APPLIED ECONOMICS

Name: ____________________________________________________________ Grade Level: _________________

LEARNING COMPETENCY
Evaluate the viability and impacts of business on the community
Subject Matter: Viability and impacts of business on the community
In this lesson, the learners shall be able to evaluate the viability and impacts of business on the community. This will also test
their critical think ability as they answer all the activities given as they go deeper to the lesson.
Different mind enhancers are also being provided to boost higher order thinking skills.
Motivational Question:
Directions: Answer what is being asked. Write your answer on the space provided after the question.
1. How does viability affects consumers and sellers?
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2. How does viability affects the economy?
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Viability of a Business
The viability of a business is measured by its long-term survival and its ability to sustain  profits over a period of time. A
business is able to survive when it's viable because it continues to make a profit year after year. The longer a company
can stay profitable, the better it's viability.
A business demonstrates its viability by making a profit every year of its existence. Some say a viable business is one
"with legs," and the Cambridge Dictionary says something with legs can continue to exist and be successful for a long
time.
Viability is like trust. When your trust in someone is shaken, it's almost impossible to get it back. And when a business
loses its profitability, that's difficult to recover. So viability is linked to profit, but also to both solvency and liquidity. 
How to Make Sure Your Business is Viable 
Viability is tricky to define and create, but there are some key factors to making a business viable. Consider these factors
in comparison to your business, and take steps to increase viability.
Creating viability is a two-part process. First, it means creating a marketing strategy by knowing who you are, who you
are selling to, and who else is selling to them. Second, it means having your business financial house in order. 
To create a marketing strategy that will make your business viable, you'll need to have this information: 
1. Unique Selling Proposition. Having a unique selling proposition (usually called a USP) is a first critical factor in having
a viable business. Heather Saffer found a unique spot on the shelf—gourmet, organic frosting. What makes your products
or services unique? Being unique keeps your business out in front of the competition. 
2. Stable Customer Base. Having a unique product or service is just the first step. To be viable, you have to know who is
going to buy your product or service. That means doing research to find out who these people are. People who buy
regular frosting are not the same people who buy Dollop frosting. 
3. Competitive Advantage. Even if your product is unique, and you know who you are selling to, you must always
consider the competition. Find out who might be your competitors, who might sell similar or new competitive products.
Create a marketing strategy that keeps your competitive advantage. In addition to your marketing strategy, a continuing
focus on your business' financial status will help create that viable business. 
4. Cash Stability. Probably the most important factor that makes a business viable is that it has assets (cash and other
reserve funds) for day-to-day operations and also to weather those ups and downs that all businesses. Getting to cash
stability isn't going to come overnight. It means being frugal, not over-spending in anticipation of sales, and not taking
too much out of the business. 
5. Continuing Attention to Your Financial Status. Most business owners get tripped up by their finances. They are too
busy doing all the other things that need to be done. But having a viable business means always being able to know
where your business is financially. Get good financial software, input all your business information regularly, and

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analyze it against goals for cash stability and other factors. Use these business check-up ratios to measure the health of
your business. 
How Viability Is Different From Solvency
Business viability is often confused with two other terms that are often used for business performance—solvency and
liquidity. A business is solvent when it has enough assets to cover its liabilities. Solvency is often confused with
liquidity, but it's not the same thing.
Solvency is often measured as a "current ratio," which is a business's total current assets divided by its total current
liabilities. A business should have a current ratio of 2:1 to be solvent and cover liabilities, which means  that it has twice
as many current assets as it has current liabilities. This ratio recognizes that selling assets to raise cash may result in
losses so more assets are necessary. A business is solvent and not likely to declare bankruptcy if its current ratio is over
2:1.
Viability vs. Liquidity
Liquidity is more of a short-term measure. It refers to the ability of a business to quickly turn assets into cash without
loss. If your business needs money, you may have to sell assets. Unless the asset is cash, the most liquid asset of all, you
may lose money by selling. For example, you may not get full value if you sell receivables. And if you try to sell
equipment, you will probably take a loss because the equipment has most likely depreciated.
If you're liquid, you have enough cash or other easily liquidated assets that you can pay your immediate bills or pay your
employees. This is called positive cash flow, and positive cash flow means liquidity.
The Long-term Look at Business Solvency, Liquidity, and Viability
Is your business solvent, liquid or viable? Creating a business that is solvent, liquid, and viable is a continuing effort. But
it's worth it because you will be creating a tremendous asset and building a business for the long term.
Small Business Impact On Community:  Small Business Have a Bigger Impact than You Might Think
The Impact of Small Businesses on Community and the Economy
The value of small businesses is often underestimated because they are small. But that doesn’t mean that the impact they
have is small. In fact, small businesses have a huge impact not only on the national economy, but on the economy of
their communities as well.
Small businesses are just as unique and individual as their owners, and cover a variety of industries. They fuel the
American dream and allow people to pursue their passion.  Small businesses also allow people the opportunity to achieve
financial independence, create employment opportunities and encourage innovation.
GDP Impact
While small businesses may not generate as much revenue individually as a large corporation, they are still vital to the
success of our economy. They help improve competition in areas that may be stale in innovation and growth, and offer
greater diversity in the economy.
Small businesses also offer diversity and innovation to our economy, and the revenue they generate has a huge impact.
We may not hear as much about small businesses in financial news, but according to the Small Business Administration,
54 percent of U.S. sales come from small businesses. That leads to a big impact on the stock market and our GDP.
Jobs Impact
The sheer amount of small businesses in the U.S. means there is the opportunity for a lot of jobs.  In 2018, there
were 30.2 million small businesses, making them 99.9 percent of all businesses in America. Small businesses are
the engines of job creation in this country and account for 64 percent of the net new private-sector jobs and over 49
percent of private-sector employment.  
Today,  8 million of small businesses being minority-owned and 9.9 million small businesses are women-owned. And
according to recent research by Thumbtack, technology is helping women and minorities achieve equal pay in the
expanding local gig economy. They found that for their community of small business professionals, the strongest growth
was found in home improvement, including a 73 percent growth in the number of handywomen. Thumbtack also states
that while the majority of small businesses are owned by men, female owners make up 40 percent of small businesses in
their online community.
Local Impact
Because many small businesses operate locally, their hiring of local people can have a huge impact not only on the local
economy, but on the overall health of a community and its people.  Small businesses’ impact on community cannot be
ignored.
Not only do local businesses help members of the community with more job opportunities, small businesses support
other small businesses too. They tend to support other local businesses to purchase supplies or for financing, keeping
more of that money in the local community.
And many people love to shop locally, helping the local economy. The First National Bank of Omaha’s 2018 Shop, Buy
Give Survey found that 69 percent of Americans prefer to support local retailers. Not only are local shoppers supporting
members of their own community, but they are also able to purchase unique products that may not be found in a big box
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store. Plus, one Chicago study found that for every $100 a person spends at a local business, $68 will stay in the
community, compared to only $43 of every $100 spent at a chain store.  
Small businesses also contribute to the identity of the local community where they operate. Many small business owners
participate in local organizations by sponsoring teams, participating in community events and donating to local
nonprofits. So it’s not just an impact on the local economy, it’s also about being a member of the community and
improving that community on many levels.
Small businesses have a big impact on the economy, both on a national and local level. Over half of U.S. sales are from
small businesses. They also are job creation powerhouses and enable minority groups and women to make an impact in
the business world more easily. They also have a big impact on their local communities, from the local economy to the
identity of that community. A higher percentage of money spent at small businesses stays locally in the community and
many small businesses love to give back to their community through programs and charities. So despite their small size,
small business really are big.
Things to Consider During a Product Viability Analysis
1. Consider product size and weight.
The size and weight of your product will have an impact on how much you sell.
If the product you’re considering is large, awkwardly shaped or heavy, you may have high shipping costs. To add to the
complexity, UPS & FedEx prices fluctuate, which could negatively impact your budget.
2. Consider product fragility.
Fragile products need extra attention when shipping to ensure they arrive in perfect condition.
Typically, durable products cost less to ship and lighten your customer service and reparation burden for products that
break en route to the consumer.
3. Consider SKUs.
Many entrepreneurs forget that a single item can often be associated with multiple SKUs.
A SKU, or stock keeping unit, typically refers to color, size and other variations of a single product.
The more SKUs you have, the more attention, time and money you will need to spend in tracking and maintaining
inventory.
4. Consider product lifespan.
Having a consumable or disposable product is often perceived as a great choice from a business perspective because you
can improve the way you earn customers’ loyalty and, ultimately, build your business off of repeat sales.
Think of the grocery store model. Inventory churn is high, competition is fierce, but the location and price point generate
loyalty, pulling in consumers on a weekly basis.
5. Consider seasonality.
Seasonality means that there are different levels of demand for a product throughout the year.
6. Consider price point.
Selling a product with a higher price tag doesn’t prevent you from finding ecommerce success. 
7. Consider competition.
If your items are sold locally and readily available in major retail stores like Target, Wal-Mart, Amazon or other online
outlets, your ecommerce journey just became an uphill, snow-covered journey from the get-go. That’s not to say that you
can’t be successful selling a commonly-found item, but the more niche your products, the less competition you’ll have—
and the more leverage you have to win a large share of the market. Don’t let this deter you—after all, competition can be
a good thing—just be sure to let it inform your market viability research.
8. Consider yourself.
Yes, on top of choosing a product that’s viable in the market, you should select one that you actually enjoy yourself or
one that solves a problem you have personally experienced.

A. Directions: Considering your manufacturing company of shoes, answer the following

questions.
To start, you’ll need to ask yourself some serious strategic questions about your product’s viability.
1. Is the product idea practical?
2. What obstacles or challenges lie ahead?
3. Will it need support services of some kind to ensure customer satisfaction?
B. Directions: Evaluate the things to consider during a product viability analysis by considering your manufacturing
company of shoes.
1. Consider product size and weight.
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2. Consider product fragility.
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3. Consider SKUs.
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4. Consider product lifespan.
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5. Consider seasonality.
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6. Consider price point.
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7. Consider competition.
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8. Consider yourself.
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