business. It is a way of knowing what product or service will
be a demand in the market? In your years of stay in Senior High School you were taught on how to
write and develop your own research. This will be a great help for you to start with.

3. Position your product or service. Find and win a place for your offering in the marketplace and
in consumer’s mind by providing unique solutions to problems or need that aren’t already being
addressed by competing products. A Place is the position and distribution channel of the product to
make it accessible to the potential buyers. You must examine and study the location of your buyer
to easily deliver the product that your customer needs. In the customers perspective, they will choose
a product or service nearest to their residence so when they encounter problem to the product or
service it will be easy for them to return for a replacement.

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4. Write your brand definition. Your brand definition describes what you offer, why you offer it,
how your offering is different and better, what unique benefits your customers can count on, and
what promise or set of promises you make to all who work with and buy from your business. In
writing your brand, it is important that you know your mission, vision, and objectives. Describe your
brand that is easy to remember and catchy messages to your target customers.

5. Develop your name, logo, and tagline. Your name is the key that unlocks your brand image in
your consumer’s mind. Your logo is the brandmark or symbol that serves as the face of your brand.
Your tagline is the memorable phrase that provides consumers with a quick indication of your
product, brand, and market position. Your business name refers to a name that is different from a
true name of an individual which is to be used or signed in connection with your business on any
written or printed receipts, including business taxes duties and fees collected to the business owner.
A logo is a symbol, designed to represent your organization or to identify your products used to aid
and promote public identification and recognition. It is an abstract or figurative design with text.
Make sure to make it easy for the customer to remember the images. A tagline on the other hand, is
a phrase or slogan used in advertising to impress and encourages the customer to patronize your
product or service offered to them.

6. Launch your brand. Your brand goes public when you unveil your name, logo, and slogan, and
when you begin to tell your market the story of how your brand reflects what you stand for. A new
brand must get to make a splash in the market if it’s going to be successful. You’ve got to stand out
in the crowd to present your product or service. Make sure to allot enough time to prepare your
presentation to the public. Giving yourself more time also helps to develop hype for your brand while
giving you ample time to make sure that all is ready. Your goal is to develop a marketing strategy
for launching your product or service. Make sure that your presentation belongs to your target
audience. It’s no use promoting it to people who are not interested, so get to know your potential
buyers. In addition, make a research to your competitor to find out what niche they might be missing
out on, then go after the market.

7. Manage, leverage, and protect your brand. This is the “care and feeding” phase of the branding
process; it’s the step that leads to a strong, healthy, resilient brand. Just like good parenting, good
branding management can be summed up in a single word — consistency. Your brand image is an
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important factor in determining your success, which is why it is absolutely necessary to make sure
it’s protected at all cost. Knowing how to prevent it from being diluted, damaged or taken advantage
if misused by competitors, counterfeiters, or unrelated companies. Managed to apply and register
your brand to the right agency for trademarking is one of the important things to remember to protect
it.

8. Realign your brand to keep it current. Occasionally, you can (and should) change how your
brand is presented. From time to time, you need to update your brand presentation (the face of your
brand) to keep it relevant to the market in which it lives. Perhaps the most obvious reason to refresh
a brand is that it’s image has simply outgrown its effectiveness. An update to visual elements is
necessary to build upon the brand structure that is already known and loved.

Personal Branding Worksheet and Instruction Guide

By: Brooke Webb Smith
Adapted: Wilbert C. Venzon, LPT, MBA.

Instructions for Completing the Personal Branding Worksheet

Part A: Inspiration

1. Who are the people you admire most in your industry?

Who are the market leaders? Do you have any role models? Who are the most successful people?
The Industry Influencers? (Note: You can also include people in other industries who you admire
and who may also serve as role models.)

2. What are the characteristics of their personal brand?

For example, do they have a background story that everyone knows such as a turning point in their
life? A signature phrase which everyone associates with that person (like Nike’s, Just Do It)? Or
Emeril Lagasse, “BAM!” Even if you don’t care for his cooking or watch his show, chances are you
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have heard that phrase and if you say it most people will hear him saying in their head. What about
Industry Influencers? Do you have a few that you keep up with? They could have a nickname that
describes their brand, such as The Jerk (obviously not someone known for their compassion). They
may even have a style that distinguishes them, such as always wearing a baseball hat and sandals.

List the things that distinguish the people you listed in Step 1.

3. Where are these people seen most often?

The places where you are seen most often are the places where you will have the greatest
opportunities to build your personal brand. Where are your market leaders hanging out and
promoting their brand? For example, do they do frequent seminars or speak at large conferences?
Do you often see them on Facebook, Twitter, YouTube, LinkedIn or Google+? Their blog may be
their biggest source of branding, or podcast and advertisements.

Conduct online searches to see where their name appears most often. Your goal is to determine where
the Industry Influencers spend the most marketing time. Locate the trend-setters. Follow the movers-
and-shakers. Emulate the strategies that may work well for your business. By all means, do not try
to replicate their brand.

Remember, your brand is about the essence of you – not anyone else.

4. What do you admire most about these people?

Make a list of some of the characteristics you would want to model or adapt to your own brand. For
example, they may have a very personal way of communicating with their market in which they
share their own pains and heartaches. Or they might have a very no-nonsense attitude and be known
most for their guerilla-style, aggressive marketing tactics.

5. What makes them unique?

How do they stand out from the rest of their industry and the world? Why are people so attracted to
them? For example, do they meet a specific need that no one else does quite as well? What
impression are they leaving on their audience? How are they making them feel? One of the things

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that intrigue me about comedians who use self-degrading humor; they are often the most popular.
Louis C.K. and Jim Gaffigan illustrated this beautifully. There is something about sharing their pain
of being lonely, tired, overweight or single that makes others not only burst out in laughter but also
resonate with their pain. How many comedians can you think of who had a rise to fame because they
talked about how broke they are or how they, “get no respect.”
~Rodney Dangerfield, yes, you remember!

Part B: Brainstorm Your Brand

1. Who are the people you want to appeal to?

What is the target market for your personal brand? Is it primarily your buyers? Or are you targeting
your ideal future employers? What are some of the characteristics of your market? For example, how
old are they, are they more conservative or liberal, what other brands appeal to them? Are they Target
or Walmart? Are they on team Android or iPhone? Do they prefer a bottle of beer, a bottle of wine
or a glass of champagne? Are they Jimmy Choo, Calvin Kline, Tory Burch or Kate Spade? Talk to
people in your target market and get a feel for what makes them tick. Hang out in forums where they
are and listen in. Study their likes as well as their dislikes.

2. How do other people see you now?

Ask some people who know you to describe the way they see you. What do they see as your strengths
and weaknesses? Ask them what stands out most about you. If possible, do an anonymous
questionnaire so you can get honest feedback on the way you’re seen now. Please note: prepare
yourself for the unexpected feedback you may receive. It is a good starting point to close the gap in
between, how you think you are and how others perceive you. It is not uncommon for our words,
actions, behavior and habits not to be in accord with our intentions. This may prove to give you some
valuable insight. Consider a learning experience and an opportunity for self-reflection.

3. What do you want to be known as? (e.g., the person who does X)

What are the key traits you want people to associate with you? For example, do you want to be
known as the ‘one-step marketing solutions’ expert? Or perhaps your reputation is for ’10-minute
sales guru or ‘compassion-based coaching’. Brainstorm different possibilities based on the people

72
you want to appeal to as well as your own strengths. Your natural skills, talent and extraordinary
gifts are your first clue.
Another way to think about it, imagine, two people are talking and one says, “I am in desperate need
of (insert your thing here!)” And the other says, Oh I know! You absolutely must call, (insert your
name here) because she is the go-to person for ! Fill in the blank. What are you the go-to
person for? You are the leader in this arena. When you are doing this thing, you get in a zone. You
are on FIRE and no one can touch you with a ten-foot pole! It’s inspires you. It motivates you. It
excites you. You would do it for free if money were not a factor. You absolutely love it and want to
share it with the world. Sit still for a bit.

Sit in silence and allow your gifts and talents come to you. As you reflect, answer the above
questions. Soon you will be confident that you for sure can be a leader in or doing
.

4. What’s your story?

Why do you do what you do? Write down some of the details of your background that have impacted
your life. Is there a good story, which you can use as part of your brand? Of course, it is. We all have
one. Whether it’s an integral part of your brand or not, people will always want to know your story,
they want to identify with you. Think about the journey to your current space. Your obstacles, your
challenges, your persistence, your determination, your fear, your faith…each of these elements is
what a good story makes. Share openly how you arrived at your current state. Not only will you
inspire others; but also some or all parts of your story will undoubtedly resonate with your ideal
buyer. When this happens, you have created brand loyalty.

5. What’s your style? (e.g., casual, professional, grunge, etc.)

Write down the specifics of your current style. For example, do you tend to be more casual or
professional? Are you more of a 60’s throwback or a futuristic trend-setter?
Are you predominately Forever 21 or Banana Republic?

At the same time, note which of these style elements would most appeal to your target market. Your
style may not be a direct reflection of your target market. For example, I

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tend to be very closely identified with the style of Tory Burch, Land’s End, Soma, Kate Spade,
Burberry, Chanel and Nordstrom. Yet, many of my peers and members of my tribe are very like me
preferring a chic, sophisticated image; they do tend to lean more toward the trendy side.

They prefer to be fashionable in the styling of Gucci, Michael Kors, Juicy Couture, Prada, True
Religion and BCBG. Although I wear items from each of those brands, I tend to be less about staying
up-to-date with the latest but rather have timeless classic pieces. I give this illustration to make the
point, my communication, marketing and public relations each must speak to the importance of
beauty and image in their lives. I must make a note of this in my language, graphics and
presentations. If I ignore that critical part of their identity, they will no doubt tune me out and ignore
me. I am in business to serve them, not meet my own needs. I must get my needs met with another
service provider who has me in their target market. Think about your preference and that of your
target market, Capitalize on the similar.

6. The skills you want people to know you have (natural, valuable talents)

Make a list of the skills your think are most important to the target market for your personal brand.
These should include the natural talents that would provide the biggest impact and value for your
market, such as a keen problem-solving ability. If you work in branding and marketing, you are
probably both creative and have a thing for studying human behavior. A systems engineer probably
doesn’t rely on creativity so much to persuade their prospects.

7. Signature phrase or value proposition (just a few words):

Do you have a signature phrase, value proposition or personal tag line? This would just be a few
words. For example, the phrase “Elementary, my dear Watson” was Sherlock Holmes’ signature
catchphrase. One of Steve Jobs’ famous lines was, “Design is not just what it looks like and feels
like. Design is how it works.” You may not become as famous as Steve Jobs, but you should have a
short phrase that describes you and the essence of your service.

8. What’s unique about you?

Finally, brainstorm all the different ways that you are unique from others in your market. What
makes you stand out? If you’re not sure, go back to what other people have said about you. You can
also think about ways that you would like to be unique, even if you aren’t right now.

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Part C: Define Your Brand

1. Your story
What is your background story?
What are some of the key events in your life that have made you who you are today? What are some
of your key accomplishments or turning points in your life that you want to share with others?

2. Personal Values
What are your most important personal values?
Some sample values could be around seeing the best in all people, laughing about something every
day, learning something new every day, striving for excellence, helping others be their best etc. List
your top 5.

3. Personal brand statement (state who you are in 1 sentence)

Write out your unique, personal brand statement in one sentence or phrase.

This should reflect the element that defines you as a person. For example, Helen of Troy was, “The
Face That Launched a Thousand Ships”.

4. Your USP - unique value proposition (how you uniquely provide value to your
market)

Now write out a short sentence or two that describes how you provide value to your market in a
unique way, different from others in your market. For example, Scott Tousignant’s value
proposition is, “I lead by example and encourage others to sculpt their body into a work of art
while living their life to their fullest potential.”

5. Mission (why you do what you do)

Your mission statement tells the world a little bit more about why you do what you do. It’s not your
story. Instead, it combines the elements of your personal values, brand, and value proposition all into
one statement that describes your personal mission for your life. This doesn’t have to be about your
whole life. If you are developing a personal brand primarily around your business, then your personal
mission statement can be focused more on those aspects.
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 WORKSHEET: CREATING YOUR PERSONAL BRAND

PART A: INSPIRATION

1. PEOPLE YOU ADMIRE IN YOUR INDUSTRY:

2. WHAT ARE THE CHARACTERISTICS OF THEIR PERSONAL BRAND? (E.G.,

BACKGROUND STORY, SIGNATURE PHRASE, NICKNAME, STYLE, ETC.)

3. WHERE ARE THEY SEEN MOST OFTEN? (ONLINE SITES, OFFLINE, SEMINARS, ETC.)

4. WHAT DO YOU ADMIRE ABOUT THEM?

5. WHAT MAKES THEM UNIQUE?

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PART B. BRAINSTORM YOUR BRAND

WHO ARE THE PEOPLE YOU WANT TO APPEAL TO? (CHARACTERISTICS)

HOW DO OTHER PEOPLE SEE YOU NOW?

WHAT DO YOU WANT TO BE KNOWN AS? (E.G., THE PERSON WHO DOES X)

WHAT’S YOUR STORY? (E.G., WHY YOU DO WHAT YOU DO)

WHAT’S YOUR STYLE? (E.G., CASUAL, PROFESSIONAL, GRUNGE, ETC.)

THE SKILLS YOU WANT PEOPLE TO KNOW YOU HAVE (NATURAL, VALUABLE
TALENTS)

SIGNATURE PHRASE OR VALUE PROPOSITION (JUST A FEW WORDS):

WHAT’S UNIQUE ABOUT YOU?

DEFINE YOUR BRAND

YOUR STORY

PERSONAL VALUES

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PERSONAL BRAND STATEMENT (STATE WHO YOU ARE IN 1 SENTENCE)

YOUR UNIQUE VALUE PROPOSITION (HOW YOU UNIQUELY PROVIDE VALUE

TO YOUR MARKET)

MISSION (WHY YOU DO WHAT YOU DO)

1. Marketing mix refers to the process of value exchange that is

facilitated by the 4P's. It is the foundation model for business.

2. 4P's was develop by a marketing expert named E. Jerome

McCarthy

3. 4P's of Marketing mix refers to four broad levels of marketing decision

4. Product, Price, Place and Promotion are the 4-broad level of marketing mix decisions

5. 7P's model is a marketing model that modifies the 4P's model.

6. People, Process and Physical evidence are the 3 added marketing mix decision.

7. A brand is a name, term, design, symbol, or any other features that identifies one seller's
good or service as distinction from those of other sellers.

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 QUARTER 2

Lesson 4. Demonstrate understanding of the 4M’s of

Operation
K to 12 CG Code: (TLE_ICTAN11/12EM-Ia-2)

Objectives: In this lesson, student will be able to:

Describe the 4M’s of operations in relation to the business opportunity:

CONTENT STANDARDS:
The learner demonstrates
understanding of
environment and market
in one’s locality/town.
PERFORMANCE
STANDARDS:
The learner independently
creates a business vicinity
map reflective of potential
market in one’s
locality/town.
1. Develop a product description;
2. Create a prototype of the product;
3. Test the product prototype;
4. Validate the service description of the product with potential
customers to determine its market acceptability;
5. Select/pinpoint potential suppliers of raw materials and other inputs
necessary for the production of the product or service;
6. Discuss the value/supply chain in relation to the business enterprise;
7. Recruit qualified people for one’s business enterprise;
8. Develop the business model;
9. Forecast the revenue of the business;
10. Forecast the costs to be incurred;
11. Compute for profits

4M’s of Operations mainly represent factors that influence on

results of any concern process. A method that has been used
for a long time in a root cause analysis like using a fish-bone
diagram created by Kaoru Ishikawa of Japan. It is a causal
diagram that shows potential causes of a specific event. This
was used to make product design and quality defect prevention to identify potential
factors on cause and overall effect. A cause of imperfection from a source of variation
which was grouped into 4 major domains to identify classification of each variation. In
manufacturing industries this method was used to apply on production control,
improvement, overall efficiency measurement, processes, and design. Let us now
describe the 4 major domains of 4M’s of Operations in relation to business opportunity.

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 A Method is a detailed procedure for accomplishing something. It is

METHOD a systematic way of doing a particular job. Method was used in

business when developing or innovating a new products or services,
expanding your business enterprise, searching for skilled workers to include in the
workforce, and for improving the efficiency of its process. All of this activity was
documented as reference for every development of the business including notations that
identifies product or service and customer preferences. This will result to a standard
operating procedure in all activities that the business will implement. In analyzing this
method, an entrepreneur must do these steps:

1. Identify the operation to analyzed.

2. Gather all relevant information about the operation, including tools, materials,
and procedures.
3. Talk to employees who use the operation or have used similar operations. They
may have suggestion for improving it.
4. Chart the operation, whether you are analyzing an existing operation or a new
operation.
5. Evaluate each step in the existing operation or proposed new operation. Does
the step add value? Does it only add cost?
6. Revise the existing or new operation as needed.

MANPOWER
A wise selection of manpower to join in your workforce
provides strategic solutions in promoting a sustainable competitive advantage that
quickly adapts changing demands in business and its operations. These are employees
that processes and give insights on how to reduce cost, increase productivity to achieve
a better business result. Finding an honest and capable people is always a challenge in
business. To have them work happily and satisfied, an employer should always take
good care and treasure them by providing the right salaries and benefits as they are
integral to the growth of the business. To look for the right employee for the business
operation, the following are the kind of staff one should have:

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 1. Skilled
2. Well qualified and well verse in business
3. Responsible
4. Dedicated and committed to work
5. Honest and with integrity
6. Able to attain targets and set goals
7. Not indulge in wasteful expenditure
8. Loyal
9. Team player

How to maximize the staff contribution to work?

• Motivate the staff. It helps to improve their morale.
• Make sure they are comfortable in their workplace. They must be provided with the
required amenities so that their work does not appear burdensome.
• Staff should be provided with necessary benefits. They must feel that their work is worth
performing. Not only the entrepreneur should gain, but also the employee should
benefit.
• Self-respect is very essential. The employee should be treated well. He must not be
treated as a slave.
• The staff should also share in the profits if possible. Yearly bonus apart from his or her
salary is added income for him or her.
• Appreciation. Hard work and dedicated effort should be appreciated.
• Leisure time should be provided for extra-curricular activities. He or she should also be
given time to take off from work so that he or she can go on a holiday. A change of
scene refreshes the mind.
• One must listen to the woes of the employees. Understanding their difficulties in
performing the task is essential.

Machine plays a vital part in operating a business. Aside from

MACHINES manpower the use of machinery is important nowadays to make the

process of production more effective and efficient. A machine is a
mechanical structure that uses power to apply forces and control movement to perform
an intended action. It is controlled by people or a machine itself to produce the
necessary or required number of productions needed. You may be able to use the

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 manpower to do a particular job but it is usually more efficient if machines are able to
automate the work. The right machine equipment can improve your processes,
productivity, and capacity to innovate. Not only will you save time and resources, but
you’ll also avoid costly quick fixes. The following are the right equipment to purchase
in starting a business:

1. Assess your business reality. It is important to understand your objectives why

you need to purchase machinery. Are you looking for increasing your
productivity? Will this equipment make you more successful in the
marketplace? Will it help you stay ahead of your competitors? Can you upgrade
instead of buying new equipment and still get better performance? These are
questions you need to ask to assess your business if you really need machinery
instead of your manpower.
2. Get an external point of view. Depending on the scale of your investment, it
may be worth working with an external consultant who can ensure you make
the most of your purchase by helping you assess your needs. To do this, you
need to make a cost-benefit analysis, which helps you justify your purchase and
determine its advantages and disadvantages.
3. Invest in digital technologies. According to a survey conduct in 2017 by 960
Canadian manufacturers, they found out that companies who adopted digital
technologies reaped impressive rewards, including improved productivity,
lower operational costs, and better product quality. This technological
advantage may monitor a real-time production and quality control to reduce
waste and rework. It predicted maintenance to prevent costly repairs, higher
automation to save labor costs and improve throughput.
4. Create a technology roadmap. Rather than making an isolated purchase, look
at the overall needs of your business and plan for the long term. A technology
roadmap is a planning tool that aligns your business objectives to long- and
short-term technology solutions. It helps you understand your current
technological systems, set technology development priorities and provide
timeline for the implementation of a new system. The first part of building your
roadmap is to get a clear picture of what you are already doing and mapping out
your processes.

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 5. Shop around for suppliers. You may browse the internet to access different
website that offers specialized machinery equipment. Check out newsletters and
attend trade shows where you can get some hands-on time equipment. Don’t let
price alone guide you in your supplier decision, consider aspects such as post-
sales service and supplier’s reputation and getting references.
6. Keep training in mind. All to often, entrepreneurs don’t’ consider the time,
money and resources required to train employees on new equipment. You want
to avoid the productivity drop that occurs when employees take too much time
to adapt to new technology or processes. If the equipment is new or has new
features, ensure that employees who uses the machine will have time to be
trained.
7. Think safety first. A healthy and safe work environment means your
employees and your company can be more productive, and this rule applies to
your equipment and technology purchases as well. Suppliers are responsible for
selling the equipment that can be used safely, but you are responsible for
ensuring that your employees follow safety rules.
8. Keep it green. When purchasing equipment, be sure that it’s energy efficient.
Not only to save money, but also by contributing to the health of the planet.
Research the environmental impact of your new equipment and find out how to
dispose of your existing equipment in a way that minimizes its impact on the
environment.

In manufacturing industry, companies are involved in turning raw

MATERIALS materials into physical products, which are then sold to consumers.
One of the things that a manufacturing company can do to achieve
efficiency is to source quality raw materials from credible suppliers. For perishable and edible
products, the business should investigate how raw materials are stored, processed, and shipped
to consumers. Do you have the materials needed to perform all parts of your production? Are
they conveniently located to minimize waste? Once the production process is in place, an
entrepreneur shifts to the daily activities of materials management, which encompass the
following activities: Purchasing, Inventory control, and work scheduling.

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Purchasing and Supplier Selection

The process of acquiring the materials and services to be used in production is

called purchasing (or procurement). For many products, the costs of materials make up about
50 percent of total manufacturing costs. Not surprisingly, then, materials acquisition gets a
good deal of the entrepreneur’s time and attention.

As a rule, there’s no shortage of vendors willing to supply parts and other materials, but the
trick is finding the best suppliers. In selecting a supplier, an entrepreneur must consider such
questions as the following:

• Can the vendor supply the needed quantity of materials at a reasonable price?
• Is the quality good?
• Is the vendor reliable (will materials be delivered on time)?
• Does the vendor have a favorable reputation?
• Is the company easy to work with?

Getting the answers to these questions and making the right choices—a process known as
supplier selection—is a key responsibility of operations management.

E-Purchasing

Technology is changing the way businesses buy things. Through e-purchasing (or e-
procurement), companies use the Internet to interact with suppliers. The process is similar to
the one you’d use to find a consumer good—say, a forty-two-inch LCD high-definition TV—
over the Internet. You might start by browsing the Web sites of TV manufacturers, such as
Sony, Samsung, TCL, or Skyworth. To gather comparative prices, you might go to a
comparison-shopping Web site, such as Lazada or Shopee. Once you’ve decided where to buy
your TV, you’d complete your transaction online, even paying for it electronically.

Inventory Control

If a manufacturer runs out of the materials it needs for production, then production stops. In
the past, many companies guarded against this possibility by keeping large inventories of

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materials on hand. It seemed like the thing to do at the time, but it often introduced a new
problem—wasting money. Companies were paying for parts and other materials that they
wouldn’t use for weeks or even months, and in the meantime, they were running up substantial
storage and insurance costs.

Most manufacturers have since learned that to remain competitive, they need to manage
inventories more efficiently. This task requires that they strike a balance between two threats
to productivity: losing production time because they’ve run out of materials and wasting money
because they’re carrying too much inventory. The process of striking this balance is
called inventory control, and companies now regularly rely on a variety of inventory-control
methods.

Just-in-Time Production

One method is called just-in-time (JIT) production: the manufacturer arranges for materials to
arrive at production facilities just in time to enter the manufacturing process. Parts and
materials don’t sit unused for long periods, and the costs of “holding” inventory are
significantly cut. JIT, however, requires considerable communication and cooperation between
the manufacturer and the supplier. The manufacturer has to know what it needs, and when. The
supplier has to commit to supplying the right materials, of the right quality, at exactly the right
time.

Material Requirements Planning

Another method, called material requirements planning (MRP), relies on a computerized

program both to calculate the quantity of materials needed for production and to determine
when they should be ordered or made. Let’s say, for example, that you and several classmates
are planning a fund-raising dinner for the local animal shelter. First, you estimate how many
people will attend—say, fifty. Next, you plan the menu—lasagna, garlic bread, salad, and
cookies. Then, you determine what ingredients you’ll need to make the food. Next, you have
to decide when you’ll need your ingredients. You don’t want to make everything on the
afternoon of the dinner; some things—like the lasagna and cookies—can be made ahead of
time. Nor do you want to buy all your ingredients at the same time; in particular, the salad

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ingredients would go bad if purchased too far in advance. Once you’ve made all these
calculations and decisions, you work out a schedule for the production of your dinner that
indicates the order and timing of every activity involved. With your schedule in hand, you can
determine when to buy each ingredient. Finally, you do your shopping.

Though the production process at most manufacturing companies is a lot more complex than
planning a dinner (even for fifty), an MRP system is designed to handle similar problems. The
program generates a production schedule based on estimated output (your food-preparation
timetable for fifty guests), prepares a list of needed materials (your shopping list), and orders
the materials (goes shopping).

The basic MRP focuses on material planning, but there’s a more sophisticated system—
called manufacturing resource planning (MRP II)—that goes beyond material planning to help
monitor resources in all areas of the company. Such a program can, for instance, coordinate the
production schedule with HR managers’ forecasts for needed labor.

Work Scheduling

As we’ve seen, manufacturers make profits by transforming inputs (materials and other
resources) into outputs (finished goods). We know, too, that production activities, like all
business activities, have to be controlled: they have to be monitored to ensure that actual
performance satisfies planned performance. In production, the control process starts when
operations managers decide not only which goods and how many will be produced, but when.
This detailed information goes into a master production schedule (MPS). To draw up an MPS,
managers need to know where materials are located and headed at every step in the production
process. For this purpose, they determine the routing of all materials—that is, the workflow of
each item based on the sequence of operations in which it will be used.

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Multiple Choice: Select the best answer.
1. It is extremely important in any organization to make appropriate assignments of
responsibility for the implementation of the marketing plan. In some cases, the availability of
a certain expertise may be uncontrollable. In any event, the entrepreneur must build an effective
management team and assign the responsibilities to implement the marketing plan.
a) Manpower
b) Method
c) Materials
d) Machine
2. A mechanical structure that uses power to apply forces and control movement to perform an
intended action.
a) Manpower
b) Method
c) Materials
d) Machine
3. Used to make new products
a) Manpower
b) Method
c) Materials
d) Machine
4. It is a detailed procedure for accomplishing a particular job used when developing or
innovating new product or service and expanding a business enterprise.
a) Manpower
b) Method
c) Machine
d) Materials

5. A selection of people to join in a workforce that provides strategic solutions in promoting a

sustainable competitive advantage that quickly adapts changing demand in business operations.
a) Manpower
b) Method
c) Machine
d) Materials

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 Now that we understand the 4M’s of operation in relation to business opportunity, let us start
making our product or services that you think possible to offer in our target market by making
of its description, prototype and validation if it is acceptable in the marketplace.

A Product description is the marketing copy that explains what

DEVELOPING A a product is and why it’s worth purchasing. The purpose of a
PRODUCT product description is to supply customers with important
DESCRIPTION
information about the features and benefits of the product, so
they’re compelled to buy. However, entrepreneurs and marketers alike are susceptible to a
common mistake that comes up when writing a product description. Product Descriptions
should be created for all the products as part of the planning activities and before the Project
Plan can be completed. It is not always possible to create all the Product Descriptions in the
Initiation Stage in each project and therefore, Product Descriptions may be created or updated
in the Stage Boundary process.

A Product Description is used to:

• Understand the purpose of the product and
its function.
• Define who will use the product and perhaps
how it will be used.
• Identify the level of Quality required of the
product so the product will be usable (fit for
purpose).
• Define the skills required to produce the product and to review and approve the product.

A Product Description is normally written for each of Writing effective

the identified products in the product breakdown Product
structure if required. Here are some things to consider
Descriptions
when creating the product descriptions. Remember that quality information forms a good part
of these descriptions.

1. Know your Target Audience. The first step in writing a product description
is to define your target audience. You want to be able to define which features

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 would be most interesting to your potential buyers. This begins with
understanding your buyer persona, a breakdown of the characteristics of your
potential customers. Your buyer persona will help you understand which
features will be most valuable to your customers.

As you are writing your product description, keep these questions in mind:

• How did this person arrive to your page?

• What are his or her interests, generally?
• Why would this person be interested in your Shopify store, specifically?
• How would this person describe the product to a friend?
• What features or benefits would interest this person the most?
By keeping these questions in mind as you write your product copy, you will be better able to
write a product description that sells.

The buyer persona is not just any person who

is shopping for a lamp. Instead, the buyer
persona is likely interested in all-natural
remedies for the home, especially when it
comes to atmosphere. In this case, the
potential buyer would likely be interested in
learning about this product description. Rather
than focus on the decorative features of the
lamp, like most other product descriptions for
lamps, Meicom Trading focuses on the
features that would appeal to the buyer
persona the most.

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2. Focus on the Product benefits

As a business owner, you are understandably excited to share all of the qualities of your
products. You want to show that your product has the best features and most unique specs.
The buyer, however, is not necessarily interested in the mundane features of the
product. Instead, they want to know
how it can benefit them.
A product feature is a factual
statement about the product that
provides technical information. A
product benefit, on the other hand,
tells how the product can improve
the buyer’s life.

If we take a closer look at the product description of the very unique item from above, we can
see the key features of the product as well as the benefits. The content of the product description
should convince the potential buyers that will improve their lives in obvious, measurable ways.

3. Tell the Full story. A good product description should give all relevant details, convince
the buyer of its benefits, and pack an emotional punch. Emotions influence the buyer behavior,
so your product description is the perfect place to elicit emotions. How do you do this? By
filling in any gaps that a potential buyer may have about the product.

Silvana Spirit does an excellent job of this

in their product description for their
Natural Amethyst Ring. The product
description includes features, sure but it
goes further into the story of the key
features: the amethyst. If does this by
focusing on the traditional spiritual
benefits of amethyst. It focuses especially
on the ways in which it can be used,
making it easy for the customer to imagine
having this ring in their life.

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4. Use Natural Language and Tone.

If you read your description aloud, does it sound like a real conversation that you would have
with your friend?

Or does it sound like a computer-generated string of words?

If your product description isn’t something that you would say to your friend about the
product, then it’s time to inject a little life into them.

Bringing this natural tone–one

that you would use in a real
conversation–will help your
customer connect with your
brand.

Nasty Gal does this

exceptionally well, using the
tone of “fun loving girlfriend”
throughout the entire site, even
in the product titles.
For example, rather than selling
regular high-heel shoes, they
are selling sassy shoes that one young woman might recommend to another. This girlfriend
tone is carried throughout the website, from the product titles, production descriptions, color
scheme, down to the very name of the company.

5. Use Power Words that Sell. There are certain words and phrases that naturally elicit an
emotional response in humans. Luckily for Lazada online shopping store, this also increases
sales. By being mindful of these words and phrases, you can more easily convince your
customers to take the leap and make the purchase.

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Jon Morrow at Smart Blogger describes
these as “power words.” He has an entire
list of words that can help make your
product copy more enticing.

6. Make it easy to scan. If you are going

to publish your product online, you can do
this by making your descriptions
scannable. As in, the buyer is able to find
exactly the information they wants
without wasting time sifting through other
pieces of information. Make your product
descriptions easy to scan by including bullet points, short paragraph made up of just a few
sentences each, lots of white space, and different size fonts.

Writing a Product Description. Using the given template

below, write a detailed description of the product or service
that you want to introduce to your target market.

PRODUCT DESCRIPTION
Name of the Product
Manufactured By
Use of the Product

Overview of the Product

Ingredients/Construction component

Price

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 one of the essential early steps in the inventing
process is creating a prototype, which simply
CREATING A PRODUCT defined as a three-dimensional version of your
PROTOTYPE
vision. Creating a prototype can also be one of the
most fun and rewarding steps you’ll take. That’s
because developing a prototype gives the opportunity to really tap your creativity, using those
skills that inspired your invention idea in the first place. And whether you’re making your
prototype at home or hiring the services of an engineer, seamstress or machinist, it’s truly
exciting to see your idea transformed into something tangible and real. So what exactly should
a prototype should look like? First, it depends on your idea. Second, it depends on your budget
and your goals. If possible, it's great to start with a handmade prototype, no matter how
rudimentary. For example, I've seen prototypes made from the simplest of household items:
socks, diaper tabs, household glue, empty milk containers--you name it. If it works for your
initial demonstration purposes, it's as good as the most expensive materials.

Eventually, if you decide to move forward with your invention, you'll probably need what's
known as a "pre-production" prototype--especially if you plan to manufacture it yourself rather
than license it. But as a first step, a homemade "presentation" prototype can give you a good
running start.

A prototype provides other advantages, as well:

1. It enables you to test and refine the functionality of your design. Sure, your idea works
perfectly in theory. It's not until you start physically creating it that you'll encounter flaws in
your thinking. That's why another great reason to develop a prototype is to test the functionality
of your idea. You'll never know the design issues and challenges until you begin actually taking
your idea from theory to reality.

2. It makes it possible to test the performance of various materials. For example, your heart
may be set on using metal--until you test it and realize that, say, plastic performs better at a
lower cost for your particular application. The prototype stage will help you determine the best
materials.

3. It'll help you describe your product more effectively with your team, including your
packaging or marketing expert, and potential business partners.

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 Prototyping is the Design Verification phase of Product
Development because it demonstrates or proves the design.
Why Think of a Prototype as simply taking a design from the
PROTOTYPE?
virtual, imaginary realm into the physical world. Of course,
there are lots of reasons we want to touch and feel and try
our new widget, and a prototype is the way to do that, But there are some specific reasons to
prototype. Some of the most common are:

• Display or Show the new product — maybe at a show or for investors.

• Test an idea to see if it really works.

• Test the design to see if it passes certain requirements.

• Use it to evaluate where improvements are necessary.

• Get customer feedback.

Prototypes typically fit in these categories: 1. Looks Like; 2. Works Like; 3. Concepts to
Test. You can think of it as Form and Function. Basically, there are prototypes that look and
feel complete (but may not actually function); then prototypes that function properly (though
just cobbled together). And, prototypes for testing just a portion of the whole concept. Of
course, there are the combination versions that both Look right and Function correctly. Those
are usually the finals.

With the concepts of “Functional” and “Display” (form) types in mind, there are many levels
of Prototypes:

• Some are simple duct-tape and bailing wire prototypes to visualize or test how something
might work;

• Then there is clay or paper mache to show roughly what it might look like;

• Still others are functional representations that work, but may not look so good or be as
strong as needed for the final product;

• 3D printed prototypes can look great and may also function, but usually not at full capacity;

• Some are high polish, fragile representations for show and tell;

• And some are complete representations of the final product. (Both form and function.)

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And, there are many more. All of these reach to a specific goal. So, whatever reasons for
building one, choose a prototype (and a prototyping process) to fit the purpose. Let your
project or tests determine which is right — especially since prototyping often comes with a
significant cost.

Prototyping Methods
Traditional prototyping methods include mock-ups (clay, wood or other), fabrication, and of
course, the infamous bailing wire and duct tape. More modern methods include CNC and rapid
prototyping (like 3D Printing, SLA, SLS and many more). Mock-ups are typically early in the
design for visualization, feel, and to allow adjustments or fiddling with shape and
size. Fabricated prototypes are typically functional versions that may or may not look like the
final product but given the opportunity to test function or prove that something works.

When to Prototype
Before diving into the prototyping phase, there are few questions to ask:

• Is a prototype desirable or necessary?

• Does the need for design verification justify it?

• Is testing needed for design improvement?

• Does the design reflect the best knowledge before prototyping?

• What kind of prototype will fill the needs best?

• And, perhaps most important, what will the prototype accomplish?

Depending on the product, a prototype may or may not be necessary — or perhaps more
importantly, it may be that only portions of the design need prototyping. This does not to say
prototypes are not important. It’s mention is to emphasize that prototyping is costly in both
time and money, so the need is worth evaluating.

In many industries the products are quite complex and require several iterations of design,
prototyping and testing. The auto industry, for instance, uses several variations of prototypes
to evaluate the design and to find areas of improvement. In the case of automobiles, the
complexity of the design, the quantities sold, and the amount learned in testing from each
version easily justify the time and cost. Another key example from automotive is the amount

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of testing that happens at the component level. They don’t test the completely new car until the
major subsystems are each proven.

One way to improve your product prototype that your idea has
been thought through in sufficient detail to merit consideration,
Building your
Product’s First the following are steps in getting your first prototype to turn
Prototype your idea into a patented, profitable product.

1. Create a Concept Sketch. The first step toward turning your

idea into reality is getting it down on paper. Draw your idea to help you visualize your prototype
in greater detail. While it is possible to use a digital drawing program for this step, it may be
more efficient to start on paper first. For one thing, in the early stages of creating your
prototype, you’ll have a lot of ideas running through your mind and competing with each other.
You’ll save time by drawing these rapidly on paper instead of investing time perfecting a digital
drawing.

2. Develop a Virtual Prototype. At some point it’s going to be invaluable to create a digital
sketch of your idea. A standard digital design tool used by engineers and other professionals is
AutoCAD, which enables them to make both 2-D and 3-D renderings.
A 3-D rendering lets you rotate and animate your virtual sketch, so you can visualize it from
all angles. You may use AUTOCAD application or other rendering applications available in
the market that can further enable you to transform your 3-D drawing into a photorealistic
prototype, helping you see approximately how a physical version of your design will look. If
you’re not skilled with computer drawing and rendering tools, professional graphic designers
or prototype designers can assist you with this step.

3. Build a Physical Prototype. Once you have a virtual prototype, you’re ready to build a
physical prototype. If you have the skill, you can build one yourself. If you need help, there are
several types of resources you can tap to get this step done. One way is going to a professional
prototype designer. An alternative is getting a designer or engineer to build your prototype.

Once your first prototype is built, you may find flaws that need to be corrected. You may need
to build several prototypes to get a good one done. Typically, early working prototypes are
built of less expensive materials than later versions to save money while fixing design flaws.

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As you improve your design, you can eventually make a prototype that replicates your actual
product as it will be sold to consumers.

4. Locate a Manufacturer. If your idea is going to be profitable, you need to be able to build
it at a cost that is low enough that you can cover expenses without cutting too far into your
revenue by locating a manufacturer that can produce your product at a profitable price. To help
you test your prototype and determine how to produce it at a cost-efficient price, go to multiple
suppliers and manufacturers to get estimates, so you can determine the most cost-efficient
materials and methods for putting your prototype into production.

Entrepreneurs use prototype to test their ideas and fail early without investing time and money
in creating a product that will work or that customers do not want. Remember everything is a
prototype that can be tested and change! With this perspective, even a finished product can be
reimagined and reinvented. An entrepreneur’s product or service idea must meet the needs of
the people it is intended for in order to be successful. To ensure this, they use an approach
called design thinking to develop their ideas. We define design thinking as a creative approach
to solving problems that focuses on user’s need.

DESIGN THINKING. Gather the following materials to use

for prototyping. Using the Design Challenge Prompts, make a
possible prototype needed from the materials provided.
You will be given a problem to solve and must do so by
building a solution.

Materials and Preparation

1. Object that will serve as a fastener (ex: pipe cleaners, rubber bands, paper clips)
2. Object that can serve as a surface (Ex: coffee filters, cardboard squares)
3. Object that can help create structure (Ex: straws, tongue depressors, tin foil)

Design Challenge Prompts

1. I need to get my groceries up the stairs to my house.
2. I need to keep a baby warm in a place with no electricity.
3. I need a way to stay dry when I walk home in the rain.

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 4. I need a way to collect and carry water.
5. I need a way to make daily exercises more fun.
6. I need a way to make my jeepney ride more comfortable.
7. I need a way to help senior citizens in your community.
8. I need a pet-friendly park.
9. I need something that reduces the use of plastic bags.

DESIGN OUTPUT: Take a picture of your design output and paste it below.

Post – Activity Discussion

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 1. How did the prototype help you think about your idea?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. What was frustrating about making a prototype?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

3. What challenges did you face when communicating and working with group members?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

Testing a prototype/developed design is a very important

part of the design and manufacturing process. Testing and
Testing the product evaluation simply confirm that the product will work as it
prototype
is supposed to, or if it needs refinement. In general,
testing a prototype allows the designer and client to assess
the viability of a design. Will it be successful as a commercial product? Testing also
helps identify potential faults, which in turns allows the designer to make
improvements. There are many reasons why testing and evaluation takes place. Some
reasons are described below.

1. Testing and evaluation allow the client / customer to view the prototype and to give
his/her views. Changes and improvements are agreed, and further work carried out.

2. A focus group can try out the prototype and give their views and opinions. Faults and
problems are often identified at this stage. Suggestions for improvement are often made
at this stage.

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 3. Safety issues are sometimes identified, by thorough testing and evaluation. The
prototype can be tested against any relevant regulations and legislation. Adjustments /
improvements to the design can then be made.

4. Evaluating a prototype allows the production costs to be assessed and finalized. Every
stage of manufacturing can be scrutinized for potential costs. If the client has set
financial limits / restrictions, then alterations to the design or manufacturing processes,
may have to be made. This may lead to alternative and cheaper manufacturing processes
being selected, for future production.

5. Component failure is often identified during the testing process. This may mean a
component is redesign and not the entire product. Sometimes a component or part of a
product, will be tested separately and not the whole product. This allows more specific
tests to be carried out.

6. Evaluating the manufacture of the prototype, allows the designer to plan an efficient
and cost-effective manufacturing production line.

7. Prototype testing can be carried out alongside the testing of similar designs or even the
products of competitors. This may lead to improvements.

8. Testing ensures that any user instructions can be worked out, stage by stage, so that the
future consumer can use the product efficiently and safely. This guarantees customer
satisfaction.

9. Testing a prototype allows ‘concept’ designs to be evaluated fully. This is sometimes

called ‘proof of concept’. This usually happens during the early development of a
product.

10. Testing against the design specification, helps ensure a full and relevant evaluation of
a prototype is carried out. This should be carried out during the entire development
process.

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 11. The testing and evaluation phase allows fellow designers, knowledgeable in the
specialist area, to offer opinions and suggest critical improvements. This may lead to a
more successful design.

TESTING AND EVALUATING A DEVELOP

DESIGN/PROTOTYPE

Testing a prototype/develop design is a very

important part of the design and manufacturing
process. Testing and evaluation simply confirm that the product will work as it is
supposed to, or if it needs refinement. In the space below, explain why testing and
evaluating a prototype is important. Give examples in your answer.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
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 One of the most important aspects
Validating the service description of of starting a business is validating
the product with potential that there is a demand for your
customers to determine its market products. There is nothing more
acceptability
discouraging than spending your
time and energy creating a product
that you think people will love, only to realize that there’s no interest when you launch. You
can validate your service description of the product with potential customers to determine its
market acceptability using a number of means.

1. Surveys. You can create a survey using available online survey platform like Microsoft and
Google Forms and send it out to groups, to your friends, and to all people who are your ideal
clients. Gather responses about how they like to have some products delivered, about their
needs and their pains so you will know exactly how to serve them. You can check in with them
on what it is they’re struggling with right now so you can brainstorm some product ideas. You
can also interview a number of your ideal clients using Skype, Microsoft Teams or Google
Meet for a videoconferencing or make use of something simple to set up individual chats using
Facebook Messenger and the like. Doing this really gets some good insight into what your
customers really need, and also how they talk about those needs; you can really get some insight
into the language and the emotions behind what they want to ensure you create something
spectacular for them.

2. Beta Test. Other ways to validate your product include creating a test version of something
and running it past a small group or audience to get their feedback. A test version of the product
can either be paid, or free, and is a great way to get testimonials and feedback while you create.
This way, the pressure is off to create a fantastic product until you have tested that it works in
the way that you hoped it would. You can also use the feedback from your first round to
improve and build on your ideas to make them even better! A test or beta round is also
invaluable for you, as you might discover that you don’t enjoy this product or service the way
you thought you would, so it’s a great chance to move on and stay in tune with what you love!

3. Early Bird Offer

Another way you can validate your product is to offer to your subscriber list, survey attendees,
or people who have expressed some interest in your product, access for an early bird price to

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see if people actually buy. If people part with money for your product and you can get some
sales for the idea, then you have an indication that this is an idea that will sell. Combine it with
social media reach by sharing on Facebook, Twitter, and Pinterest, and let people know about
your brand new ideas coming to life.

4. Be Yourself
It is so tempting to follow models and ideas of what other small businesses have created – and
that can be a great starting point to help brainstorm some ideas – but we all bring a different
set of skills, experiences, and benefits to our work. So, make sure that you are really working
in your own unique zone of genius which will sustain you for the long term.

5. Stay Passionate
Once you begin to check what people need, what their pain points are, and how you can serve
them, you can stay inspired by making sure you are using your own unique combination of
skills and the passion that makes this product unique to you. If you are creating products that
you are no longer feel passionate about, this will be reflected in the way that you communicate
about them, in your level of service to your customers, and in the end results of reduced sales.
Make sure your product or service has been validated by people who fit your ideal client
criteria, that people have tested the product for you and/or parted with money to prove to you
that this is what they want.

What happens if no one seems interested?

If your audience doesn’t want your amazing idea? Take a look at the execution; it might be
they love the concept, but the delivery needs to be different. Or, that the idea is sound, but the
offer isn’t clear. If you are super passionate about your idea and truly believe it has a place in
your business, test it with a few variants of concepts and play around with some methods of
delivery and adding value.

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 VALIDATING A PRODUCT/SERVICE THROUGH
SURVEY. Using your prepared Text Form (Microsoft Forms or
Google Forms) create a survey to validate your product or service
to determine its market acceptability. You may go to the
following link to start with your survey.
https://www.google.com/forms/about/, https://forms.office.com/

SAMPLE SURVEY QUESTIONNAIRE

Reference: https://www.examples.com/education/product-questionnaire.html

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 Choosing the right supplier
Select/pinpoint potential suppliers involves much more than scanning
or raw materials and other inputs a series of price lists. Your choice
necessary for the production of the will depend on a wide range of
product or service factors such as value for money,
quality, reliability, and service.
How you weigh up the importance of these different factors will be based on your business'
priorities and strategy. A strategic approach to choosing suppliers can also help you to
understand how your own potential customers weigh up their purchasing decisions.

This guide illustrates a step-by-step approach you can follow that should help you make the
right choices. It will help you decide what you need in a supplier, identify potential suppliers,
and choose your supplier.

1. Thinking strategically when selecting suppliers

The most effective suppliers are those who offer products or services that match - or exceed -
the needs of your business. So, when you are looking for suppliers, it's best to be sure of your
business needs and what you want to achieve by buying, rather than simply paying for what
suppliers want to sell you. For example, if you want to cut down the time it takes you to serve
your customers, suppliers that offer you faster delivery will rate higher than those that compete
on price alone.

The numbers game

It's well worth examining how many suppliers you really need. Buying from a carefully
targeted group could have a number of benefits:

• It will be easier to control your suppliers

• Your business will become more important to them
• You may be able to make deals that give you an extra competitive advantage
For example, if you've got a rush job for an important customer, your suppliers will be more
likely to go the extra mile if you spend P1,000 a month than if you spend P250.
However, it's important to have a choice of sources. Buying from only one supplier can be
dangerous -where do you go if they let you down, or even go out of business?

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Equally, while exclusivity may spur some suppliers to offer you a better service, others may
simply become complacent and drop their standards.

2. What you should look for in a supplier

• Reliability. Remember - if they let you down, you may let your customer down.
• Quality. The quality of your supplies needs to be consistent - your customers
associate poor quality with you, not your suppliers.
• Value for money. The lowest price is not always the best value for money. If you
want reliability and quality from your suppliers, you'll have to decide how much
you're willing to pay for your supplies and the balance you want to strike between
cost, reliability, quality and service.
• Strong service and clear communication. You need your suppliers to deliver on
time, or to be honest and give you plenty of warning if they can't. The best suppliers
will want to talk with you regularly to find out what needs you have and how they
can serve you better.
• Financial security. It's always worth making sure your supplier has sufficiently
strong cash flow to deliver what you want, when you need it. A credit check will
help reassure you that they won't go out of business when you need them most.
• A partnership approaches. A strong relationship will benefit both sides. You want
your suppliers to acknowledge how important your business is to them, so they
make every effort to provide the best service possible. And you're more likely to
create this response by showing your supplier how important they are to your
business.

3. Identifying potential suppliers

You can find suppliers through a variety of channels. It's best to build up a shortlist of possible
suppliers through a combination of sources to give you a broader base to choose from.

• Recommendations. Ask friends and business acquaintances. You're more likely to get
an honest assessment of a business' strengths and weaknesses from someone who has
used its services.

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 • Directories. If you're looking for a supplier in your local area, it's worth trying
directories such as Yellow Pages or Google Search Engine.
• Trade associations. If your needs are specific to a particular trade or industry, there
will probably be a trade association that can match you with suitable suppliers.
• Business advisors. Local business-support organizations, such as chambers of
commerce, can often point you in the direction of potential suppliers.
• Exhibitions. Exhibitions offer a great opportunity to talk with a number of potential
suppliers in the same place at the same time. Before you go to an exhibition, it's a good
idea to check that the exhibitors are relevant and suitable for your business.
• Trade press. Trade magazines feature advertisements from potential suppliers. You
can contact our Strategic Information Centre for a list of specialist trade magazines.

4. Drawing up a shortlist of suppliers

Once you've got a clear idea of what you need to buy and you've identified some potential
suppliers, you can build a shortlist of sources that meet your needs.
When considering the firms on your shortlist, ask yourself the following questions:

• Can these suppliers deliver what you want, when you want it?
• Are they financially secure?
• How long have they been established?
• Do you know anyone who has used and can recommend them?
• Are they on any approved supplier lists from trade association or government?

Do some research and try to slim your list down to no more than four or five candidates. It's a
waste of time for you and the potential supplier if you approach them when there's little chance
of them fulfilling your requirements.

5. Choosing a supplier
Once you have a manageable shortlist, you can approach the potential suppliers and ask for
a written quotation and, if appropriate, a sample. It's best to provide them with a clear brief
summarizing what you require, how frequently you'll require it and what level of business you
hope to place.

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 • Get a quotation. It's worth asking potential suppliers to give you a firm price in
writing for, say, three months. You can also ask about discounts for long-term or
high-volume contracts.
• Compare potential suppliers. When you've got the quotation, compare the
potential suppliers in terms of what matters most to you. For example, the quality
of their product or service may be most important, while their location may not
matter. Price is important, but it shouldn't be the only reason you choose a supplier.
Lower prices may reflect poorer quality goods and services which, in the long run,
may not be the most cost-effective option. Be confident that your supplier can make
a sufficient margin at the price quoted for the business to be commercially viable.
• Check that the supplier you employ is the one that will be doing the work. Some
suppliers may outsource work to subcontractors, in which case you should also
investigate the subcontractor to determine if you are happy with this arrangement.
Wherever possible it is always a good idea to meet a potential supplier face to face
and see how their business operates. Understanding how your supplier works will
give you a better sense of how it can benefit your business. And remember that your
business' reputation may be judged on the labor practices of your suppliers. It makes
good business sense to consider the ethical dimensions of your supply chain.
• Negotiate terms and conditions. Once you've settled on the suppliers you'd like to
work with, you can move on to negotiating terms and conditions and drawing up a
contract. See our guide on how to negotiate the right deal with suppliers.

6. Getting the right supplier for your business

Know your needs. Make sure you know what you need. Don't be tempted by sales pitches that
don't match your requirements. Understand the difference to your business between a strategic
supplier, who provides goods or services that are essential to your business - such as high-value
raw materials - and non-strategic suppliers who provide low-value supplies such as office
stationery. You will need to spend much more time selecting and managing the former group
than the latter.
Spend time on research. Choosing the right suppliers is essential for your business. Don't try
to save time by buying from the first supplier you find that may be suitable.

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Ask around. People or other businesses with first-hand experience of suppliers can give you
useful advice.
Credit check potential suppliers. It's always worth making sure your supplier has sufficiently
strong cash flow to deliver what you want, when you need it. A credit check will also help
reassure you that they won't go out of business when you need them most.
Price isn't everything. Other factors are equally important when choosing a supplier -
reliability and speed, for example. If you buy cheaply but persistently let down your customers
as a result, they'll start to look elsewhere.
Agree on service levels before you start. It's a good idea to agree on service levels before you
start trading, so you know what to expect from your supplier - and they know what to expect
from you. See our guide on how to manage your suppliers.
Don't buy from too many suppliers. It will be easier for you to manage - and probably more
cost-effective - if you limit the number of sources you buy from. This is particularly the case
with low value-added suppliers.
But don't have just a single supplier. It's always worth having an alternative supply source
ready to help in difficult times. This is particularly important with regard to suppliers strategic
to your business' success.

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 SUPPLIER’S CHECKLIST. Choosing the right supplier
involves much more than scanning a series of price lists.
Your choice will depend on a wide range of factors such as
value for money, quality, reliability, and service. In the
given template below, create a list of suppliers available in
your area.

SUPPLIER’S INVENTORY LISTING

SUPPLIER’S NAME LOCATION PRODUCT DETAILS PRICE

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 The term value chain refers to the process in
which business receive raw materials, add
VALUE/SUPPLY CHAIN IN
value to them through production,
RELATION TO THE
BUSINESS ENTERPRISE manufacturing, and other processes to create a
finished product, and then sell the finished
product to
consumers. A supply chain represents the steps it takes to get VALUE CHAIN VS.
SUPPLY CHAIN
the product or service to the customer, often dealing with
Original Equipment Manufacturer (OEM) and aftermarket
parts. While supply chain involves all parties in fulfilling a customer request and
leading to customer satisfaction, a value vain is a set of interrelated activities a company
uses to create a competitive advantage.

The idea of a value chain was pioneered by American academic

VALUE CHAIN Michael Porter in his 1985 book "Competitive Advantage:

Creating and Sustaining Superior Performance." He used the
idea to show how companies add value to their raw materials to
produce products that are eventually sold to the public. The concept of the value chain comes
from a business management perspective. Value chain managers look for opportunities to add
value to the business. They may look for ways to cut back on shortages, prepare product plans,
and work with others in the chain to add value to the customer.

There are five steps in the value chain

process. They give a company the ability
to create value exceeding the cost of
providing its goods or service to
customers. Maximizing the activities in
any one of the five steps allows a
company to have a competitive
advantage over competitors in its
industry. The five steps or activities are:

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 1. Inbound Logistics: Receiving, warehousing, and inventory control.
2. Operations: Value-creating activities that transform inputs into products, such as
assembly and manufacturing.
3. Outbound Logistics: Activities required to get a finished product to a customer. These
include warehousing, inventory management, order fulfillment, and shipping.
4. Marketing and Sales: Activities associated with getting a buyer to purchase a product.
5. Service: Activities that maintain and enhance a product's value, such as customer
support and warranty service.
In order to help streamline the five primary steps, Porter says the value chain also requires a
series of support activities. These include procurement, technology development, human
resource management, and infrastructure. A profitable value chain requires connections
between what consumers demand and what a company produces. Simply put, the connection
or sequence in the value chain originates from the customer's request, moves through the value
chain process, and finally ends at the finished product. Value chains place a great amount of
focus on things such as product testing, innovation, research and development, and marketing.

The supply chain comprises the flow of all information, products,

SUPPLY CHAIN materials, and funds between different stages of creating and selling a
product to the end-user. The concept of the supply chain comes from
an operational management perspective. Every step in the process—including creating a good
or service, manufacturing it, transporting it to a place of sale, and selling it—is part of a
company's supply chain.

The supply chain includes all functions

involved in receiving and filling a customer
request. These functions include:

• Product development
• Marketing
• Operations
• Distribution
• Finance
• Customer service

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Supply chain management is an important process for most companies and involves many links
at large corporations. For this reason, supply chain management requires a lot of skill and
expertise to maintain. While many people
believe logistics—or the transportation of
goods—to be synonymous with the supply
chain, it is only one part of the equation.
The supply chain involves the
coordination of how and when products
are manufactured along with how they are
transported. The primary concerns of
supply chain management are the cost of
materials and effective product delivery.
Proper supply chain management can
reduce consumer costs and increase profits
for the manufacturer.

A. Value Chain Analysis. Using the provided template,

identify the activities of the chain that create value for your
customers and placed your collected ideas to make a final
output.

ACTIVITIES OF YOUR COMPANY VALUE CHAIN THAT CREATE VALUE FOR

CONSUMERS

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2. Identify:

• Factors that will give the greatest value to customers form the assigned activity.
• What do you can improve to do to deliver the better value to your customers from
this activity?
• Identify the distinctive capability that distinguish you from the competitors. What
is your competitive advantage?

ACTIVITY 1 __________________________

FACTORS THAT GIVE GREATEST WHAT IS NEEDED TO DELIVER

VALUE TO CUSTOMERS MAXIMUM VALUE

DISTINCTIVE CAPABILITY: ____________________________________________

ACTIVITY 2 __________________________

FACTORS THAT GIVE GREATEST WHAT IS NEEDED TO DELIVER

VALUE TO CUSTOMERS MAXIMUM VALUE

DISTINCTIVE CAPABILITY: ____________________________________________

Concluding, with these unique capabilities how the company should ensure the long-term
success?

COMPETITIVE ADVANTAGE: _____________________________________

SOURCE: MindTools blog. http://www.mindtools.com/pages/article/newTMC_10.htm

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 B. Personal Supply Chain. Improvements in travel and
communication over the last 500 years have led to the
interconnection of the four world zones, but what does this
means for us today? In this activity, you’ll research an
item you use everyday in order to understand how this
item is made and what it takes to get the item to you.
Choose an item you use in your daily life. Research the raw materials needed to make
it and how these raw materials come together to form the finished product. Also,
research what kind of transportation is used to get the final product to you.

Your research will specifically answer the following questions:

1. What are the raw materials needed for this product? Where are they
found?_________________________________________________________
_______________________________________________________________
______________________________________________________________
_______________________________________________________________
_______________________________________________________________

2. What are the steps involved in making this product? Where does each step in
the production takes place?
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

3. What energy is needed to produce this item? Where does that energy come
from?
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

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 _______________________________________________________________
_______________________________________________________________

4. What kind of transportation, if any, is needed at each stage of the production

process, including getting the finished product to you?

_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

1. Managing the activities involving the flow of supplies into and out of a
company is known as what?
a. SCM
a. Supply Chain
b. Procurement and distribution
c. Operations Management

2. Which of the following is involved with supply chain?

a. Goods
b. Marketing
c. Overhead
d. Survey

3. The _______is a tool that disaggregates a firm into its core activities to help reduce
costs and identify sources of competitiveness.

a. Delta Model
b. Value reference model
c. Generic data model
d. Demand chain
e. Value chain

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 4. Which of the following is not a core activity in the value chain?
a. Marketing and sales
b. Operations
c. Human resource management
d. Inbound logistics

5. The linkage between series of suppliers and consumers involved the complex
interaction of ____________
a. Inbound logistics and outbound logistics
b. Marketing and sales
c. Operations, sales and services
d. Logistics, systems, and human behavior

6-10. Enumerate the five steps in the value chain process.

_________________
_________________
_________________
_________________
_________________

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 In human resource management, “recruitment” is
Recruit the qualified the process of finding and hiring the best and
people for one’s most qualified candidate for a job opening, in a
business enterprise timely and cost-effective manner. It can also
be defined as the “process of searching for
prospective employees and stimulating and encouraging them to apply for jobs in an
organization”.

It is one whole process, with a full life

cycle, that begins with identification
of the needs of the company with
respect to the job and ends with the
introduction of the employee to the
organization. When we speak of the
recruitment process, we immediately
think of activities such as the analysis
of the requirements of a specific job,
attracting candidates to apply for that
job, screening the applicants and
selecting among them, hiring the
chosen candidates to become new
employees of the organization, and
integrating them into the structure. Obviously, the main reason why the recruitment process is
implemented is to find the persons who are best qualified for the positions within the company,
and who will help them towards attaining organizational goals. But there are other reasons why
a recruitment process is important.

1. To ensure proper alignment of skill sets to organizational goals.

Through recruitment, organizations make sure that the skill sets of the staff or manpower of
the company remains aligned to its initiatives and goals. In the event that they notice some
positions do not really contribute to the advancement of the organization towards its goals, then
it can take the proper action to correct this, probably through job redesign, restructuring of the
workforce, or conduct of job enrichment programs.

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 2. To ensure effective and efficient recruiting.
Effective recruiting means that the person employed for the job is the best possible candidate
for it, with all the required skills, talents and qualifications of the job. Efficient recruiting, on
the other hand, means that the process has been carried out without incurring a lot of costs on
the part of the organization. By following the process, there is a greater chance that the human
resources department can get the best possible person for the job. Organizations may carry out
their hiring processes their own way, but without a system or set guidelines in place for its
conduct and implementation, there is a risk that the company may incur more expenses than
necessary. The company will also end up wasting its resources if the wrong or unqualified
person was actually hired. Not only will this create problems for the company in the long run,
particularly in the attainment of its goals, but it would mean that the organization would also
have wasted its resources in training an employee that is not right for the job after all.

3. To ensure compliance with policies and laws.

There are various rules, laws and regulations that organizations must adhere to when it comes
to its human resources management. Equal opportunity employment and non-discrimination in
hiring are two of them. By following a recruitment process, the chances of the organization
violating these policies will be low.

Organizations, depending on their structure and specific

The Recruitment needs, may have special procedures that they integrate into
Process their recruitment process. For purposes of discussion,
however, we will take a look at the general approach of a
recruitment process, one that is used by most organizations or companies across various
industries. Many say that recruitment begins when the job description is already in place and
the hiring managers begin the process of actually looking for candidates. However, if we are
looking at it more holistically, the process begins way earlier than that. Prior to the recruitment
process, the organization must first identify the vacancy and evaluate the need for that position.
Will the organization suffer if that vacancy is not filled up? Is there really a need for that open
position to be occupied by someone? If the answer is affirmative, then you can proceed to the
recruitment.

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 Step 1: Conduct of a job analysis
Basically, this step will allow the human resources manager, hiring manager, and other
members of management on what the new employee will be required to do in the position that
is currently open for filling up. This has to be done in a systematic manner, which is what the
job analysis is for. According to human resource managers, the position or job description is
the “core of a successful recruitment process”. After all, it is the main tool used in developing
assessment tests and interview
questions for the applicants.
What does this stage entail?

a. Build a job description.

Before anything else, the
organization must first know
exactly what it needs. Or who it
needs. It could be that the
organization deemed a need for a
job that is not included in the
current roster of jobs. Hence, the need to create a new one. Job analysis involves identification
of the activities of the job, and the attributes that are needed for it. These are the main parts that
will make up the job description. This part has to be done right, since the job description will
also be used in the job advertisement when it is time to source out talents.
The job description generally includes the following:

• Title and other general information about the position

• Purpose of the position in the unit, department, and organization as whole
• Essential functions of the job or position
• Minimum requirements or basic qualifications

b. Review the job description.

Once the job description has been created, it is a good idea to review it for accuracy, and to
assess whether it is current or not. Also, in cases where job descriptions are already in place,
there is a need to revisit them and check their accuracy and applicability with respect to the
status quo. What if the job description is already outdated? A review will reveal the need to
update the job description, for current applicability.

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 There are three positive outcomes from conducting a review of the job description:

• To ensure continuous improvement of the organizational structure. This can be an

efficient way of conducting organizational audit, to determine which jobs are redundant and
thus no longer needed, and which ones are needed.
• To evaluate competencies for each position. Jobs evolve. In as much as circumstances and
work conditions change, so will the requirements for the job. It is possible that a job may
require a new competency from the worker that it did not need before. By evaluating the
competencies, the impact of the job within the organizational structure is ensured.
• To evaluate the wages or compensation for each position. Without management knowing
it, the worker or employee performing a specific job may be undercompensated, leading to
dissatisfaction. By reviewing the job description, management can assess whether the job is
getting paid an amount that is commensurate to the skills and competencies required.
Finally, you should then have an effective job description ready for attracting talent.

c. Set minimum qualifications for the employee who will do the job.
These are the basic requirements
that applicants are required to have
in order to be considered for the
position. These are required for the
employee to be able to accomplish
the essential functions of the job.
Therefore, they should be relevant
and directly relate to the identified
duties and responsibilities of the
position. The organization may
also opt to include other preferred
qualifications that they are looking
for, on top of the minimum or basic qualifications.

d. Define a salary range.

The job must belong to a salary range that is deemed commensurate to the duties and
responsibilities that come with the position. Aside from complying with legislation (such as
laws on minimum wages and other compensation required by law), the organization should

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 also base this on prevailing industry rates. For example, if the position is that of a computer
programmer, then the salary range should be within the same range that other companies within
the same industry offer.

Step 2: Sourcing of talent

This is the stage where the organization will let it be known to everyone that there is an open
position, and that they are looking for someone to fill it up. Before advertising, however, the
organization must first know where to look for potential candidates. They should search out
the sources where the persons that can potentially fill the job are going to be available for
recruitment. That way, they will know where to direct their advertising efforts. Various
methods are employed by organizations in order to advertise the open position.

• Networking. Word-of-mouth is the best form of advertising, and when it takes the form of
networking, it becomes more effective. In recruitment, this is often done through
representatives of the company attending college and career fairs, letting them know about the
opening in their organization. This is a tactic employed by large software and tech companies
that want to hire fresh, young and brilliant minds into their organization. They personally visit
colleges, targeting the top students. They also use their connections within the industry to
attract the attention of talents with the highest potential.
• Posting. Recruitment often involves the application of candidates both from within and outside
the company. Thus, in order to attract the best possible talents, it is recommended that the
posting of the open positions be made internally and externally. Internal posting usually takes
the form of the vacancy announcement being displayed in bulletin boards and other areas
within the business premises where the employees and visitors to the company are likely to see
it. Posting externally may be in the form of flyers being distributed, or vacancy notices being
displayed in other areas outside of the business premises. Companies with websites often post
open positions on their company site, while some also use job boards.
• Print and media advertising. One classic example of this would be the Classifieds section of
the local daily or weekly newspaper. Companies looking for people to fill up open positions
make the announcement in the newspapers, providing the qualifications and the contact details
where prospective applicants may submit their application documents. When trying to attract
the attention of suitable candidates, the organization makes use of various tools and techniques.
If it wants to get the best candidates, then it should not be haphazard about things.

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• Developing and using proper techniques. The company may include various offerings in
order to attract the best candidates. Examples are attractive salaries, bonus and incentive
packages, additional perks and opportunities that come with the job, proper facilities at work,
and various programs for development.
• Using the reputation of the company. Perhaps the best publicity that the company can use to
attract candidates is its own reputation in the market. If the company is known for being a good
employer – one that aids in its employees’ personal and professional growth and development
– then it is a good point for the company to capitalize on in advertising its open positions.

Step 3: Screening of applicants

This is most probably the part of the recruitment process that requires the most amount of work.
This is where the applicants’ skills and personalities are going to be tested and evaluated, to
ascertain whether they are a good fit for the job and its description.

• Preliminary screening. It is often the case, especially in large organizations, where one open
position will receive hundreds to thousands of applications from candidates. In an ideal world,
it would be good for the hiring managers to be able to interview each and every single one of
them. However, that is also impractical, and very tedious. Not really advisable, especially if
the organization is in need of manpower in the soonest possible time. Thus, there is a need to
shorten the list of candidates, and that is done through a preliminary screening. Usually, this is
conducted by going through the submitted resumes and choosing only those that are able to
meet the minimum qualifications. It is possible that this would shorten the list of applicants,
leaving a more manageable number.
• Initial interview. The candidates
who were able to pass the
preliminary screening will now
undergo the initial interview. In
most cases, the initial interview is
done through phone. There are those
who also conduct interviews through
videos using their internet
connection. Often a basic interview,
this may involve the candidates being asked questions to evaluate or assess their basic skills
and various personal characteristics that are relevant to the open position.

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• Conduct of various tests for recruitment. The hiring managers may conduct tests on the
skills of the candidates and how they use these skills and talents. Other tests that are often
employed are behavioral tests and personality assessment tests.
• Final interview. Usually depending on the number of candidates for the job, and the preference
of the hiring managers and senior management, a series of interviews may be conducted,
gradually narrowing down the list of candidates. This may go on until the company has finally
come up with a shortlist of candidates that will undergo a final interview. Often, the final
interview requires a face-to-face meeting between the candidate and the hiring managers, as
well as other members of the organization. Top management may even be involved during the
final interview, depending on the job or position that will be filled up.
• Selection. In this stage, the hiring managers, human resources representatives, and other
members of the organization who participated in the process meet together to finally make a
selection among the candidates who underwent the final interview. During the discussion, the
matters considered are:
o Qualifications of the candidates who were able to reach the last stage of the
screening process.
o Results of the assessment and interviews that the final pool of candidates were
subject to hiring.

There will no problem if they have a unanimous decision on the candidate that the job will be
offered to. In case of varying opinions, the majority will prevail. If they do not arrive at a
decision, there may be a need to restart the recruiting process, until such time that they are able
to reach a decision that everyone will be satisfied with.

Step 4: Finalization of the job offer

The last step of the previous phase involves the selection of the best candidate out of the pool
of applicants. It is now time for the organization to offer the job to the selected applicant.

o Making the offer: To make things more formal, a representative of the

company or of the human resources department will contact the candidate and
inform him that he has been selected for the job. In this stage, complete details
of the compensation package will also be made known to the applicant.
o Acceptance of the offer by the applicant: The applicant should also
communicate his acceptance of the offer for it to be final. Take note that, if the

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 selected applicant does not accept the job offer and declines it, the recruitment
process will have to start all over again.

Step 5: Introduction and induction of the new employee

The moment that the applicant accepted the job offer, he has officially gone from being an
applicant to an employee of the organization. The induction process will now begin. Usually,
the beginning of the induction process is marked by the signing of the employment contract,
along with a welcome package given to the new employee. The date for the first day that the
employee will have to report for work and start working in the company will be determined
and communicated to the newly hired employee. However, it doesn’t end there. The employee
will still have to undergo pre-employment screening, which often includes background and
reference checks. When all this pre-employment information has been verified, the employee
will now be introduced to the organization.

RECRUITMENT PLAN. To ensure you attract the best

people, that is fine-tuned, non-discriminatory and tailored
to your business needs. Make a poster, advertisement on
your own recruitment of your future employee. Paste it
inside the box below.

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 A business model describes how a company creates, delivers,
DEVELOPING THE and captures value. Everyone has their way of viewing the
BUSINESS MODEL
business model. A business model canvass, developed by
Alexander Osterwalder, is a visual representation of current or
new business model, generally used by strategic managers. The canvass provides a holistic
view of the business as a whole and is especially useful in running a comparative analysis on
the impact of an increase in investment may have on any of the contributing factors. The
business model
canvass gives people
a common language
through which they
can evaluate
traditional processes
and bring innovation
into their business
models.

Most startups fail because entrepreneurs put all their faith in the
THE TRADITIONAL idea of the product the organization exists to create. In their
APPROACH TO A
loyalty to this product or service, they fail to give in depth
BUSINESS MODEL
consideration to the business model their organization will follow.
Usually the business model is either a one-size-fits-all model,
common in the industry or it is a random amalgamation of systems and processes, created at the spur
of the moment to further the main goal; sell the product or service. Successful new ventures do not go
to market with their first idea; instead, the product/ service has usually gone through several iterations
before arriving at the final version. Similarly, organizations are more sustainable if they have considered
several business models before deciding on a particular one

THE 9 BUILDING The Business Model Canvas categorizes the processes and
BLOCKS OF A internal activities of a business into 9 separate categories, each
BUSINESS MODEL
CANVASS representing a building block in the creation of the product or

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service. These categories represent the four major aspects of a business; customers, offer,
infrastructure, as well as financial viability. All 9 categories are listed and explained below.

1. Customer Segments
The total customer pie is divided into segments based on the manner in which an organization’s
products or services address a specific need for the segment. The customer segment is an
essential part of an organization’s business model and is key to ensuring that the product
features are aligned with the segment’s characteristics and needs.
To carry out an effective customer segmentation, a company must first know its customers,
both through their current and future needs. Then the organization must list its customers in
terms of priority, including a list of potential future customers. Finally, the company should do
a thorough assessment of its customers by understanding their strengths and weaknesses and
exploring other kinds of customers who may benefit the company more if they are to focus on
them.
Various customer segments are as below:

1. Mass Market: An organization opting for this type of customer segment gives itself a
wide pool of potential customers because it feels that its product is a relevant need
amongst the general population. A potential product for such an organization could be
Flour.
2. Niche Market: This customer segment is based on highly specific needs and unique
traits of its clients. An example of an organization with a niche customer segment is
Louis Vuitton
3. Segmented: Organizations adopting the segmented approach create further
segmentation in their main customer segment based on slight variations in the
customer’s demographics and resultantly, their needs.
4. Diversify: An organization with a Diversified Market Segment is flexible in the
iterations of its product or service tweaking it to suit the needs of segments with
dissimilar needs or traits.
5. Multi-Sided Platform/ Market: This kind of segment serves customers who have a
relationship to each other, i.e. blogging sites need a large group of active bloggers to
attract advertisers. And they need advertisers to create cash flow. Hence, only by
creating a pull with both segments will the blogging site be able to have a successful
business model

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2. Value Propositions
An organization’s value proposition is the combination of products and services it provides to
its customers. Osterwalder stated that these offerings need to be unique and easily
differentiated from competition. Value propositions can be divided into two categories:

1. Quantitative: this stresses the price or efficiency of the product or service

2. Qualitative: this value proposition highlights the experience and results the product
and its use, produce.
The value proposition provides value through a number of attributes such
as customization, performance, “getting the job done”, brand/ status, design, newness,
price, cost and risk reduction, accessibility, as well as convenience/ usability.
When creating your product’s value proposition, the first question an entrepreneur must
ask himself is, what problem he is solving through his offered product or service. Then
one needs to look into how the product, service or overall experience can be improved
so that it provides greater value than the competition. Finally, it is imperative to identify
the core value that your business provides. One way to identify this value is for an

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 owner to specify what he/ she wants customers to remember about their interaction with
the company.

3. Channels
The medium through which an organization provides its value proposition to its customer
segment is known as a channel. There are various options for channels available to an
organization, and the selection is based on the channel that is the quickest, most efficient with
the least amount of investment required. There are two basic kinds of channels; Company
owned channels such as store fronts or Partner Channels such as Distributors. A company can
opt to choose either one or employ a combination of both.
For an entrepreneur, the first step in dealing with channels is to identify the customer channels.
Touch points with customers can be limited or diverse depending on company strategy. Then
he/ she needs to evaluate the strength of the channel by conducting an SWOT analysis on the
channel. Finally, the company can identify and build new customer channels.

4. Customer Relationships
An organization must select the kind of relationship it will have with its customer segment to
create financial success and sustainability. Customer Relationships can be categorized as
follows:

1. Personal Assistance: In this kind of relationship the company interacts with the
customer directly through an employee who provides the human touch by assisting the
customer presale, during the sale and even may provide after sales services.
2. Dedicated Personal Assistance: This kind of relationship is characterized by a very
close interaction between the customer and the company through a dedicated
representative who is assigned a set of clients and is personally responsible for the entire
experience the customer has with the company.
3. Self-Service: Self-Service places the onus of the customer experience on the tools the
company provides for the customer to serve him or herself.
4. Automated Services: These are customized self-service relationships where the
historical preference of the customer is considered to improve the overall experience.
5. Communities: In today’s electronic age creating communities of clients allows
organizations to communicate with them directly. This allows for an enhanced client

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 experience because the community allows clients to share their experiences and come
up with common challenges and solutions.
6. Co-creation: The customer has a direct hand in the form the company’s product or
service will take.
For an entrepreneur, the priority is to identify the type of relationship he/ she has with
the customer. Then the value of the customer must be evaluated in terms of the
frequency of his expenditure on the firm’s product and services. Loyal customers are
relationships that the company should aim to invest in as they will yield steady revenue
throughout the year.

5. Revenue Streams
A revenue stream is the methodology a company follows to get its customer segments to buy
its product or service. A revenue stream can be created through the following ways:

1. Asset Sale: the company sells the right of ownership over the good to the customer.
2. Usage Fee: the company charges the customer for the use of its product or service.
3. Subscription Fee: the company charges the customer for the regular and consistent use
of its product or service.
4. Lending/ Leasing/ Renting: the customer pays to get exclusive access to the product
for a time-bound period.
5. Licensing: the company charges for the use of its intellectual property.
6. Brokerage Fees: companies or individuals that act as an intermediary between two
parties charge a brokerage fee for their services.
7. Advertising: a company charges for others to advertise their products using their
mediums.
When setting up revenue streams, it is important to recognize that an effective price for
the product and/or service will be arrived at through the process of elimination.
Different iterations of prices should be listed and evaluated. It is important, in the end
to take a break ad reflect on possible avenues open to you as a business.

6. Key Resources
These are the assets of the organization fundamental to how it provides value to its customers.
Resources can be categorized as human, financial, physical and intellectual.

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For an entrepreneur, it is important to begin with listing your resources. This gives you a clear
idea of what final product or service your company needs to create for the customer and which
resources are dispensable, resulting in cost savings for your company. Once the final list of
resources is available, the company can decide on how much it needs to invest in these key
resources to operate a sustainable business.

7. Key Activities
Activities that are key to producing the company’s value proposition. An entrepreneur must
start by listing the key activities relevant to his/her business. These activities are the most
important processes that need to occur for the business model to be effective. Key activities
will coincide with revenue streams. Now it is important to evaluate which activities are key by
adding or removing some and evaluating their impact.

8. Key Partnerships
To create efficient, streamlined operations and reduce risks associated with any business
model, an organization forms partnerships with its high-quality suppliers. Key partnerships are
the network of suppliers and partners who complement each other in helping the company
create its value proposition. Partnerships can be categorized as follows:

• Strategic alliance between competitors (also known as coopetition),

• Joint ventures and
• Relationships between buyers and suppliers.
An entrepreneur must begin by identifying its key partners followed by making future
partnership plans. This can be done through an evaluation of the partnership
relationship to judge which characteristics of the relationship need improvement and
what kind of future partnerships will be required.

9. Cost Structure
This defines the cost of running a business according to a particular model. Businesses can
either be cost driven i.e. focused on minimizing investment into the business or value driven
i.e. focused on providing maximum value to the customer.
Following are some traits of common cost structures:

1. Fixed Costs: costs that remain the same over a period of time

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 2. Variable Costs: as the name suggests, these costs vary according to a variance in
production
3. Economies of Scale: costs decrease as production increases
4. Economies of Scope: costs are decreased by investing in businesses related to the core
product. The first step for an entrepreneur is to obviously identify all costs associated
with the business. A realistic understanding of the costs of the business is one of the
hallmarks of a good business model. After identification, it is important to list all the
costs on the canvas, so they are visually present and then create plans for each cost.
Some costs may be decreased through certain measures while others may go up if you
decide that an investment in a particular section will result in future gains

A business model describes how a company creates, delivers,

and captures value. Everyone has their unique way of viewing
the business model. From the given business model canvass
template below write and describe your own business idea
that will meet your market need.

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 You’ve likely heard hundreds of times from mentors and
FORECAST THE business experts that you need to set a budget to keep your
REVENUE OF THE
BUSINESS small business expenses on track. But how do you make
decisions about your budget? Like how many employees you
can afford to hire or how much you can spend on advertising?
If you don’t know how much revenue, you’ll be bringing in the coming months and years? If
you’re starting a business from scratch, making revenue forecast will be particularly
challenging, where established businesses use historical data to predict what will happen in the
future. In order to prepare an accurate budget, you first need to develop a revenue forecast for
your business. A forecast is an educated prediction for the upcoming year about how much
money your company will likely bring in, so that you can estimate what you can afford to
spend, and what your profit margin be like? On the other hand, Revenue is the amount of
money that a company receives during a specific period, including discounts and deductions
for a returned merchandise. Don’t worry if your forecasts aren’t completely accurate, you can
always alter them after your first few months. Concentrate instead on trying to make your
figures as realistic as possible.

Why Revenue Forecasting Matters

Can you afford to hire a new employee or launch a new marketing campaign? If you were to
take on a business loan in the coming months, how much of a monthly payment could you
reasonably handle? These questions, and thousands more that you likely ask yourself about
your business every day, cannot be answered with any degree of accuracy without revenue
forecasting. And the more thoroughly researched and realistic your revenue forecasting is, the
easier it will be to stay on budget throughout the year.

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Revenue forecasting helps you budget business expenses early because you have a better idea
of the total amount of money you have to budget each month. And if you start to get off track,
either on your revenue predictions or on fixed expenses, you’re more likely to catch those
deviations early if you have a forecast to compare with.

Forecasting will also help you time important moves—like bringing in a new hire, launching a
new marketing campaign, or cutting costs during slow seasons—to match your predicted
revenue throughout the year. A detailed, well-researched forecast can even help convince
lenders or investors to contribute funds to your business. While no revenue forecast will ever
be 100% accurate down to the penny, it will provide you with a very educated guess for your
upcoming financial needs. This information will be crucial to your ability to make the best
possible choices for your business.

Revenue Forecasting Tips and Tricks

There are two different ways to go about forecasting upcoming revenue for your business.
Judgment Forecasting involves using your intuition and experience as the business owner to
set a general pattern for your expectation of the year’s income and expenses. Quantitative
Forecasting is more scientific, using actual past revenue data from your own business or other
businesses in your industry as a basis for tracking trends and predicting changes.

Experts recommend using a combination of judgment and quantitative forecasting methods to

achieve the most accurate possible prediction of what the upcoming fiscal year will be.
If you’ve been in business for a little while, start with last year’s revenue statements as a basis
for predicting what will happen in coming year. Then, consider any recent changes in
personnel, products, pricing, competition, or other factors which could impact your future
revenue.

As you calculate anticipated revenue, separate individual income sources, such as online vs.
retail sales or sales from different major product lines, to get a clear picture of potential ups
and downs from each revenue stream. This will help you isolate variables for a more accurate
revenue forecast.

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Remember that updating your forecast isn’t just an annual task to check off your to-do list.
Rather, it is a living document that should be constantly reviewed and updated to reflect
changes in your business. Ideally, keep your revenue forecast up to date by inputting changes
once per month, or at minimum once per quarter.

Doing so will help you keep the current year’s forecast as accurate as possible, as well as setting
you up for even more accurate revenue forecasting in future years.

Forecasting for Newer Businesses

Revenue forecasting for established businesses is comparatively straightforward, but what if
you have a newer business with no revenue history to inform your predictions? Without the
benefit of solid quantitative data, you’ll need to be very smart (and thorough!) in utilizing
judgment forecasting methods to develop your predictions.
As Covestor CEO Asheesh Advani explains, “forecasting business revenue and expenses
during the startup stage is really more art than science.” As a starting point, Advani
recommends focusing more on your upcoming expenses than on upcoming cash flow. What is
your overhead (or fixed costs)? Which costs are likely to fluctuate?

Marketing, legal, and licensing expenses tend to spiral out of control during the early stages of
a startup, so consider doubling or even tripling your initial estimates. Advani encourages
startups to create two versions of the initial revenue forecast—an optimistic version, and a more
conservative/realistic version. “Embrace your dreams and build at least one set of projections
with aggressive assumptions,” Advani says. “You won’t become big unless you think big! By
building two sets of revenue projections, you’ll force yourself to make conservative
assumptions and then relax some of these assumptions for your aggressive case.”

Working with a Mentor

Startup entrepreneurs often benefit from working with a mentor or a seasoned business owner
within their same industry to help guide the initial revenue forecasting process. A little bit of
mentoring can go a long way towards preparing you and your business for the road ahead. With
their expertise, experience, and data sets from their own company’s past revenue, a mentor can
offer you great insight into what to expect from your first year’s sales numbers. That data will

135
be invaluable to creating a revenue forecast that you would be impossible to predict on your
own.

Find a business mentor through contacts you already have, such as your suppliers and members
of trade associations you belong to, through a local chamber of commerce, or through a private-
sponsored small business mentoring program such as GO Negosyo, an advocacy of the
Philippine Center for Entrepreneurship (PCE), a non-stock, non-profit organization that
advocates for a change in mindset and attitude who encourages Filipinos to address poverty in
the country by engaging in entrepreneurship and developing an optimistic, passionate, creative
and innovative, resourceful, diligent and persevering character.

For any company, revenue forecasting is essential in preparing for the ups and downs of the
year to come. But for newer businesses, without many years of experience to draw on, the
forecasting process can present special challenges.
To get the most out of your revenue forecasting, use what data you do have, be thorough and
realistic about factors that might affect your income and cash flow, and don’t be afraid to ask
for help from someone who’s been in your shoes. With an objective vision and substantial
research, you’ll be able to create a great revenue forecast that can help to guide your business
decisions throughout the year.

How to Forecast Revenue?

1. Choose between Qualitative Forecasting or Quantitative Forecasting (or a
mixture). A Qualitative method is a type of forecasting based on judgment, opinions,
intuition, emotions, or personal experiences and are subjective in nature while
Quantitative Forecasting is a type of forecasting method based on mathematical models
and are objective in nature. They rely heavily on mathematical computations.

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 2. Start with last year’s revenue statements for a basis of prediction.
The thought of forecasting sales intimidates a lot of people, but in actually, it’s simply an act
of looking at some raw data and making some logical assumptions from it. If you own an
existing business, look at your past sales figures, and then consider the following factors to
make an educated guess about future sales on a month by month basis:

• Your customers: Identify your customer base and determine which ones you’ll
include in the forecast. Remember, common wisdom says that you’ll get 80 percent
of your business from 20 percent of your customers.
• Your service area: Do you have plans for expansion? If so, include your current
geographical area as well as the area you plan to include in the future.
• Market conditions: What is the state of the market? Will it remain steady or
increase?
• Business position: Consider the position of your business within your industry, and
factor in your growth expectations.
• Seasonal adjustments: Many businesses have increased and decreased sales in a
cyclical seasonal cycle. If your business falls into that pattern, take this into
consideration.

3. Consider any recent changes in personnel, products, pricing, competition, or other

factors. The forecaster should choose a technique that makes the best use of available
data. If there are changes in personnel like reassignment of an employee to a higher job

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 position, innovation of the product which may need additional budget that will also
affect pricing, changes in competitors and other factors to consider in making your
forecast.
4. Calculate anticipated revenue. You have a great idea for a business. But now you
need to know how to calculate start up costs and expected revenue for business. The
type of business you open will determine the amount of money you will need to open.
However, as a rule you should count on having six months’ worth of money on hand to
cover your expenses. Startup cost are the expenses that are incurred prior to opening.
For example, startup costs may include legal work, logo design, brochures, site
selection and building improvements. Compare startup costs with your startup assets.
This include cash, starting inventory and equipment.
5. Separate individual income sources to get a clear picture of potential ups and
downs from each revenue stream. Revenue streams are the various sources from
which a business earns money from the sale of goods or the provision of services. The
types of revenue that a business records on its account depend on the types of activities
carried out by the business. Generally speaking, the revenue accounts of retail
businesses are more diverse, as compared to business that provide services. Separating
your individual income sources will give you good and accurate forecast of your
business.
6. Constantly review and update the forecast to reflect changes in your business.
Once your business is established and running well, you may be inclined to let things
continue to run as they are. However, it’s actually time to plan again. After the crucial
early stages, you should regularly review your progress, identify how you can make the
most of the market position you’ve established and decide where to take your business
next. You will need to revisit and update your business plan with your new strategy in
mind and make sure you introduce the development you’ve noted.

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 FORECASTING REVENUE. Using Microsoft Excel
application make a forecast revenue of your business.

COMPANY NAME
Revenue Forecast
As of October 30, 2020
PRODUCT JUNE JULY AUGUST SEPTEMBER OCTOBER TOTAL
UNIT UNIT AMOUNT UNIT AMOUNT UNIT AMOUNT UNIT AMOUNT UNIT AMOUNT
PRICE

TOTAL

TRUE OR FALSE
1. _________Accurate forecasting can be done with inaccurate historical
data. If the forecasting model is a good one, it will improve the input
used.
2. _________If quantitative data is available on which to base a forecast,
it is unnecessary to consider qualitative information.
3. _________In a good forecast, about half of the forecast misses should
be randomly scattered above the actual results and half below the actual
results.
4. ________ A Qualitative method is a type of forecasting based on
judgment, opinions, intuition, emotions, or personal experiences and are
subjective in nature
5. ________Revenue is the amount of money that a company receives
during a specific period, including discounts and deductions for a
returned merchandise

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 Financial forecast assists you to meet your business goals. They are
FORECAST THE
a future prediction of your business finances, as compared with
COST TO BE
INCURED statement, which provides details of actual results or progress.
Predicting the financial future of your business is not easy,
especially if you’re starting a business and don’t have a trading history. However, forecasting
and making adjustments frequently will enable you to become more accurate. Monthly or
weekly forecasts may be necessary when starting your business, experiencing rapid growth, or
having financial difficulties. Regular forecasts allow you to closely monitor your finances and
develop strategies to fix problems before they become major issues. Monthly or quarterly
forecasts may be more appropriate for a stable, established business.

Start-up costs
Whether starting a new business or purchasing an existing one you will need to factor in start-
up costs, such as:
• legal or accounting fees
• insurance costs
• furniture, equipment, supplies or fit-out
• stock
• advertising
• permits
• cash required to fund the business until you start collecting payments from customers
• staff wages
• leasing costs of property, plant and equipment

Starting a business often costs more than you expect; it is a good idea to add an extra 20 percent
to your forecast to allow for unexpected expenses.

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 STARTUP COST. From the given template below make
a startup costing of your business.

Company Name:
Initial Startup cost Amount

Professional Advisors
Legal P
Accounting P
Training Course P
Website development P
Graphic design fees P

Licenses and Registrations

Licenses and Permits P
Business Name Registration P
Professional Association Fees P

Plant and Equipment

Computer Equipment P
Vehicles P
Mobile Phones P
Office Furnitures P
Photocopier P
Manufacturing Equipment P
Tools P

Business Premises
Office rental fees P
Lease bond P

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 Legal fees P
Fit-out costs P
Signage P
Telephone/Internet installation P
Utilities installation P
Insurance Premium P

Operations
Business Cards, Letterheads P
Business Travel and Accommodation P
Office supplies P
Opening inventory and raw materials P
Pre-opening advertising and promotion P
Wages and Salaries P
Contingency P
Working Capital, 6 months P

Total Establishment Costs P

Source of Funds
Personal savings P
Loans from Family and Friends P
Supplier Credit P
Bank loans P
Other P

Total Funds Available P

Note: Balance (a positive figure means you have sufficient funds to cover your costs, a
negative figure means you need to seek additional funding)

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 It is important for a business to understand how much profit they’ve
COMPUTE FOR
made to give it an idea as to whether the business is successful. With
PROFIT
so much money going in and out of a business, it is not always easy to
see whether what a small business owner is doing is actually making money. By calculating
profit, it helps give some clarity. If a business is making a profit it can:
• expand and grow
• attract more investment
• employ more staff
It is worth mentioning that profit is a different to cash. Some things will affect the cash flow of
the business, but won’t affect profit e.g. money taken out of the business for personal use.
Likewise, some items will affect profit but will not affect cash such as provisions e.g. where a
business makes an adjustment for a customer not paying.

To answer what is profit we have to go back a bit. Instead of

WHAT IS
providing a profit definition, let's do in a more natural way - you
PROFIT?
have an item you wish to sell. It doesn't matter whether you're selling
homemade beauty products or just reselling some old clothes - producing items or acquiring
them always has a cost. For the sake of simplicity, let's assume that each item you sell has the
same cost per product, regardless of how many you sell. This is usually the case for small
businesses or individuals.

Keep in mind that it will be different when talking about large production lines. For
example car companies tend to enjoy economies of scale - the more cars they produce, the
cheaper it gets to build each of them. It means that the objects marginal cost, the cost added
by creating an additional unit, is decreasing. The change in price depends on the actual level
of production. Every item you wish to sell has a sale price. When you sell the item, this price
becomes your income or revenue. In other words, revenue is the money generated from
selling things. The more items you sell, the higher your revenue will be.

Profit is the difference between the price and cost when talking about one item. When dealing
with higher volumes of items, total profit is the difference between revenue and total cost.
Generally speaking, profit is the incentive behind the majority of business transactions. One
side wants to buy a product or a service, and the other wants to sell it for a profit.

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To recap and understand what profit is:
• first remember that cost is money spent,
• then revenue is money earned,
• and finally, profit is money gained.

When calculating profit for one item, the profit formula is simple
How to calculate
Profit? enough: Profit = Price - Cost. When determining the profit for a
higher quantity of items, the formula looks like this: Total Profit =
Revenue - Total Cost or expressed differently Total profit = unit price * quantity - unit cost
* quantity.

Depending on the quantity of units sold, the following are the variables used to determine
Profit:

1. cost - the amount for which items are acquired or produced, also known as the cost of
goods sold,
2. unit cost - the amount for which a single item is acquired or produced,
3. price - price for which the items are sold,
4. unit price - the amount for which a single item is sold,
5. quantity - the number of items for which the profit is calculated,
6. total cost - cost multiplied by the number of items,
7. discount - the percentage price reduction,
8. total profit - total amount of money gained.

Using the profit formula and the information from

selected Balance Sheet & Income Statement, we can
calculate that Company ICTORY profit was:
P2,000,000.00 – P1,000,000.00 – P50,000.00 –
P95,000.00 = P855,000.00.

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Unfortunately, personal expenses will not reduce profit nor will
cash taken out of the business for personal use. So, reducing your Do personal
profits to zero and paying no tax by drawing out all of your profits expenses affect
profit?
as cash won’t avoid a tax. For a sole trader, personal expenses
will be called drawings and include cash taken out the business for personal expenditure, such
as household bills and holidays.

The starting point for tax purposes is the profit that has been
Should I pay for tax calculated from the profit and loss account. However, there are
from my Profit? different rules with regards to what is allowable as an expense
for accounts purposes and what is allowed for tax. Certain
expenses are not allowed as expenses for tax purposes, such as
fines and client entertaining. Because you’re earning from your business it is mandated and it
is our obligation to pay taxes to the government.

It is vital that books and records are kept safely as there are rules What information and
surrounding how long business records must be stored for. records I need to keep?
Information that you will need to keep preparing your accounts is
necessary for accounting purposes. The following are example documents needed for safe
keeping: Sales and Purchase invoice, fuel receipts, business expenses, bank statements, tax,
salaries, details of loan (if there’s any) etc.

Gross Profit is the profit a company makes after deducting the costs
GROSS PROFIT
associated with making and selling its product, or the cost
associated with providing its services. Gross profit will appear on
company’s income statement and can be calculated by subtracting the cost of goods sold
(COGS) from revenue (sales). The figures can be found on a company’s income statement. It
may also be referred to as sales profit or gross income.

Gross profit assesses a company's efficiency at using its labor and supplies in producing goods
or services. The metric mostly considers variable costs—that is, costs that fluctuate with the
level of output, such as:
• materials
• direct labor, assuming it is hourly or otherwise dependent on output levels

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 • commissions for sales staff
• credit card fees on customer purchases
• equipment, perhaps including usage-based depreciation
• utilities for the production site
• shipping

The formula for gross

profit is:

As generally defined, gross profit does not include fixed costs (that is, costs that must be paid
regardless of the level of output). Fixed costs include rent, advertising, insurance, salaries for
employees not directly involved in the production and office supplies.

However, it should be noted that a portion of the fixed cost is assigned to each unit of
production under absorption costing, which is required for external reporting under the
generally accepted accounting principles (GAAP). For example, if a factory produces 10,000
widgets in each period, and the company pays P30,000 in rent for the building, a cost of P3
would be attributed to each widget under absorption costing.

Gross profit shouldn't be confused with operating profit, also known as earnings before interest
and tax (EBIT), which is a company's profit before interest and taxes are factored in. Operating
profit is calculated by subtracting operating expenses from gross profit.

Gross profit can be used to calculate another metric, the gross GROSS PROFIT
vs. GROSS
profit margin. This metric is useful for comparing a company's PROFIT MARGIN
production efficiency over time. Simply comparing gross profits
from year to year or quarter to quarter can be misleading, since gross profits can rise while
gross margins fall, a worrying trend that could land a company in hot water. Although the terms
are similar (and sometimes used interchangeably), gross margin is not the same as gross profit
margin. Gross profit is expressed as a currency value, gross profit margin as a percentage. The
formula for gross profit margin is as follows:

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Example:

To calculate the gross profit, we first add up the cost of goods sold, which sums up to
P350,462.00. We do not include selling, administrative and other expenses since these are
mostly fixed costs. We then subtract the cost of goods sold from revenues to obtain a gross
profit of P1,088,403.00 – P350,462.00 = P737,941.00 million.

To obtain the gross profit margin, we divide the gross profit by total revenues for a margin of
P737,941.00/P1,088,403.00 = 67.80%.

Standardized income statements prepared by financial data

Limitations of services may give slightly different gross profits. These statements
using Gross Profit
conveniently display gross profits as a separate line item, but they
are only available for public companies. Investors reviewing
private companies' income should familiarize themselves with the cost and expense
items on a non-standardized balance sheet that do and don't factor into gross profit
calculations.

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 Compute for Profit. Using Microsoft Excel application,
compute the profit of your startup business. Print and
paste it in the given box below.

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 1. 4M's of operations mainly represent factors that influence
on results of any concern process. These are composed of
Manpower, Machine, Method and Materials.
2. Fish-bone diagram was created by Kaoru Ishikawa of
Japan.
3. A product description is the marketing copy that explains
what a product is and why its worth purchasing.
4. A prototype is a three-dimensional version of vision. It is the design verification
phase of a product development.
5. Testing a prototype is important part of the design and manufacturing process.
6. One of the most important aspects of starting a business is validating that there is a
demand for your products.
7. Choosing the right supplier involves much more than scanning a series of price lists.
Your choice will depend on a wide range of factors such as value for money, quality,
reliability, and service.
8. The term value chain refers to the process in which business receive raw materials,
add value to them through production, manufacturing, and other processes to create a
finished product, and then sell the finished product to consumers. A supply chain
represents the steps it takes to get the product or service to the customer, often dealing
with Original Equipment Manufacturer (OEM) and aftermarket parts. While supply
chain involves all parties in fulfilling a customer request and leading to customer
satisfaction, a value vain is a set of interrelated activities a company uses to create a
competitive advantage.
9. The idea of a value chain was pioneered by American academic Michael Porter in
his 1985 book "Competitive Advantage: Creating and Sustaining Superior
Performance."
10. The supply chain comprises the flow of all information, products, materials, and
funds between different stages of creating and selling a product to the end-user.
11. In human resource management, “recruitment” is the process of finding and hiring
the best and most qualified candidate for a job opening, in a timely and cost-effective
manner. It can also be defined as the “process of searching for prospective employees
and stimulating and encouraging them to apply for jobs in an organization”.

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 12. A business model describes how a company creates, delivers, and captures value.
Everyone has their way of viewing the business model. A business model canvass,
developed by Alexander Osterwalder, is a visual representation of current or new
business model, generally used by strategic managers.
13. A forecast is an educated prediction for the upcoming year about how much money
your company will likely bring in, so that you can estimate what you can afford to
spend, and what your profit margin be like? On the other hand, Revenue is the amount
of money that a company receives during a specific period, including discounts and
deductions for a returned merchandise
14. Financial forecast assists you to meet your business goals. They are a future
prediction of your business finances, as compared with statement, which provides
details of actual results or progress.
15. It is important for a business to understand how much profit they’ve made to give
it an idea as to whether the business is successful. With so much money going in and
out of a business, it is not always easy to see whether what a small business owner is
doing is actually making money.

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 QUARTER 2

CONTENT STANDARDS:
Lesson 5. Manifest understanding of starting
The learner demonstrates and operating a simple business
understanding of key K to 12 CG Code:
concepts, underlying CS_EP11/12BENTREP-IVa-i-1
CS_EP11/12BENTREP-IVa-i-2
principles, and processes CS_EP11/12BENTREP-IVa-i-3

of starting and operating a

simple business. Objectives: In this lesson, student will be able to:

PERFORMANCE
STANDARDS:
1. Implement the business plan;
The learner independently 2. Identify the reasons for keeping business records (CS_EP11/12B-
or with his/her classmates ENTREPIV-j-4);
starts and operates a
3. Perform key bookkeeping task;
business plan and present
4. Identify where there is a profit or loss for a business; and
a terminal report of its
operation. 5. Generate an overall report on the activity

Making a business proposal presentation to prospective investors is

PRESENTATION
stressful for nearly all entrepreneurs. Even if they are confident their
OF BUSINESS
PLAN business plan is well thought out, they still worry that they will not be
able to express the most important aspects of their plan and engage the
investors’ interest in the short time allotted for the in-person presentation. The keys to a
successful presentation are advance preparation and rehearsal until your delivery is smooth and
polished.

Preparing the Business Plan Presentation

Business plan presentations are designed to sell your idea to investors through a concise and
engaging overview of what your business does, how it fills a consumer need and what you are
looking for in terms of an investment. Seasoned investors are busy, and typically aren't
interested in a long, drawn-out presentation filled with irrelevant information. In fact, many
seasoned venture capitalists and angel investors will give you a specific time limit and a

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suggested outline for your presentation; if you receive these suggestions, it's a good idea to
follow them. If you don't receive specific guidance, using Microsoft Powerpoint application
focus your presentation on the following key points:

Slides 1-3. Introduce yourself, your company and its product. Describe your market and how
you solve your customer’s problem. Explain how your product is different than anything else
on the market.
Slides 4-6. Discuss the size of the market for your product. Explain who your customer are.
Demonstrate growth in your market in the next 3-5 years.
Slides 7-8. Discuss the competitive advantages your venture has that will lead to outstanding
revenue growth and profitability. Demonstrate your projected revenues and pretax profits for
the next 3-5 years.
Slides 9-10. Discuss your marketing strategies, including distribution channels and sales
strategies.
Slides 10 onwards. Introduce your management team and advisory board members. Include
one or two points about each person’s background and experience. and explain how each
person on the team brings a critical element necessary for your company’s success.
Final slides. Reveal the total amount of capital you need and a short list of major expenditures.
By following this general outline and focusing on the most important information, you'll
answer most of the investors' questions and give them the details they need to make a
decision. Remember to only hit the highlights, and don’t try to fit your entire business plan
into the presentation. Too many slides can result in information overload, and they will not
remember the most important pieces of information. Aim for a business plan PowerPoint of
about 10-12 slides.

Rehearsing Your Presentation

Once you've created the presentation, practice presenting it to ensure that you appear polished
and professional come presentation day. Again, keep time limits in mind, and respect the
investors' time. Don't forget to include time for questions in your overall presentation plan.

To begin rehearsing, create an outline of the presentation, addressing the important points
that you want to cover. If you are using presentation software like PowerPoint, print a copy

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of your presentation in outline view, and use that to identify the key points you want to make
from each slide and jot down additional notes about what you want to say. Creating the
outline not only ensures that you cover all of the key points, it also keeps you from simply
reading what's on the screen, which will quickly bore the audience.

Once you have an idea of what you are going to say, rehearse your presentation with
colleagues. Invite members of your management team or trusted associates into a conference
room and conduct a dress rehearsal of the presentation. Get their feedback on what parts of
the presentation might need editing or clarification. Time your presentation and cut it down
if necessary. Rehearse the presentation several more times on your own.

Succeeding on Presentation Day

It's normal to be nervous come presentation day but do your best to relax and calm your
nerves. Try some breathing or visualization exercises ahead of time to clear your mind and
get into the right frame of mind. If you are well-prepared and know your presentation inside
and out, there is nothing to be nervous about. Just be yourself – the investors are evaluating
you as well as your business plan, after all – and do your best to project an image of
confidence and competence.

Show enthusiasm and urgency but avoid coming across as desperate or unfocused. Speak
slowly, smile, make eye contact and refer to your notes if you need to and you'll impress
investors with both your business and your presentation skills.

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 BUSINESS PLAN PRESENTATION. Prepare a 10-
12 PowerPoint Presentation slides of your preferred
business plan proposal. Your presentation will be
graded using the following rubrics from the content of
your Business Plan:

BUSINESS PLAN RUBRICS

I. CONTENT
Criteria Excellent (10) Very Good (9) Good (8) Fair (7) Poor (6) No
Discussion
Executive Summary
Opportunity
Execution
Company
Financial Plan
Appendices
TOTAL POINTS: 60

II. STYLES AND MECHANICS

Criterion
Unsatisfactory (0) Satisfactory (1) Exceptional (2)
Does not meet the criteria Accomplishes Exceeds the established
satisfactory, but needs criteria
improvement

Paper is laid out effectively--uses, heading and

other reader-friendly tools
Paper is neat/shows attention to detail

Properly cites ideas/info from other sources

Rules of grammar, usage, punctuation are followed

Spelling is correct

Sentences are complete, clear, and concise

Sentences are well-constructed with consistently
strong, varied structure

154
Transitions between sentences/paragraphs/sections
help maintain the flow of thought
Words used are precise and unambiguous

The tone is appropriate to the audience, content,

and assignment
TOTAL POINTS: 20

III. ORGANIZATION
Criterion
Unsatisfactory (0) Satisfactory (3) Exceptional (4)
Does not meet the criteria Accomplishes Exceeds the established
satisfactory, but needs criteria
improvement

The introduction provides a sufficient background

on the topic and previews major points

Central theme/purpose is immediately clear

Structure is clear, logical, and easy to follow

Subsequent sections develop/support the central

theme
Conclusion and overall evaluation follow logically
from the body of the paper

TOTAL POINTS: 20

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 Whether a business is a start-up or already well established,
IMPLEMENTATION business implementation becomes the responsibility of all the
OF BUSINESS PLAN
employees. Implementation is the process of executing a plan
or policy so that a concept becomes a reality. To implement a
plan properly, managers should communicate clear goals and expectations, and supply
employees with the resources needed to help the company achieve its goals.

Improvement Through Change. The

implementation of a plan brings about change
meant to help improve the company or solve
a problem. The changes can occur to policies,
management structures, organizational
development, budgets, processes, products or
services. Since the status quo can be
detrimental to a company, change can help
improve the work environment and/or the
customer experience.
Good Organizational Development. Part of good organizational development involves
including all employees in implemented changes. When a company shares its ideas and goals
with workers, the workers will feel a sense of ownership and loyalty to the company, as well
as feel included in something important that is larger than their respective job descriptions.
Making workers feel valued also helps maintain or improve employee retention.
Communicating goals to employees helps encourage participation and can give a plan a
strong start.
Increased Interdepartmental
Cooperation. When executed properly,
business implementation can increase
interdepartmental cooperation. It can be
easy for a department within a business
to work independently and only rely on
another department when a need arises,
particularly in large company. Business
implementation helps unite departments,
open the lines of communication, create

156
a diverse culture within the organization and increase efficiency and productivity. Successful
business implementation links performance factors with projects designed to develop and
optimize individual and departmental activities.
Setting Clear Priorities. As well as
communicating goals, business strategy
implementation sets clear priorities.
Priorities are generally based on due
dates, client needs, financial concerns,
worker needs or logistics. Deadlines help
guarantee the implementation of a plan
with realistic due dates, but a company
must provide its workers with clear action
steps and resources to ensure the success of the plan. Failure to communicate priorities can
cause inefficiencies, miscommunications, worker frustration and low morale. When priorities
or deadlines are realistic, employees feel as if a company is setting them up for success.
Moving a Company Forward. Business implementation is important for moving a company
forward, as is not underestimating the importance of implementation planning. When a
business fails to implement and execute its strategies properly, it fails to move forward and
grow. According to website Business Balls, to implement and execute a plan successfully,
there must be "motivational leadership," a plan of action and "performance management."

Everyone in business must keep records. Keeping good IDENTIFY THE

records is very important to your business. Good records will REASON FOR
KEEPING BUSINESS
help you do the following: RECORD

Monitor the progress of your business. You need good records to monitor the progress of
your business. Records can show whether your business is improving, which items are selling,
or what changes you need to make. Good records can increase the likelihood of business
success.

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Prepare your financial statements. You need good records to prepare accurate financial
statements. These include income (profit and loss) statements and balance sheets. These
statements can help you in dealing with your bank or creditors and help you manage your
business.

• An income statement shows the income and expenses of the business for a given
period of time.
• A balance sheet shows the assets, liabilities, and your equity in the business on a given
date.

Identify sources of your income. You will receive money or property from many
sources. Your records can identify the sources of your income. You need this information to
separate business from nonbusiness receipts and taxable from nontaxable income.

Keep track of your deductible expenses. Unless you record them when they occur, you may
forget expenses when you prepare your tax return.

Keep track of your basis in property. Your basis is the amount of your investment in property
for tax purposes. You will use the basis to figure the gain or loss on the sale, exchange, or other
disposition of property, as well as deductions for depreciation, amortization, depletion, and
casualty losses.

Prepare your tax return. You need good records to prepare your tax returns. These records
must support the income, expenses, and credits you report. Generally, these are the same
records you use to monitor your business and prepare your financial statement.

Support items reported on your tax returns. You must keep your business records available
at all times for inspection by Bureau of Internal Revenue. If the BIR examines any of your tax
returns, you may be asked to explain the items reported. A complete set of records will speed
up the examination.

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 When you opened the doors of your small business, you were

PERFORM KEY probably excited to meet your first customers and start turning
BOOKKEEPING TASK a profit. In contrast, you might have felt less enthusiastic about
learning to bookkeep, especially if you’ve never thought of
yourself as a “math person.” But to run a small business, you
have to be at least a little skilled in the art of bookkeeping. The thought might be overwhelming
if you’re more passionate about, say, selling used books or offering excellent life-coaching
advice than you are about numbers—but a basic understanding of bookkeeping can
revolutionize your business.

With the right bookkeeping tools, you’ll feel more confident in your business’s future and
better able to understand (and plan for) your own profitability. Best of all, you don’t need to
become an overnight calculus expert to understand bookkeeping. Instead, just keep reading—
the tips we list below can help you get a handle on bookkeeping basics that will help your small
business succeed.

Before we dive in, let’s define what bookkeeping actually is. WHAT IS
Basically, bookkeeping is the process of recording and BOOKKEEPING?
organizing a business’s financial transactions, and a
bookkeeper is a person responsible for that process. Bookkeeping is the primary way
business owners can figure out if their business is profitable: keeping an eye on your numbers
lets you identify financial challenges early on and address them before they blossom into full-
fledged crises. Bookkeeping also helps you identify areas of profit expansion—areas you might
not have noticed without clear financial reports you can interpret easily.

In general, a bookkeeper records transaction, sends invoices, makes payments, manages

accounts, and prepares financial statements. Bookkeeping and accounting are similar, but
bookkeeping lays the basis for the accounting process—accounting focuses more on analyzing
the data that bookkeeping merely collects.

1. Understand business accounts. In the world of bookkeeping, an account doesn’t refer to

an individual bank account. Instead, an account is a record of all financial transactions of a
certain type, like sales or payroll.

159
There are five basic types of accounts:

• Assets, which are the cash and resources owned by the business (e.g., accounts
receivable, inventory)
• Liabilities, which are the obligations and debts owed by the business (e.g., accounts
payable, loans)
• Revenues or income, which is the money earned by the business, usually through sales
• Expenses or expenditures, which is the cash that flows out from the business to pay
for some item or service (e.g., salaries, utilities)
• Equity, which is the value remaining after liabilities are subtracted from assets,
representing the owner’s held interest in the business (e.g., stock, retained earnings)

Bookkeeping begins with setting up each necessary account so you can record transactions in
the appropriate categories. You likely won’t have the same exact accounts as the business next
door, but many accounts are common. The table below shows some frequently used small-
business accounts and their types.
ACCOUNT DESCRIPTION ACCOUNT TYPE
Accounts Payable Liability
Accounts Receivable Asset
Cash Asset
Dividends Equity
Equipment Asset
Insurance Expense Expense
Interest Expense Expense
Interest Income Revenue
Interest Payable Liability
Inventory Asset
Owner’s capital Equity
Real Estate Asset
Rent Expense Expense
Rental Income Revenue
Retained Earnings Equity

160
 Salaries and Wages Expense
Sales Income Revenue
Supplies Asset
Supplies Expense Expense
Unearned Service Revenue Liability
Utilities Expense Expense

2. Set up your business accounts. Knowing the accounts, you need to track for your business
is one thing; setting them up is another. Back in the day, charts of accounts were recorded in a
physical book called the general ledger (GL). But now, most businesses use computer software
to record accounts. It might be a virtual record rather than a hard copy, but the overall file is
still called the general ledger.

There are three main methods for creating a GL:

• Spreadsheet software (e.g., Excel)

• Desktop accounting bookkeeping software (e.g., QuickBooks Desktop)
• Cloud-based bookkeeping software (e.g., QuickBooks Online, Wave)

Spreadsheet software is the cheapest option; Google Sheets doesn’t cost a monthly fee but
trying to craft your own general ledger in a spreadsheet program can spiral quickly into disaster.
Desktop bookkeeping software usually requires a high up-front fee, but the software is then
yours to keep. With online, cloud-based bookkeeping software, you have to pay a monthly fee
to keep your online subscription, but it’s a much lower cost than that of desktop software.

Alternatively, you can pay an accountant, bookkeeper, or outsourced accounting company to

manage your accounts and ledger for you.

3. Decide on a bookkeeping method. If you plan to do your own books in house instead of
outsourcing to an accounting or bookkeeping firm, you need to make one crucial choice before
you start setting everything up: Are you going to use single-entry bookkeeping or double-entry
bookkeeping?

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With single-entry bookkeeping, you enter each transaction only once. If a customer pays you
a sum, you enter that sum in your asset column only. Makes sense, right? This method can
work if your business is simple—as in, very, very simple. If you work out of your home, don’t
have any equipment or inventory to offer, and don’t venture too frequently into the realm of
cash transactions, you might consider single-entry bookkeeping.

However, most bookkeeping is done using the double-entry accounting system, which is sort
of like Newton’s Third Law of Motion, but for finances. Newton’s law holds that “for every
action (in nature), there is an equal and opposite reaction.” Likewise, in double-entry
accounting, any transaction in one account requires an equal and opposite entry in another
account. It isn’t physics, but for managing a business, it’s just as important.

In the double-entry bookkeeping system, you’ll record two entries for each transaction: a debit
(Dr) and a credit (Cr). Debits and credits are recorded as journal entries in the ledger. The debit
is usually recorded first (on the left), followed by the credit (on the right).

4. Record every financial transaction. You’ve created your set of financial accounts and
picked a bookkeeping system—now it’s time to record what’s actually happening with your
money. It’s crucial that each debit and credit transaction is recorded correctly and in the right
account. Otherwise, your account balances won’t match, and you won’t be able to close your
books.
Account Type Debit recorded for Credit recorded for
Asset Increase Decrease
Liability Decrease Increase
Revenue Decrease Increase
Expense Increase Decrease
Equity Decrease Increase

To record a transaction, first determine the accounts that will be debited and credited. For
example, imagine that you’ve just purchased a new point-of-sale system for your retail
business. You paid for the system, which cost P250,000, in cash. The transaction will affect
two accounts: cash (an asset account) and equipment (also an asset). Because you’re decreasing
your cash and increasing your equipment, you would record a P250,000 debit (on the left) for
the equipment account and a P250,000 credit for the cash account (on the right). Note that

162
journal entries don’t include specific details about the item, vendor, or biller; you just track
debits and credits by account.

5. Balance the books. The last step in basic bookkeeping is to balance and close the books.
When you tally up account debits and credits—often at the end of the quarter or year—the
totals should match. This means that your books are “balanced.” You have been recording
journal entries to accounts as debits and credits. At the end of the period, you’ll “post” these
entries to the accounts themselves in the general ledger and adjust the account balances
accordingly.

For example, if over the course of the month your cash account has had P3,000 in debits
(increases) and P5,000 in credits (decreases), you would adjust the cash account balance by a
total of P2,000 (as a decrease). Follow this method to adjust the balances for each account in
your ledger. At the end of this process, you’ll have what’s called an “adjusted trial balance.”
When you combine accounts types, the adjusted balances should meet the accounting equation:

Assets = Liabilities + Equity

If two sides of the equations don’t match, you’ll need to go back through the ledger and journal
entries to find errors. Post corrected entries in the journal and ledger, then follow the process
again until the accounts are balanced. Then you’re ready to close the books and prepare
financial reports.

6. Prepare financial reports. Now that you’ve balanced your books, you need to take a closer
look at what those books mean. Summarizing the flow of money in each account creates a
picture of your company’s financial health. You can then use that picture to make decisions
about your business’s future.

Here are some of the most common financial reports created in bookkeeping:

• Balance sheet. This document summarizes your business’s assets, liabilities, and
equity at a single period of time. Your total assets should equal the sum of all liabilities

163
 and equity accounts. The balance sheet provides a look at the current health of your
business and whether it has the ability to expand or needs to reserve cash.
• Profit and loss (P&L) statement. Also called an income statement, this report breaks
down business revenues, costs, and expenses over a period of time (e.g., quarter). The
P&L helps you compare your sales and expenses and make forecasts.
• Cash flow statement. The statement of cash flow is similar to the P&L, but it doesn’t
include any non-cash items such as depreciation. Cash flow statements help show where
your business is earning and spending money and its immediate viability and ability to
pay its bills. Bookkeeping software helps you prepare these financial reports, many in
real-time. This can be a lifeline for small-business owners who need to make quick
financial decisions based on the immediate health of their business.

7. Stick to a schedule. At least once a week, record all financial transactions, including
incoming invoices, bill payments, sales, and purchases. And make it a priority to close your
books regularly too. You may do this every month, but at the very least, balance and close your
books every quarter. Another pro tip? Make sure to tackle your books when your mind is fresh
and engaged—say, at the start of the day before you open your doors rather than late at night,
after you’ve closed up shop. You want to be at your best when you’re looking at figures that
explain your business’s profitability and help you chart a course for progress. Plus, doing the
books earlier in the day can help you minimize the temptation to put off bookkeeping until the
next day . . . and then the day after that.

8. Store records securely. Proper record-keeping for small businesses makes the process
easier and keeps you compliant with the law. You never want to waste time chasing down last
month’s missing invoice, and you certainly don’t want to find yourself in trouble with legal
requirements.

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RECORD KEEPING. In which journal would you record each of the following
transactions? Indicate your selection with a tick ().

Cash Cash
Purchases Sales
Scenario Payments Receipts
Journal Journal
Journal Journal

1 You received a cheque for goods you sold    

2 You collected the car from your garage mechanic after it

had been serviced that day and you wrote a cheque to    
cover the invoice.

3 You called in at the printer and collected the printing

you ordered. The printer gave you an invoice and put    
the amount on your account.

4 The bank paid you interest on the money you had in

your bank account.    

5 You supplied sports equipment to ten members of

your sports club on the condition that they will pay    
you in one month’s time.

6 The monthly telephone bill arrives in the mail and

must be entered into the accounting system of the    
company.

7 You paid rent with a cheque    

8 You received a cheque from a customer who  

 
paid his account

9 You took delivery of stock which you purchased on

   
account from your supplier

10 You received a telephone call from your customer

   
ordering goods to be sent on his account.

165
B. Double Entry Bookkeeping
(Level - Simple)

Write the appropriate journal entries in the Books of Account ICTORY for the following
questions.

1. Lots of ICTORY purchased P500 of clothing for resale purposes from Sweet
Temptation on credit.

Account Dr Cr

Clothing

Creditors

2. Lots of ICTORY received a bill for P200 from Telstra

Account Dr Cr

Telephone Expenses

Creditors

3. Lots of ICTORY paid the fortnightly salary of P2,500 of M. Davies (Executive

Director)

Account Dr Cr

Salaries

Bank A/c

4. Lots of ICTORY received a sum of P500 from Southbank Institute of Technology

as a donation

Account Dr Cr

Bank A/c

Donations

166
 5. Lots of ICTORY received and banked P1, 500 of Fundraising Sales

Account Dr Cr

Bank A/c

Fundraising

6. Lots of ICTORY purchased a new motor vehicle costing P20,000 with a bank loan

Account Dr Cr

Motor Vehicles

Bank Loan

7. Lots of ICTORY paid outstanding creditors of P1,500

Account Dr Cr

Creditors

Bank A/c

8. Lots of ICTORY wrote a P50 cheque for postage

Account Dr Cr

Postage

Bank A/c

9. Lots of ICTORY sold P500 of equipment on credit.

Account Dr Cr

Debtors

Equipment Sales

167
 10. Lots of ICTORY paid the Auditor P1,000 with a cheque.

Account Dr Cr

Auditor Fees

Bank A/C

The profit and loss (P&L) statement is a financial

IDENTIFY WHERE statement that summarizes the revenues, costs, and
THERE IS A PROFIT
OR LOSS FOR A expenses incurred during a specified period, usually a
BUSINESS fiscal quarter or year. The P&L statement is synonymous
with the income statement. These records provide
information about a company's ability or inability to generate profit by increasing revenue,
reducing costs, or both. Some refer to the P&L statement as a statement of profit and
loss, income statement, statement of operations, statement of financial results or income,
earnings statement or expense statement. P&L management refers to how a company handles
its P&L statement through revenue and cost management.

Understanding a
Profit and Loss
Statement (P&L)

The P&L statement is

one of three financial
statements every public
company issues quarterly
and annually, along with the balance sheet and the cash flow statement. It is often the most
popular and common financial statement in a business plan as it quickly shows how much profit
or loss was generated by a business. The income statement, like the cash flow statement, shows
changes in accounts over a set period. The balance sheet, on the other hand, is a snapshot,
showing what the company owns and owes at a single moment. It is important to compare the
income statement with the cash flow statement since, under the accrual method of accounting,
a company can log revenues and expenses before cash changes hands.

168
The income statement follows a general form as seen in the example below. It begins with an
entry for revenue, known as the top line, and subtracts the costs of doing business, including
the cost of goods sold, operating expenses, tax expenses, and interest expenses. The difference,
known as the bottom line, is net income, also referred to as profit or earnings. It is important
to compare income statements from different accounting periods, as the changes in revenues,
operating costs, research and development spending, and net earnings over time are more
meaningful than the numbers themselves. For example, a company's revenues may grow, but
its expenses might grow at a faster rate.

Here is a profit and loss statement example created using BUHO, Inc template.

BUHO, Inc.
Income Statement
As of 31 October 2020

Revenue & Gains

Sales revenues P250,000
Interest revenues 10,500
Gain on sales of assets 2,500
Total revenue & gains 263,000

Expenses & Losses

Cost of goods sold 25,250
Commission expense 3,000
Office supplies expense 2,125
Office equipment expense 10,245
Interest expense 2,657
Total expenses and losses 43,277

Net Income P 219, 723

Regardless of the industry, profit and loss statement are all organized the same
way with five main sections: Total Revenue (Income), Cost of Goods Sold
(COGS), Expenses (including operating expenses), Other Income/Expenses
(including taxes and earning on shares) and Net Income.

169
 Why do Profit and
Simply put, the profit & loss statement shows whether a company is
Loss Statements
making money or not. All companies need to generate revenue to Matter?
stay in business, and that makes the P&L essential. Revenues are
used to pay expenses, interest payments on debt, and taxes. After the costs of doing business
are paid, the remaining amount is called net income. Net income is theoretically available to
shareholders; however, the company will often keep these earnings for future investment
instead of paying out dividends. Companies don’t always have a positive net income at the end
of a P&L. If a company is suffering a ‘loss’, this means that they are spending more than they
earn (also known as being company ‘in the red’). When you need to know whether your
business is profitable, you’ll turn to the profit & loss statement. Use this statement to answer
important questions about business profits like:

• Do you generate enough profit to cover expenses?

• Do you have enough money each period to pay yourself, your employees, and
shareholders?
• How does your current P&L compare to past P&Ls? Has anything changed? Did this
change increase or decrease your net income?
You’ll want to keep records of your profit & loss statements for reference. You can also take
these statements to an accountant for suggestions about improving your bottom line. When
reviewing your P&L it is useful to analyze key benchmarks or performance indicators (KPIs).
Analysis KPI Formula
What percentage of the sales COGS as a percentage of COGS ÷ revenue x 100
price covers the cost of sales/revenue
providing or producing the
product or service?
Is my business running Gross profit margin Gross profit ÷ revenue x 100
profitably?
Net profit margin Net profit ÷ revenue x 100
What percentage of the sale Expenses as a percentage of Expenses ÷ revenue x 100
price covers the fixed costs sales/revenue
of my business?

170
Gross profit is an indicator of efficiency. The higher the gross profit margin the better, as your
business keeps more from each dollar of sales. If your gross profit margin decreases over time
you will need to determine the reason and take action to address the decline. The net profit
margin is an indicator of how much profit you make (before tax) from every dollar you spend.
A fall in net profit margin generally means you are paying more in expenses, which needs to
be monitored. More profitable businesses generally spend less of their income on expenses.

INCOME STATEMENT. The following list of accounts for

BUHO, Inc. is available at the end of December 2020. Make a
summary of Income Statement from the given information below
with the following required data.

1. Calculate the net turnover.

2. Calculate the consumption of goods for sale
3. Prepare the Income Statement of BUHO, Inc. for the year 2020

ACCOUNT AMOUNT
Advertisement expenses 25,500
Change in inventory of goods for sale (increase) 1,700
Discount for volume of sale 250,000
Grants, donations and legacies transferred to income for the year 112,000
Income tax 13,500
Insurance expense 44,500
Intangible assets depreciation expense 110,800
Interest from long term loans to other companies 125,000
Interest of debt from financial institutions 1,120,000
Losses for uncollectible accounts 21,200
Losses from disposal of tangible fixed assets 22,640
Losses from impairment of inventory of goods for sale 5,800
Losses from impairment of trade accounts receivable 23,600
Purchase of goods for sale 10,854,000
Purchase returns of goods for sale 130,000
Rent revenue 54,800
Repairs and conservation 69,600
Revenue form holdings in equity instruments, other companies 51,200
Reversion of impairment of trade accounts receivable 92,000
Sale of goods for sale 36,109,440
Social security in charge of the company 198,000
Tangible assets depreciation expense 630,000
Wages and salaries 3,840,000
Work performed for own assets 45,000

171
 BALANCE SHEET A balance sheet is the financial statement of a company which
includes assets, liabilities, equity capital, total debts. It is one of
the three fundamental financial statements and is key to both financial modeling and
accounting. The balance sheet displays the company’s total assets, and how these assets are
financed, through either debt or equity. It can also be referred to as a statement of net worth, or
a statement of financial position. The balance sheet is based on the fundamental equation:

Assets = Liabilities + Equity

As such, the balance sheet is divided into two sides (or sections). The left side of the balance
sheet outlines all of a company’s assets. On the right side, the balance sheet outlines the
companies liabilities and shareholders’ equity. On either side, the main line items are generally
classified by liquidity. More liquid accounts such as Inventory, Cash, and Trades Payables are
placed before illiquid accounts such as Plant, Property, and Equipment (PP&E) and Long-Term
Debt. The assets and liabilities are also separated into two categories: current asset/liabilities
and non-current (long-term) assets/liabilities as shown below.

Current assets Items of value that are expected to be

consumed or converted into cash within the
next 12 months, such as stock that turns
over regularly and payments from debtors.
Non-current assets Items not expected to be consumed or
converted into cash within the next 12
months, such as equipment, vehicles,
buildings, and goodwill.
Current liabilities Items expected to be paid within the next 12
months, such as credit card debts, tax owed,
short-term loans, and stock purchases.
Non-current liabilities Items not expected to be settled within the
next 12 months, such as mortgages on
buildings and long-term loans.

172
Here is a Balance Statement example created using BUHO, Inc template.

BUHO, Inc.
Income Statement
As of 31 October 2020
ASSETS
Current Assets P 1,650,785
Accounts receivable P578,000
Inventory P 1,850,000
Total Current Assets P 4,078,785

Non-Current Assets
Plant and Equipment P 85,000
Business Premises P 25,450
Vehicles P 350,000
Total Non-Currents Assets P 460,450

TOTAL ASSETS P 4,539,235

Current Liabilities
Accounts Payable P 1,950,000
Bank overdraft P 15,000
Credit Card debt P 600,000
Tax liability P 1,564,895
Total Current Liabilities P 4,129,895

Non-Current Liabilities
Long term business loan P 1,500,000
Total Non-Current Liabilities P 1,500,000

TOTAL LIABILITIES P 5,629,895

NET ASSETS P 1,090,660
OWNERS EQUITY P 1,090,660

173
 The balance sheet is a very important financial statement for many
IMPORTANTE OF reasons. It can be looked at on its own, and in conjunction with
BALANCE SHEET
other statements like the income statement and cash flow statement
to get a full picture of a company’s health.

4 important takeaways include:

1. Liquidity – Comparing a company’s current assets to its current liabilities

provides a picture of liquidity. Current assets should be greater than current
liabilities so the company can cover its short-term obligations. The Current
Ratio and Quick Ratio are examples of liquidity financial metrics.
2. Leverage – Looking at how a company is financed indicates how much
leverage it has, which in turn indicates how much financial risk the company is
taking. Comparing debt to equity and debt to total capital are common ways of
assessing leverage on the balance sheet.
3. Efficiency – By using the income statement in connection with the balance
sheet it’s possible to assess how efficiently a company uses its assets. For
example, dividing revenue into fixed assets produces the Asset Turnover
Ratio to indicate how efficiently the company turns assets into revenue.
Additionally, the working capital cycle shows how well a company manages
its cash in the short term.
4. Rates of Return – The balance sheet can be used to evaluate how well a
company generates returns. For example, dividing net income into
shareholders’ equity produces Return on Equity (ROE), and dividing net
income into total assets produces Return on Assets (ROA), and dividing net
income into debt plus equity results in Return on Invested Capital (ROIC).

174
 BALANCE SHEET. Using the following scenario to fill out
the Balance Statement Worksheet. Complete the Balance
worksheet with the information from the table below.

You have P12,250 in You have P12,750 in You purchased a You received a
your checking your revolving computer last graduation gift of a
account savings account summer and it is watch and it is
valued at P1500. valued at P23,300.
You purchased Your car is valued at You owe P3000 on a You have put
new furniture for P1,700 into a Sunlife
P5,000, but you still credit card.
your apartment. It Insurance
owe P1,550
is valued at
P15,000, but you
still owe P4,000.
You just cashed your You purchased
You participate in You need a root a flat-screen TV
your employer’s canal procedure at income tax refund of
that is valued at
401k program. your dentist office. P1,090 P5000.
You have saved You owe
P5,090. P4,100.

You have a You purchase a You and your

You have P7,055 best friend
student loan condo for P60,000
in cash. move into your
balance of and you owe
new condo.
P145,000.
P200,000. They pay you
P43,250 a
month in rent.

175
Assets P Liabilities P
Monetary Assets Short-term Liabilities
Savings account Credit card
Checking account Medical debt
Cash
Other
Total Monetary Assets Total Short-term Liabilities

Tangible Assets Long-term Liabilities

Computer Automobile loan
Jewelry Home mortgage
Furniture Furniture loan
Automobile Student loan
Television
Home

Total Tangible Assets Total Long-term Liabilities

Investment Assets
Sunlife Insurance
401K Retirement Account

Total Investment Assets

Total Assets Total Liabilities

Assets
Liabilities
Net Worth

176
 The statement of cash flows, or the cash flow statement, is a financial
CASH FLOW statement that summarizes the amount of cash and cash
STATEMENT
equivalents entering and leaving a company. The cash flow statement
(CFS) measures how well a company manages its cash position,
meaning how well the company generates cash to pay its debt obligations and fund its operating
expenses. The cash flow statement complements the balance sheet and income statement and
is a mandatory part of a company's financial reports.

How to Use a Cash Flow Statement

The CFS allows investors to understand how a company's operations are running, where its
money is coming from, and how money is being spent. The CFS is important since it
helps investors determine whether a company is on a solid financial footing. Creditors, on the
other hand, can use the CFS to determine how much cash is available (referred to as liquidity)
for the company to fund its operating expenses and pay its debts.

The Structure of the CFS

The main components of the cash flow statement are:

1. Cash from operating activities

2. Cash from investing activities
3. Cash from financing activities
4.
Disclosure of noncash activities is sometimes included when prepared under
the generally accepted accounting principles, or GAAP.

It's important to note that the CFS is distinct from the income statement and balance sheet
because it does not include the amount of future incoming and outgoing cash that has been
recorded on credit. Therefore, cash is not the same as net income, which on the income
statement and balance sheet, includes cash sales and sales made on credit.

Operating Activities
The operating activities on the CFS include any sources and uses of cash from business
activities. In other words, it reflects how much cash is generated from a company's products or
services.

177
These operating activities might include:

• Receipts from sales of goods and services

• Interest payments
• Income tax payments
• Payments made to suppliers of goods and services used in production
• Salary and wage payments to employees
• Rent payments
• Any other type of operating expenses

In the case of a trading portfolio or an investment company, receipts from the sale of loans,
debt, or equity instruments are also included. When preparing a cash flow statement under
the indirect method, depreciation, amortization, deferred tax, gains or losses associated with a
noncurrent asset, and dividends or revenue received from certain investing activities are also
included. However, purchases or sales of long-term assets are not included in operating
activities.

Accounts Receivable and Cash Flow

Changes in accounts receivable (AR) on the balance sheet from one accounting period to the
next must also be reflected in cash flow. If accounts receivable decreases, this implies that more
cash has entered the company from customers paying off their credit accounts—the amount by
which AR has decreased is then added to net sales. If accounts receivable increases from one
accounting period to the next, the amount of the increase must be deducted from net sales
because, although the amounts represented in AR are revenue, they are not cash.

Inventory Value and Cash Flow

An increase in inventory, on the other hand, signals that a company has spent more money to
purchase more raw materials. If the inventory was paid with cash, the increase in the value of
inventory is deducted from net sales. A decrease in inventory would be added to net sales. If
inventory was purchased on credit, an increase in accounts payable would occur on the balance
sheet, and the amount of the increase from one year to the other would be added to net sales.
The same logic holds true for taxes payable, salaries payable, and prepaid insurance. If
something has been paid off, then the difference in the value owed from one year to the next

178
has to be subtracted from net income. If there is an amount that is still owed, then any
differences will have to be added to net earnings.

Investing Activities and Cash Flow

Investing activities include any sources and uses of cash from a company's investments. A
purchase or sale of an asset, loans made to vendors or received from customers or any payments
related to a merger or acquisition is included in this category. In short, changes in equipment,
assets, or investments relate to cash from investing. Usually, cash changes from investing are
a "cash out" item, because cash is used to buy new equipment, buildings, or short-term assets
such as marketable securities. However, when a company divests an asset, the transaction is
considered "cash in" for calculating cash from investing.

Cash from Financing Activities

Cash from financing activities include the sources of cash from investors or banks, as well as
the uses of cash paid to shareholders. Payment of dividends, payments for stock repurchases
and the repayment of debt principal (loans) are included in this category. Changes in cash from
financing are "cash in" when capital is raised, and they're "cash out" when dividends are paid.
Thus, if a company issues a bond to the public, the company receives cash financing; however,
when interest is paid to bondholders, the company is reducing its cash. Here is a Cash Flow
Statement example created using BUHO, Inc template.

BUHO Inc.
Cash Flow Statement
FY ended 31 December 2020

Cash Flow from Operations

Net Earnings P 5,450,000
Additional to Cash
Depreciations P 65,000
Decrease in Accounts Receivable P 45,450
Increase in Accounts Payable P 37,540
Increase in Taxes Payable P 45,500
Subtraction from Cash

179
 Increase in Inventory (P42,500)
Net Cash from Operations P 5,600,990
Cash Flow from Investing

Equipment 1,750,945
Cash Flow from Financing
Notes Payable 100,965
Cash Flow for FY ended 31 December 2020 3,951,010

From this CFS, we can see that the cash flow for FY 2020 was P3,951,010. The bulk of the
positive cash flow stems from cash earned from operations, which is a good sign for investors.
It means that core operations are generating business and that there is enough money to buy
new inventory. The purchasing of new equipment shows that the company has the cash to
invest in inventory for growth. Finally, the amount of cash available to the company should
ease investors' minds regarding the notes payable, as cash is plentiful to cover that future loan
expense.

Negative Cash Flow Statements

Of course, not all cash flow statements look this healthy or exhibit a positive cash flow, but
negative cash flow should not automatically raise a red flag without further analysis.
Sometimes, negative cash flow is the result of a company's decision to expand its business at a
certain point in time, which would be a good thing for the future. This is why analyzing changes
in cash flow from one period to the next gives the investor a better idea of how the company is
performing, and whether or not a company may be on the brink of bankruptcy or success.

A cash flow statement is a valuable measure of strength, profitability, and of the long-term
future outlook for a company. The CFS can help determine whether a company has enough
liquidity or cash to pay its expenses. A company can use a cash flow statement to predict future
cash flow, which helps with matters of budgeting.

For investors, the cash flow statement reflects a company's financial health since typically the
more cash that's available for business operations, the better. However, this is not a hard and

180
fast rule. Sometimes a negative cash flow results from a company's growth strategy in the form
of expanding its operations.

By studying the cash flow statement, an investor can get a clear picture of how much cash a
company generates and gain a solid understanding of the financial well-being of a company.

CASH FLOW. Using the following scenario to fill out the

Cash Flow Statement Worksheet. Complete the Cash Flow
Statement worksheet with the information from the table
below.

You Pay a P1150 car You receive your You Pay rent of You Pay your
P3,450 Per month.
Payment. monthly gross salary medical insurance of
of P2,500. P750 a month.
You Pay your You Pay your car You Pay for Your monthly
insurance of P950. monthly groceries utilities are due. You
renter’s insurance of
P12,200. owe P1250.
P2000.

Your monthly bill It’s your mother’s Taxes come out of You go to a movie
for gasoline comes birthday. You your Paycheck. with a friend that
Purchase a P540 costs P1450.
in and you must Federal Tax P130
Present.
Pay P705. State Tax P540
Social Security
P1500
You go out to You find the Perfect
You Put P1040 You hit a Pothole outfit for your date
dinner with
into savings for a and have a flat tire. this weekend. You
friends. Your bill
vacation at the You must Pay Pay P1,420 for the
is
beach. outfit.
P745 for a new P2945.
one.

181
Income
Gross salary
Total Income

Expenditures
Fixed Expenses
Rent
Renter’s insurance
Automobile loan payment
Automobile insurance
Medical insurance
Revolving savings fund
Federal income tax
State income tax
Social Security tax
Total Fixed Expenses

Variable Expenses
Food
Utilities
Gasoline and maintenance
Clothing and personal upkeep
Gifts
Miscellaneous
Total Variable Expenses
Total Expenses

SURPLUS (DEFICIT)

182
 Starting your own business can be an exciting and rewarding
GENERATE AN experience. It offers numerous advantages like being your own
OVERALL REPORT
boss, setting your own schedule, and making a living doing
ON THE ACTIVITY
something you enjoy. Becoming a successful entrepreneur
requires sound planning, creativity and hard work, and it also
involves taking risks, because all business require some form of investment usually time or
money. Now that you are prepared for this business opportunity and you already identified how
to become a successful entrepreneur. It is within your hands on how to maintain this success.
Failure is not the end of the road there’s a lot of things we can do to reach what we desire. As
Proverbs 20:4 (NIV) says, “The sluggard will not plow by reason of the cold; therefore, shall
he beg in harvest, and have nothing”. – Always be on the lookout for opportunities that lead to
a harvest.

FINANCIAL STATEMENT. As final output, prepare and

submit the completed Financial Statement of your business.
Write your report in the given blank space provided.

183
 [Company Name]
INCOME STATEMENT
As of 31 October 2020

184
 [Company Name]
CASH FLOW STATEMENT
As of 31 October 2020

185
 [Company Name]
BALANCE SHEET
As of 31 October 2020

186
 1. Business plan presentations are designed to sell your idea to
investors through a concise and engaging overview of what your
business does, how it fills a consumer need and what you are looking
for in terms of an investment.
2. Implementation is the process of executing a plan or policy so that
a concept becomes a reality. To implement a plan properly, managers
should communicate clear goals and expectations, and supply
employees with the resources needed to help the company achieve its goals.
3. You need good records to monitor the progress of your business. Records can show whether
your business is improving, which items are selling, or what changes you need to make. Good
records can increase the likelihood of business success.
4. Bookkeeping is the process of recording and organizing a business’s financial transactions,
and a bookkeeper is a person responsible for that process
5. The profit and loss (P&L) statement is a financial statement that summarizes the revenues,
costs, and expenses incurred during a specified period, usually a fiscal quarter or year.
6. A balance sheet is the financial statement of a company which includes assets, liabilities,
equity capital, total debts.
7. The formula for Assets is Assets = Liabilities + Equity
8. The statement of cash flows, or the cash flow statement, is a financial statement that
summarizes the amount of cash and cash equivalents entering and leaving a company.

187
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