Professional Documents
Culture Documents
t, , FINANCIAL ebAN
DEFINITION
.e_URPOSE OF A BUSIN - • n ..
Ess PLAN
btY,ln';',',.
for how you will opnn..tte yrJur fr)r f(;U r
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usines s pla
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2. STAY ON TRACK
ve lop ed , ref err ing to it pe rio dic all y he lps yo u ma int ain
After your business plan is de to fol low
as you ma ke da ily de cis ion s. The plan ma ke s it ea sie r
a long-range view po rta nt ele me nts
ss de ve lop me nt ste p in ord er so you do n't mi ss an y im es a
each busine
ritt en pla n pro vid es yo u wit h a sta rtin g po int an d ou tlin
along the way. A we ll-w ping yo u gro un de d, foc us ed
on yo ur tar ge t
t dri ves yo ur ac tiv itie s, kee yo u
timetable tha in bu sin ess tac tic s an d on tra ck as
ne d wit h yo ur ma
market, strategically alig
progress.
3. CLARIFY GOALS
ne ed ed
an eff ec tive me an s of de fin ing yo ur go als an d the ste ps
A business plan is tio n. It als o
m. It spe lls ou t yo ur pu rpo se , vis ion an d me an s of op era
to reach the to inv es tor s,
as yo ur co mp an y's res um e, ex pla ini ng yo ur ob jec tiv es am ou nt
serves bu sin es s pla n cle arl y sta tes the
,an d ve nd ors . A go od
partn~rs, employees wo rk an d wh ere the inv es tm
en t is co mi ng
d to ma ke the co mp an y
of capital yo_u nee mo ne y, yo ur sa les
nfi e: the me an s by wh ich yo u wil l pa y ba ck bo rro we d
from. It cla es t pro fits .
h flo w an d ho w yo u wil l inv
forecast, spending bu dg et, cas
4 • PREPARE FOR TH E FU TU RE
.
yo u wil l rea ch th
By outlining yo ur goals and ho w res ea rch in the bu ~m , you,r bu sin es s pla n he
lps yo u
Ma rke t e
pre~are for the fut ure . s me ss P an sh ou ld inc lud
proJections based to ful fill t~o se ne ed s. A we
ll-
~~ o~ ~~ !n~ ;~{ t~i r ab ilit y
dev~lo~ed bu sin es ~~ ~o nn !~s ns the co mp an y wil l fol low in
ca se the
be too o tim · f
proJect,ons tur n ou t to lop ed to ide nti fy
sta cle s, inc lud ing pis sib ~: ~b as ;t~ ~o ~h sh ou ld be de ve
~~l~e~tial ob t the co mp an y
red to ma ke op era tio na l de cis ion s th t e ma ~k ~t, ~o etha wi th the ov era ll
busin e prepa a rem ain in lin
ess str ate gy ,
SE Of A BUSINess
Ttff pURPO
~
T· tfAT IS
ss pl.AN? W
sus1NE AL'7
WHAT IS A T IS A GO -
pLAN? WHA
sruovuNKS
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FEATU
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2. A business plan should be presented in a binder . a cover risti ngmber
with e·
the nam1
of the business, the name(s) of the principal(s)' ad~ress' pbor:ie n ~ !ot'of
mail and website addresses, and the date. You don t have to sper:1 a
money on a fancy binder or cover. Your readers want a plan that 1ooks
professional, is easy to read and is welJ-put-together.
Indude the same information on the title page. If you have a logo, you can use\
too. At.able of contents follows the executive summary or statement of purpose,
5
that reader.; can quickly find the information or financial data they need.
1. ~- EXECUllVE SUMMARY. It tells the reader what you want and why,
nght up front. Are you IOOking for a loan to remocJel and refurbish your ,
factory? A loan to expand your Product fine or buy new equipmerit? How "to
you repay vour loan, and over what tenn? Would you like to find a partner
iness? What's in it for him or her? The
whom you'd sell 25 percent of the bus and
n shou ld be addressed here clearly
questions tha t pertain to your situatio
succinctly.
LF A PAGE
SUM MA RY OR STA TEM ENT SHO ULD BE NO MO RE THA N HA
THE ELE ME NTS :
LEN GTH AN D SH OU LD TOU CH ON THE FO LLO WIN G KEY
IN
es
iness, its product, the ma rke t it serv
• Business concept describes the bus
age.
and the business' competitive advant
l high lights, such as sales and profits.
• Financial features include financia or
much capital is needed for sta rtup
• Financial requirements state how
wha t collateral is available.
expansion, how it will be used and pany,
s relevant info rma tion abo ut the com
• Current business position furnishe and
was founded, the principal owners
its legal form of operation, when it
key personnel. s,
anything not ewo rthy , such as patent
• Major achievements points out , or results
arding pro duc t dev elo pm ent
pro toty pes , imp orta nt contracts reg
n conducted.
from tes t ma rke ting tha t have bee
ESS
1. 3. DE SC RIP TIO N OF THE BU SIN
2. ins with a sho rt exp lan atio n of the
3. The business des crip tion usually beg as well
ust ry, discuss wha t's going on now
ind ust ry. When describing the ind can pro vide
necessary research so you
as the out loo k for the futu re. Do the
ts with in the ind ust ry, incl udi ng
info rma tion on all the var iou s ma rke der you r
elo pm ent s tha t could ben efit or hin
references to new pro duc ts or dev foo tno te
on reliable dat a and be sure to
business. Base you r obs erv atio ns
when necessary. Rem em ber tha t
and cite you r sources of info rma tion on
w hard fac ts-- the y wo n't risk mo ney
ban ker s and inve sto rs wan t to kno
ass um ptio ns or con ject ure .
, reta i\, foo d
des crib ing you r bus ine ss, say whi ch sec tor it falls into (wh ole sale
When ss is new or
and so on) , and whether. the bus ine
service, ma nuf act urin g, hos pita lity tne rsh ip, C
d. The n say wh eth er the bus iness is a sole pro prie tors hip , par
establ ishe sta te wh at the y
t, list the business' prin cipa ls and
or Sub cha pte r S cor por atio n. Nex cus tom ers
to the bus ine ss. Con tinu e with info rma tion on who the bus ine ss'
bring d and
the pro duc t or ser vice is dis trib ute
are, how big the ma rke t is, and how
ma rke ted .
SERVICE
1. 4. DESCRIPTION OF THE PRODUCT OR
2. len gth ,
few par agr aph s to a few page~ in
3. The business des crip tion can be a d,
n. If you r pla n isn 't too com plic ate
ing on the com ple xity of you r pla
dep end on~
sho rt, des crib ing the ind ust ry in
kee ps you r bus ine ss des crip tion ces s J~etQrs
r, and the bus ine ss and its suc
par agr aph , the pro duc t in ano the
in two or thre e mo re par agr aph s.
e . ma k Su re y o u r re a d
u describe your Produc t or service, use your p d t
e r h a s a c:le
~i°!~It°vou're p 1
E p\ain hOW e.oP e ro uc or serv iceari
talking ab~~~- p:O d 'f fe th \
ta\\<. about w ctuct or se rvi~i~e~ re n t fr o m o e rs availa
· q~\
ble i
hat ~a\<.e: ~
t what sets y s a part from those
market. Be sp
ecific a o o u r bu of You r 1
competitors.
t· it iv e e d g e
ga1·n a c o. m p e
Then exp\ai_n b ·ness will and why y
how your -~ o u r busi~
wi\\ _be p ro f1 ta
~~s~~~~sJit~:~e
!\
b \\ ~!s~;'ed as
he factors yo th
a financing p
u
·11
1
1m
ink e x p la in
~op~sa G iv e
a k e it s u c c e f I If
w
s s
h y th e a d d
u . Yo ur
it io n a l eq~
1
equipment w
yo ur busin ess mor:a~oit;~i,'o
h a rd fa c ts , s u c h as "ne w
i\\ create an in
co oo per year" an
how. m e s tr d briefly d escribe
Other inform . d
ation to ~ddre . ti o n o f th e
key peop\e _in ss here ,s a e x p e ri e n c e
the business. e ;c n ~ u r busines o f th e oth er
what supphe W~oever ;: ~ s p la n w il l
t~ ~ b o u t y o u w a n t to kno w
to your idea.rs or experts you ve sp r b u s in e s s
They may eve o a n d th e ir resp
for se\\ing this n ask you to \ ·fy y o u r choice o ns~
particu\ar pro can o f lo c a ti o n
duct. o r reason s
1. 5 . MARKET AN
2. ALYSIS
A thorough m
arket ana\ysi
help you esta s will he\p yo
blish pricing, u define y o u
allow your co distribution, r p ro s p e c ts
mpany to be and p ro m o ti as w e ll as
short and lon successful vis o n a l s tr a te g ie
g term. -a-vis y o u r c s th a t will
o m p e ti ti o n ,
b o th in the
Begin your m
a
structure, gro rket analysis by defining
w th
your product th prospects, trends, an e market in te rm s o f s
or service will d sales pote ize d e m o
the potential
you either ha
annual purch
ve or can att
be purchased
ase. Then fig
ain. Keep in
by
ure out wha
ntial. N e x t
your ta rg e t m
t percent e
a rk
d t'
e ermm_e
. ira hies
p ft '
o w O en
share, and th mind th a t no t. T h e ~ fi g u
a t a somethin one g e t age re o
Your market
share will be
g as small as
25 percent is o f th is a n n u u t
of your mark a con -~ lO O P a l sum
et-planning p benchmark th a t tells you e rc e n t m a rk
rojections. hows, ~~ed et
a d o m in a n t
You'll also ha we You're share.
ve to describ d o in g in lig
product or se e your positio ht
rvice from th ning strategy.
niche to fill is a t of your com H o w
business plan
ca
tity within the
pe
service's iden lled "positioning." Positio titors and then Otu d i~ e
nin J .
on. ~g
Prices are ers
,
all costs,
by ma nuf act ure rs to assure tha t
• cos t-pl us pricing is used ma inly e is
d and the desired pro fit percentag
both fixed and variable, are covere
attained .
• ies tha t sell the ir products thro ugh
a
• Demand pricing is used by compan
es based on demand .
var iety of sources at diff erin g pric
• panies tha t are entering a ma rke
t where
• Competitive pricing is used by com one
e and it's diff icu lt to diff ere ntia te
there's already an established pric
pro duc t from ano the r .
• retailers and is calculated by add
ing you r
•Markup pricing is used mainly by
duct.
desired pro fit to the cost of the pro
cess of
tion, which includes the entire pro
ou'II also have to determine distribu analyze you r
ory to the en d user. Make sure to
moving the product from the fact the same typ e of
befo re decid ing whether to use
competitors' distribution chann els antage.
nne l or an alte rna tive tha t ma y provide you wit h a stra tegic adv
cha
municate with
should include all the way s you com
Finally, you r promotion stra teg y be successful,
r ma rke ts to ma ke the m awa re of your products or services. To
you relations,
ress advertising, packag ing, public
you r promotion strategy shou ld add
s.
sales promotion s and persona l sale
lysis is to determine:
The purpose of the competitive ana
t.
the competitors with in you r marke
the strength s and weaknesses of
• age.
a distinct advant
strateg ies tha t will provide you with
• r
pre vent competition from entering you
bar rier s that can be developed to
•
ma rket. cycle.
loit ed in the product development
• any wea knesses tha t can be exp
indirect
lysis is to identify both direct and
The fi rst step in a com pet itor ana grouped
now and in the future. Once you 've
competi tion for your business, both ntifying the ir
r com pet itor s, sta rt analyzing the ir marketing strategies and ide you
you
ble area s by exa min ing the ir stre ngths and weaknesses. This will help
vuln era
advantage.
determine your distinct competitive
targ et ma rke t
should be very clear on who your
Whoever reads your business plan com pet itors,
t you r ma rke t niche is, exa ctly how you'll stand a~?irt from your
is, wha '\. t
so.
and why you'll be successful doing
NT
1. 7. OPERATIONS AND MANAGEME
2.
ponent of your plan is designed to
The o_perations and management com ons
s on a continuing basis. The operati
describe how the business function
. th th . a ti o n s u c h
plan highllghts e logistics of e o rg.a n iz ' a s th e respon
. . sibilit•
the managemen t team the tasks ass1g~ ed to e a c h d1v1s1. on w ,th ·in
company, and . I ~nd expen e m e n ts re la te the ies
capita se requ1 r d to th e o p e ra tion
the business.
s~
!: 8. FINANCIAL CO
MPONENT
S OF YOUR B
U S IN E S S P L
s. AN .
After defining th
e product, _mar t and o p e ra ti o n s , th e n e
k~I s ta te m e n ts xt
attention to are
your business the thre~ financ, t te m th a t fo rm th e a re a to tu rn Yo~
plan: the in c o e n t cash fl o w b a c k b o n e of
sheet. mes a s ta te m e n t, a n d balan
' c~
The income sta
tement is a sim
generating abili ple and s tr a ig
ty. It is a scorec h tf o rw a rd re p
th a t reflects whe ard on the fina o rt o n th e b u
n sales are mad ncial p e rf o r~ s ines~ ' cash-
information fro e and when exp ance of your
m the various enses a re in c busine ss
expenses, capita financial mode u rr e d • It d ra w s
l (in the form o ls d e ve lo p e d
these elements f depreciation), e a rl ie r s u c h
, the income st and c o s t o f g a s revenue ,
makes o r loses atement ill u st ra oods. By com
during the yea te s ju s t h o w b ining
revenue to arr r by subtractin much your c
ive a t a net re g co st o f g o o d s a o m p a ny
income statem sult, which is e n d e x p e n s e
ents,_ i~clude a it h e r a p ro fi t o s from
very short, ~m note ~nalyzing r lo s s . In a d d
th e re su lt s. T h e it io n to the
you craft this. phas1zing the key poin a n a ly s is s h o
ts o f th e in co m u ld be
e s ta te m e n t.
Y o u r CPA can
The cash flow help
business, since st a te m e n t is one o f the most
it shows how m cr
require it and uch cash you'llitical in f •
where it will co ne d o rm a ti
each month an me from. The o n ~ool~ fo r
d year. The ca result~ t~ me your ,
to th e n e xt m o sh flow st a te m e n e t_ ob
n th to also show t is t e p ro fi ll g a t, o n s , w h e n you II
cash flow st a te the cumulativ t o r lo s s a t th
m e n t is a m a jo ca rr ie s b o th p e end of
m e e t expense r red flag th a t i ro fi ts a n d lo s
s-something th ed~mount. R u s e s over
a t demands im n n in g a lo s s
m :~ ~ = :: s n o t o n your
The cash flow ~ a v in g e n o u g
s ta te m e n t sho a tt e n ti o n a n d h c a s h to
year, on a q u a uld be prepare acr
rt e rl y basis fo d
following 1 7 it r the second io n ·
e m s are listed ea
statement. As in th e order ih on a m o n th ly b a s is d .
w it h th e incom r, and a n n u a ll .
st a te m e n t in a e st y fo r thu n n ~
sh o rt su m m a ry a te m e n t ey ~eed to a p p e a th e fi rs t
doesn't have to in th e bus{n You II r e th ir d y e a r.
be long and sh need to a n a l The
ould cover h~ 5 on Your cash
~ plan. On
ce a g :z e th e fl o w
The last financi 9 11 c a s h fl o w
al s ta te m e n t yo 9 h ts o n ly . A s
financial st a te u 'll ne ed is k in , th e a n a ly
m e n ts th e ba
.
an d is~ lance sheet is b Y o u r CPA fo r
s is
more o r less,' a alance s h e h e lp .
down into thre a s u m m a ry o f Qenerat d et U .
e areas: asse a ll th e Pree _e a n n · n lt k th
ts, liabilities a uau e e p re v io u
nd e e~ing fi n s
Balance sheets q u ,t y. a n c iI I ~ or th e b u s in e s s
are used to ca 1n forn-,. . pla n
measuring ass lculate th e n e ·r ~ 1
ets a g a in st lia tw , • • ,at1on
b ro k e n
th e _balance sh bilities. If y o u
e r
business plan et fr o m y o u r la st re p o rt in g b u ~ ~ h o f a bus.m-e
is fo r a ne ~ . ess
· ·
you may
will be over !he cours~ of the business plan to determ ine what equity
ng for a new busines s, you'll need to
~ccum ulate in the business. To obtain financi
include a personal financi al statem ent or balance sheet.
sheet just as
In the business plan, you'll need to create an analysis for the balance
s of the
you need to do for the income and cash flow statem ents. The analysi
balance sheet should be kept short and cover key points.
STUD YUNK S
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IJ!SS PL
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Describe the guldo otho
II es for deVe I ns
buslnesfil p a .
~'. Identify ttio users of
<'o here ;,ire ,,ornc ,,1,
. ~ dlfflCUlt to do. , '
13•. lor wr,1 •I
Howt~vcr , 9cttlnQ •lt"i111cd trlrlY h<.
\u ,~'" d h,t$ t h- •.? p1rn, .
cH
1. RESEARCH, IU:SEAR w --RESEARCHJL
. . d your ob jed .iv ,: <;.1p,:rt
!',t:,"
:~,~=:r~,:911:~: ~~w-rctlred se;:~; :;~~~~ ~,i:r,c
d . I 1.c your product, yo ur market an
m o n e y and fu nd ba t k !' o w h o w
th e new ve nt ur e nks, o r fr ie n ~ a t s fo r au s ta O
~ t .Q ro 1e ct ed sa
. le~
U p s, w h e th e r or , t
s a n d farnuy t
' IS
ln th is case, th e 0 no
business plan is P a rt With t h e ir
go in g to do, ho focused on ex
w it is go in g to . .
th e fo un de rs ar
e th e ri g h t peop
accomplish it s
le to do th e jo9b
:ftntng W h at ~·
~s, a n d -n io s ~ ~ n e
w c o m pa n y is
• st a rt u p buS
in •r n p o rt
a n tl y- wh
ess P la n a lso d e tay ,
..
, •➔ r
IOllld l gr-ow e, 1 p, ta:::rc.:, 1., ,u c ..,, .. .,....,.,._
DYU NKS
DI FF ER EN T W AY S OF
ES TA BL IS HI NG YOUR
BU SI NE SS NA M E:
1. Us ing yo ur ow n na
me
Do a few searches, and see wl':lether anything tur:ns up on the company name
vou're considering. You can also go to the Office website, as well as
using KnowX.oom or similar searcher sites.
2. Se cu rity
crime,
not , you r loc atio n can incr eas e you r odds of bei ng affected by
Believe it or the additional
r insurance premiums, as well as
wh ich in tur n can infl uen ce you . It's fair to
y me asu res you ma de nee d to take to keep you r premises safe
sec urit intuition and
decisions based on information,
say tha t in business, we all ma ke of crim e in the areas
luck. But knowing the chances
pro bab ility mix ed in wit h a littl e cess.
ant par t of the decision making pro
you are considering is an imp ort
3. Co mp eti tio n
r success.
pro xim ity to oth er com pet ing businesses could be crucial to you
You r ? Establishing
you r business or cause a hindrance
Could the y pro vid e a ben efit to rantee you
pet itor s are in you r are a and the ir offe ring could help gua
wh ich com n then it
rig ht loc atio n for you r bus ine ss. If the re is too much competitio
choose the There are
y be a wa rnin g sig n to exp and you r horizons to a new location.
ma h oth er as
lerships who wa nt to be nea r eac
exc ept ion s to this such as car dea e pro xim ity. .
ers com par e and cho ose the best car d_ea l, hen~e th~ ir clos
cus tom some krnd
if you hav e an ele me nt of you r offe ring tha t rs unrqu_e or offers
Likewise, ma rke t could be
an area tha t already has a npe
of new inn ova tion the n choosing ce in a new
wa y to pic k up cus tom ers ver y qui ckl y and establish a presen
the ideal
e.
area in a rela tive ly sho rt tim e fram
-www~ entrepreneur.com
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.ww..w ,bplnDS &m J
ION
TOPIC TWO: BU SIN ESS DE SCR IPT
LESSON FIVE
OBJECTIVES
ine ss ow ner shi p
1. Exp lain var iou s for ms of bus
ION
FORMS OF BU SIN ESS OR GA NIZ AT
er is how the
of the firs t dec isio ns tha t you will hav e to ma ke as a business own
One con figu rati on
businesses mu st ado pt som e legal
bus ines s sho uld be stru ctu red . All s's own ers hip,
s of par ticip ant s in the busines
tha t def ine s the righ ts and liab ilitie n will hav e
trol , per son al liab ility , life spa n, and fina ncia l stru ctu re. This decisio
con t and
y wan t to con sult with an acc oun tan
lon g-te rm imp lica tion s, so you ma In ma king a
of own ers hip tha t is righ t for you .
atto rne y to hel p you sele ct the form
acc oun t the follo win g:
cho ice, you will wan t to tak e into
nat ure of you r business.
•Yo ur visi on reg ard ing the size and
e.
•Th e leve l of con trol you wis h to hav
ing to dea l with .
•Th e leve l of "str uct ure " you are will
suit s.
•Th e bus ines s's vuln era bilit y to law
aniz atio nal stru ctur es.
•Ta x imp lica tion s of the diff ere nt org
ines s.
•Ex pec ted pro fit (or loss ) of the bus
re-i nve st ear ning s into the business.
•W het her or not you nee d to
of the bus ines s for you rse lf.
•Yo ur nee d for access to cash out tors hip;
l form s of org aniz atio n: Sole Pro prie
An ove rvie w of the fou r bas ic lega
ited Liab ility Com pan y follo ws.
Par tne rsh ips; Cor por atio ns and Lim
i. G en er al Pa rt ne
rs hi p · ·· es of
vi de re sp on si bi lit y fo r m an a emen t a nd lia bi lit y, as well as th e shar
Partners di in g to th ei .
g
Equal shares are as
sumed
pr of it or lo ss ac co rd te r in te rn al ag re em en t. re .
unless th er e is a w
rit at es di ffe nt ly
n ag re em en t th at st
3. C or po ra tio ns
considered by
wh ich it is he ad qu ar te re d, is
te re d by th e st at e in Corporation
A Co rp or at io n, ch ar an d ap ar t fro m th os e who own it. A ners
en tit y, se pa ra te ag re em en ts . The ow
la w to be a un iq ue te r in to co nt ra ct ua l
of di re ct or s to
n be su ed ; it can en ol de rs el ec t a board
can be ta xe d; it ca de rs . Th e sh ar eh own and
e its sh ar eh ol at io n has a life of its
of a co rp or at io n ar io ns . Th e co rp or
policres an d de cis
ov er se e th e m aj or ges.
no t di ss ol ve wh en ow ne rs hi p chan
do es
C or oo ra tio n
!A dv an ta qe s of a
bt s or ju dg m en ts
ite d lia bi lit y f.or th e co rp or at io n' s de
ve lim
• Sh ar eh ol de rs ha t in sto~k
at io n. fo r th ei r inves~men
ag ai ns t th e co rp or ol de rs can on ly be held ac co un ta bl e fo r th ei r
• G en er al ly , sh ar eh of fic er s ca n be he ld pe rs on al ly lia bl e
ot e ho we ve r, th at m en t ta xe s.
of th e co m pa ny . (N to wi th ho ld an d pa y em pl oy
e fa ilu re c_k .
ac tio ns su ch as th na l fu nd s th ro ug ~ th e s~le of sto
ra is e ad di tio fic er s and
• C or p; ra tio ns ca n th e co st of be ne fit s 1t pr ov id es to of
de du ct
• A Co rp or at io n m ay .
. is election
. m ~n ts ar e m et . Th
em pl oy ee s. Co rp or at io n st at us 1f ce rta in re qw re
• ca n el ec t s si m ila r to a pa rt? ~r
sh1p.
pa ny to be ta xe d
en ab le s co m
a C or po ra tio n
D is ad va nt ag es of he r fo rm s of
qu ire s m or e tim e an d m on ey th an ot
co rp or at io n re
• The pr oc es s of in
or ga ni za tio n.
. federal, state and som~ local agencies, an
• corporations are monitored by mply with regulations. d as 1
result may have more pape_rwo_rk t~ ~~erall taxes. Dividends paid to share
01
• Incorporating may result 1~ hig~e . thus this income can be taxed tw~1 de
are not deductible from business income, ce.
Subchapter S Corporation
• bl the shareholder to treat the earni
A tax election only; this election ena es d. ti t O th • ngs an
profits as distributions, and have them pass through ,_rec Y e,r personal ta~
th
return. The catch here is that the shareholder, if ~orkmg for e compa ny, and i
there is a profit, must pay his/herself wages, and it mu~t meet _standards of
"reasonable compensation". This can vary by geographical region as well as
occupation, but the basic rule is to pay yourself what you would have to pay
someone to do your job, as long as there is enough profit. If you do not do this
the IRS can reclassify all of the earnings and profit as wages, and you will be liabl
for all of the payroll taxes on the total amount.
!he LLC is a relati~ely n~w type of hybrid business structure that is now permi 51'b
m most states. ~t 1s _designed to provide limited liability features of a corporati~
and the tax effic1enc1es and operational flexibility of a partnership F f •n
more complex and formal than that of a general partnership. . orma ton is
es s la h . fund yo ur
his se cti on of yo ur bu sin T: th ;/e o~ld ex cit e those y~u're hoping will
u. and
r usiness or wo rk wi th yo r~a d:~ :re are a few tips to create a product
pe als to the
erv ice s se cti on th at ap
. u're
• In di ca te wh y yo ur pr od uc t
n t or_ se rv1 ~e s ar e ne ed ed . Especially if yo
ve ntu rin g int o a ne w co p or in~ent1on, or a place
where there is no
ma rk et ou ce pro du ct or service.
cu rre nt ex pl~,n the need for yo ur
ou ~ ~e ne ed to ess is the ab ilit y
• Hi gh li ht A cru cia l pa rt of success in busin or sim ila r
1ttu re s.
ab le togse t y esses tha t sell the same
yo ur se _ ap ar t fro m busin level of service
ro du
~tc es ._ W ha t fea tur es , such as price po int or '
p cts;n d se e to yo u?
d o yo u 011er th at 1s un iqu is how
iqu e fea tur es are im po rta nt bu t even more so
• Fo cu s on be ne fit s. Un consumers. Translate yo
ur features (i.e.,
es pr o~ ide va lue to The goal is
tho se fea tur t it now or save money).
fa st~ r o: ch ea pe r) mt o
pr
be
od
ne
uc
fits
t or
(i.e
se
.,
rvi
ge
ce wi ll fix a problem or impro
ve a client
to h1ghltght ho w yo ur
or cu sto me rs life.
in too
Do n't let yo ur bu sin es s plan ge t bogged down
.
• Be de ar an d co nc ise tio n. You can even use bullets
or numbered
tio n an d inf or ma
mu ch de sc rip
want
lists. "\ J.)
se , ex pe rie nc e, an d accolades. You no t only
• Sh ow ot ry ou r ex pe rti se rvi ces bu t also share wh y
yo u'r e the best to
ur pr od uc ts an d tha t makes
to de sc rib e yo in yo ur education or experience
lud e an yth ing
pr ov ide th em . Inc s. If you ha ve testimonials, awards or
s bu sin es
yo u th e ex pe rt in thi pa ten t, co py rig ht
y, if you ve applied for a
1
UE ST IO NS
ani zation s
f th . . four ma;.ior business org t·on fro m a pa rtn ership
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corpora 1
2, Dlf fe1cntlat c ~th , , ...ited lfabllitY
~tu res of a sol e pr
op rie tor sh ip
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- www.ent rep reneur.co m
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TO PIC TW O: BUSINESS DE SC
RIP TIO N
OBJECTIVES
TH ES E MA Y INC LU DE :
er needs
(i) Kn ow led ge of pot ent ial cus tom
'
dem and s for certain products,
(ii) Wa tch ing em erg ing tre nds in
pro duc t,
(iii) Sco pe for pro duc ing sub stit ute
interests like
th rou gh cer tain pro fes sio nal magazines catering to specific
(i v) tGoi~g
e 1ec ron ics , com put ers , etc .,
abl e persons,
(vii i) Ide as giv en by the kno wle dge
ives, list of
Kn ow led ge ab ou t the Go ver nm ent pol icy , concessions and incent
(ix )
nuf act ure in sm all- sca le sector,
item s res erv ed for exc lus ive ma
com pet itor , and
(x) A new pro du ct intr odu ced by the
h obs erv atio n.
(xi) On e's ma rke t ins igh ts thr oug
ing his / her
ren eur can ~et ideas for est abl ish
In nut she ll, a pro spe ctiv e ent rep duc ts
m var iou s sou rce s. The se ma y inc lud e con sum ers , exi stin g pro
ent erp rise fro ls, and
pre sen tly on off er, dis trib utio n cha nne ls, the gov ern me nt offi cia
and ser vic es
res ear ch and dev elo pm ent .
a. CO NS UM ER S:
and
erp rise can be tho ugh t of wit hou t con sum ers . Co nsu me rs dem
No bus ine ss ent in terms of
ts and ser vic es to sat isfy the ir wants.. Als o, con sum ers ' wa nts
for pro duc eur needs to
enc es, tas tes and liki ng kee p on cha ngi ng. He nce , an ent rep ren
pre fer he/ she can off er the pro duc t or
ons um ers act ual ly wa nt so tha t
th ro ug h th ei r feedb
service accordingly.
Consumers , wan t 5 can be known ack. aba
sing and would wan t to use in f t
the products and se
rvices they have been
u u ure ,lJt
b. EXISTING PRODUCTS
AND SERVICE~
One _w ay to have an ·t r the existing prod
en terprise idea may
be to ~o ni ~ompetitiv ucts and
se rvices already av e analysis of th em t
ailable in the marke
ide nt ify th ei r shortco t and m~ eda ·de wh
ming s and then, base at and ho w a bette 1
produ~t and service d on it, eci M y en r
can be offered to the terprises are
es t ab lished m ainly consume~ . anver th
to of fer better produc e ex ist ing ones .
ts and se rvi ces 0
Di str ib ut io n ch anne
ls called market inter
so urce fo r new ideas mediaries, also serve
fo r entrepreneurs. Th s as a ve ry effective
th e ult im ate co nsum e reason is th at the y
ers and hence bette ultim at el y deal With
I r know the consumer
I
s' wants.
As su ch, t he channe
l members such as
fo r new prod uc t de wholesalers and reta
velopment and modif ilers can pr ovide ide
an en trepr eneu r ca ication in the existing as
me to know from a product. Fo r example
reason his hosiery salesman in a departm ,
was no t selling was ental sto re th at the
cu sto m er s wa nt ho its dark shade while
siery with light shad most of th e yo un g
fe ed ba ck and accord e. The entrepreneur
ingly changed the sh paid heed to th is
En tre pr eneu r found ade of his hosiery to
his hosiery enjoying light shade.
increasing demand ju
st within a m on th .
d. GOVERNMENT:
At t im es , t he Gove
rnment can also be
wa ys . For example a source of new prod
, go ve rn me nt from uct ideas in various
pr od uc tion and cons time to time issues re
umption. Many a tim gulations on pr od uc
so ur ce s fo r new ide es, these regulations t
as fo r enterprise for become excellent
mation.
Fo r ex am pl e, go ve
rn m en t's regulation
ide a to m an uf ac tu re . s on ban on polythe
Jute bags f or mar ket· ne bags have given
A pr os pe cti~e en tre intg co~ve~d1.encef of t h
pr ~n eu r can also ge e sellers and bune
yew rs .
pa te nt s av ail ab le fo t en erpnse I ea rom
r license or sale. the pu blications of
Besides, th er e are
some governmental
ob ta in in g specific pr agen~ies th at _assist
od uc t information. entrepreneurs in
Such information ca
en te rp ris e fo rm at io n also become basis
n. fo r
e. RESEARCH AN D DE
VELOPMENT:
bu t no means th e lea
T he la st . . st source of new ide
as
(R ~~ ) ac t1 vg 1t :~
b rried ou t in-house or is research and ~evelopment
t~ ~~ :;n ; ~i w a new outside the organizati
ac t1v1ty sug or modified product on. R&o
th e cu st om er s' re can be produced to me
qu ire me nt s. et
Available evidences indicate that man
enterprise establishments hav b Y new product development, or say, new
research scientist in a Fortu \ ~en th e outcome of R&D activity. For example, one
became the basis of a new ne 0 compan_ y developed a new plastic resin that
the product diversificaf ~oduct, a plastic molded modular cup pallet. Most of
ions ave stemmed from the organization's R&D activity.
METHODS OF GENERATING IDEAS:
This_ involves a process including first generating the ideas and then scrutinizing of
the ideas generated to come up with an idea to serve as the basis for a new
~nterprise formation. The entrepreneur can use several methods to g.enerate new
ideas. However, the most commonly used methods of generating ideas are: focus
groups, brainstorming, and problem inventory analysis.
A group called 'focus group' consisting of 6-12 members belonging to various socio-
economic backgrounds are formed to focus on some particular matter like new
product idea. The focus group is facilitated by a moderator to have an open in-
depth discussion. The mode of the discussion of the group can be in either a
directive or a non-directive manner.
The comment from other members is supplied with an objective to stimulate group
discussion and conceptualize and develop new product idea to meet the market
requirement. While focusing on particular matter, the focus group not only
generates new ideas, but screens the ideas also to come up with the most excellent
idea to be pursued as a venture.
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•
1. BUSINESS PROFITABILITY OBJECTIVES
•
1. CUSTOMER SERVICE OBJECTIVES
Customer service goals could include reducing complaints by 50 percent over one
year or to improve resolution times to customer complaints to a minimum of one
business day. To meet customer service goals, objectives could include increasing
your customer service staff from one to three workers by the end of the year or
implementing a policy where customers are guaranteed to receive a return phone
call before the end of the business day .
•
1. RETENTION OF EMPLOYEES
If you've experienced a problem with employee turnover, your overall goal could be
to improve retention. To make this goal specific, you could measure the current
turnover rate, like one employee in five leaves after three months, and decide to
double this figure to six months. Objectives to meet this goal could include
implementing a training program that details new-hire activities for the first 90
days on the job. You also could implement one-on-one bi-weekly meetings with
your employees in an effort to build rapport and find out what1s on their mind .
•
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'lihe business can use ,1ny of the follow1ng way~ to grow Its Pl>ritf011o
ST R EGY
1. MARK ET PENETRATION AT
sin es .
One gro wt h str ate gy in bu hs is market penetration . A
small company uses a
tio n str ate gy
ma rke t pe ne tra g produ cts wit hin t he
same m~ rke t it has bee n usi n~ ~~ it decides to market exi stin
produ cts and
se ma rke t ·h e on ly way to grow using exi sting
ma rke ts 1s to inc rea ert s. Marke t
nt of un it ; dar e, acc ording to sm all business exp
sha re is the pe rce ds wit hin a cer tai n
t vs. all oth er com pe t~~ rs. olla r sales a company hol
ma rke
ma rke t sh . . in markets
One wa y to increasedif fer e f /re rs by lowering prices . For example,
where t he re is litt le lower pric e may help a
mp an y inc rea se ,
·ts sh n ,fa ron among prod ucts, a
co are o t he ma rket.
OR DEVELOPMENT
1. MARKET EXPANSION
dev elo pment 1 entails
n gro wth str ate gy, often called marke t
A ; ark et exp an sio why a company
cts in a ne_w ma rket. There several reason s
se rng cu~ren t pro du y be such tha t
rke t exp an sio n str ate gy. First, the competitio n ma
ma y c? nsrder a ma s not find
_fo r gro wth wit hin the cur rent market. If a business doe
the re rs no room or profits.
cts, it cannot increase sales
ne w ma rket s for rts produ
finds new uses for
ma y als o use a ma rke t expansion strategy if it
~ sm all com pa ny stores may
r exa mp le, a sm all soa p dis trib uto r tha t sells to retail
tt~ produ ct. Fo
rs also use its product.
discover t ha t fac tor y worke
1. PRODUCT EXPANSIO
N STRATEGY
to increase
y als o exp an d its pro du ct line or add new features
A sm all co mp an y ma strategy,
. Wh en sm all com panies employ a product expansion
its sales and pro fits within the existing
du ct de vel opment, they continue selling
also kn ow n as pro well when tec hno logy
an sio n gro wth strategy often works
ma rke t. A pro du ct exp new products as old er
ng e. A sm all com pa ny may also be forced to add
sta rts to cha
ones become ou tm od ed .
VERSIFICATION
1. GROWTH THROUGH DI
a small compa ny
in bus ine ss also inc lude diversification, where
Gr ow th str ate gie s very risky. A
du cts to new ma rke ts. This type of strategy can be
will sell new pro diversification growth
nee d to plan carefully when using a
sm all co mp an y wil l pany will need to determ ine
gy . Ma rke tin g res ear ch is essential because a com
str ate products.
ers in the new ma rke t will potentially like the new
if consum
R COMPANIES
1. ACQUISITION OF OTHE
In acquisition, p_
bus ine ss can also includes an acquisition.
., Growth str ate gie s in s. A small compan y
• an oth er com pany to expand its operation
ter new markets. An
r
company pur cha ses
s typ e of str ate gy to exp and its product line and en
ma y use thi
. . kY as a d iversific
blJt no t as ns
. . · gr ow th st can be ns kY, at io n
acqws1tion rategy
strategy.
1readY bt· he d . A co m
One reason is . t th e produ cts and market are a . g esta rs . . . ~
th a ·t an ts to achi.ev w he n usrn an a~qurs rnon strate ~ ny
m us t know exac e gy
tly ·red t it
st m en t requ.r , ·ro im pl e m en
m ai nl y because w ha : rn ;c an t in ve ,
of th e s19 .
S W O T A N A LY S
IS
SWOT st an ds fo . ·e s an d T h re
th weaknesses, O pp or tu at s . an d so a
SWOT Analysis r St re ng . s, as ni
sessing these fo ti ' pe ct s of yo
is a te ch ni qu e fo ur as u r business .
r
You can use SW st
m ak e th e m o re of w ha t yo u' ve g o t. to y o u
OT A na ly si s to
or ga ni za tio n's d ce th e ch an ce r
un de rs ta nd in g
be st ad va nt ag e. And yo s o f fa ilu re , bv
w ha t yo u' re 1ack u ~ n .
ca tc h yo u un aw ing, an d ehm m a ~ng haza rd s th a t w ou ld ot
ar es . he rw ise
HOW 'fO DO A
SW O T ANALYSI
S
Fi rs t, dr aw up a
SWOT Analysis
o f th e fo ur aspe m at ri x. This is a
cts of SWOT• 2x 2 gr id , w it h
o n e sq ua re fo r
ea cti
•
1. S TR E N G TH
S
Strengths ar e th
in gs th at yo ur or
di st in gu is he s you ganization does
fr om yo ur ro m pe pa rt ic ul ar ly w el
organization ha tit or s. T hi nk ab l, o r in a w.a y
s ou t th at
st af f, access to ceov er ot he r organizations. These m th e ad va nt ag es yo u r
rt ai n materials, or ig be th e m o
a st ro ng se t o f mht ti va ti
an uf ac tu ri ng p ro o n o f ·y ou r
Y:our st re ng th s ce ss es .
ar e
it "t ic k. " W ha t do an in te gr al pa rt o f yo ur or ga ni za
you do be tt er th tio n, so th in k ab
W ha t un iq ue o r an an yo ne else?
W
out w h at m ak
an d analyze yo lo w e st -~ " 7 ° u ha t va lu es d ri ve
u r or ga m za tio n s ~ ca n ):>U aw yo u r b u - ess
'"''"' q .... e S el lin g dr up on th at o th er
~-opnsition . s c a n 't ' ~ n ti
T he n tu m yo ur
perspective ar ou • 1 en
se e as yo u r st re nd and as k yo ur se
ng th s. W ha t fa
ct or s m ea n th a
lf w ha t yo u r com
t you g e t th e sa
le a. ., .- ~ tit or s m
.
R em em be r, an tg
ad va nt ag e. fo r
y as pe ct of_ yo ur
organization ~ on • ~ o f th e m ?h t
~ m p J e , if _all o ly S tr en gt h if it
th en a _hi gh -q ua f yo ur ~ m p e ti to bt i
ht y pr od uc tio n pr rs pr o~ id e h ig h -q u
ocess is n o t st re a ~ s YOU a d e a
ne ce ss ity. ng th m Y ou r rnar1<:!! ~ • r
•
1 . WEAKNESSE
S
Be hon est! A SWOT Ana lysi s .11 the info rma tion
~~l y be valuable if you gat her all
you nee d. So, it's bes t to be r:lis leas ant trut hs as soon
ic now, and face any unp
as pos sibl e.
.
Weaknesses, like stre ngt hs , are inhe ren t featu res of you r organization, so focus on
Ie, res our ces sys tem d
you r peo p s could
' an procedures. Think abo ut wha t you
imp rov e, and the sor ts'o f pra ct·ices you should avoid.
Once aga in, ima gin e ( or find Out how oth er P~ople in you r ma rke t see you. Do
)
the y not ice wea kne sse s tha t
mine how
_te nd to be blind to? Take time to exa
and why you r com pet itor s a y~uoing bet ter tha n you. What are you lacking?
re
•
1. OP PO RT UN ITI ES
happen but you 'll
Opportuniti_es are ope ning s or lf!chances for som eth ing positive to '
nee d to clai m the m for you rse
eye to
aris e f~om situ atio ns out side you r organization, and require an
The y u~u ally in the ma rke t
The y mig ht arise as dev elop men ts
wha t mrg ht h~p pen in the futu re. exp loit
you use. Being able to spo t and
you serv~,. or m the tec hno log y to compete
ren ce to you r organization's abil ity
opp ortu niti es can ma ke a hug e diffe
t.
and tak e the lead in you r. ma rke
don 't need to be
you can spo t imm edia tely . These
Thi nk abo ut goo d opp ortu niti es atio n's
ant age s can increase you r org aniz
gam e-c han ger s: eve n sma ll adv e or small,
pet itive nes s. Wh at inte res ting ma rke t tren ds are you aware of, larg
com
whi ch cou ld hav e an imp act ?
to you r field.
nges in gov ern me nt policy related
You sho uld also wat ch out for cha can all thro w up
cha nge s in soc ial pat tern s, pop ulat ion profiles, and lifestyles
And
inte res ting opp ortu niti es .
•
1. THREATS
the out side ,
eat s incl ude any thin g tha t can neg ativ ely affe ct you r business from
Thr a sho rtag e of
shif ts in ma rke t requi~ement~, or
suc h as sup ply cha in pro ble ms, the m before you
ats and to take action aga inst
rec ruit s. It's vita l to ant icip ate thre
r gro wth stalls.
bec om e a vict im of the m and you
and selling.
in get ting you r pro duc t to ma rkedt t
. k bou t the obs tacl es you face ·f· t· f ~r you ; pro uc s ~re
Th ,n a dar ds or spec, ,ca ions
You ma y not ice tha t qua lity stan sta y in_ th e
cha nge tho se pro duc ts 1f you re to 1
cha ngi ng, and tha t you 'll nee d to at, as well as an opp ortu nity .
nolo g.y, isnan eve r-pr ese nt thre
lead . Evo lvin g tech
_ nd h e th e r y o u s h o u ld
ider what yo r compet1to~ are doing, a ~enge. Bu be
Alway~ con~ _u ' empha m e e t th e t re ~
u
changing Y r o rg a n iz a ti o n \ be sis to . fo r ha c do and av e m b e r th
what they're . might no . th. e ri g h t tht~~ p o s it io to
you , o id c o p yingQt
doing ·ng ho prove yo n.
them withou w it will ,m
t know,
. ll e x p o s
Be sure to e I re whether yo nization is e d to e x te
xpo u es pe c 1a / fo rnal
r o rg
ave bad deb a cash-flow p r e x a m p le , th
make you vuo,o y~~I~ to even sm
challenges. t o r ro b ~ t co u\d
es in y o u r le
m
m k e t? T h is
is
a r th e k md of
threat that caner . sly damageall cha~~siness, so .
n senou your be a le rt .
1 ASSIGNM
ENTS . .
2: ctors to co
Highlight fi nsider w h c h o o s in g
location ve fa en a b u s m es
. s
3 ·· rt from sole . e x p
. u. A pa p ro p ri e to rs la in o th e r v a ri
h ip ,
!~rms of business ownership · o us
Explain vari d g r o w th
4 . 111. ous e n tr y ·
s tr a te g ie f
b
. usiness
an so a
5 . IV . .
Dis cuss v a r ·ious pricing • .
can use s tr a te g ie s th a t a b u s in e s s e n
tity
STUDYUN
KS
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T O P IC TH
REE: MARK
ETING P lA N
LESSON E
IG H T
OBJECTIV
ES
1 . Explain
cu
2. Do th e c s to m e r id e n ti fi c a ti o
o m p e ti to r n b y a bus
analysis o in
f th e busin e s s
CUSTOME
R ID E N T IF e ss
IC A T IO N
The custom
er identifica
Know Your tion proces
Customer o s is globally
authorizatio r known a s K
n o f th e cu know y o u r clients. I t is YC, w h ic h
s ta n d s fo r
stomer con th e proces
sidering ris s o f id e n ti
k factors re
KYC is gene
rally practic la te d to th fi c a ti o n a n d
,i regulation e d by bankin e busi
o f general g and finan
enterprises b a nking and a cial in s ti tu ti
n ti -m o n e y ons as par
b ri b e ry comare also practicing K la u n d e ri n g t
pliant asse YC to contr a c ti v it ie s .
ssment w it h ol th e ri s k
th e ir clients fa c to rs and
ensure
d the
o f a su cc es sf ul b . id en tif yi ng yo ur customers an
A critical p a rt an is s and
S ol id bu si ne ss pl us,~ess pl se ar ch on po tential customer
co m pe tit io n. te re
~nlclorporaqu tips on
tit or s. B eg in by asking :hns e ,o owing e st·ions, and then apply the
compe . .
inning business
how to b ecome a w
e r Q u es ti o n s
T h re e C u s to m
?
• Who is buying
buy?
• W ha t do th e y
y?
• Why do th e y bu
s
ti to r Question
T h re e C o m p e
ey?
• How big are th ter?
ers are th ey af
• Which custom
rategy?
• What is th e ir st
W in
T h re e W a y s to
e bone
• C ut costs to th
unique
• O ff er so m et hi ng p
cu st om er grou
• Focus on one
S A N A L Y S IS of
COMPETITOR em en t is an assessme n t
strategic m an ag
a ly s is in m ar ke tin g and potential comp
etitors.
C o m p e ti to r a n t an d identify
an d w ea kn esses o f cu rr en
de fe ns iv e st ra tegic context to
th e st re ng th s fensive and
n a ly s is pr ov ides both an of
This a
and th re at s.
op po rt un iti es
analysis:
ar e st ep s to do co m pe tit or
The fo llo w in g
S
COMPETITOR sses o r
1: L IS T YOUR or s. Th es e are the busine
pe tit nd to serve
ur main com s. They also te
lis tin g a t le as t three o f yo se rv ic e to yo ur
S ta rt by r pr od uc t o r
ov id e a si m ila
people who pr
e t. yours. For
the same m a rk e o f a similar size as
es th a t ar e, big
lo ok fo r those business m ad e potholders onlin
It 's also be st to
tr ep re ne ur selli
ng ha nd ig h t carry
u' re a so lo en co m pe tit or s, even if they m
example, if yo n 't yo ur direct all to medium
gr oc er y st or es usually a re y. In st ea d, lo ok fo r ot he r sm
chain inventor accessories.
olders in th e ir similar kitc'1~n
handmade poth po th ol de rs an d
s o f handmade
scale producer
W
RIEF OVERVIE
2: WRITE A B
Wr\te a br\
ef descn.pt1. of the c o m p . , busines
on e ti to rs s and wh
y y o u th in
compet\to
r.
k they 't~
~
P..\so, how h do you k
the businemuc now abou t each com e ti to r in th e fi r s
ss we\\ en h to fl\\ up m o s t f th ep w o rk t p\ace? D
you ha\le o ug o s h · h o Yo u k
to d\g dee e e t w it ou t re
per? searc h or ~~
00
Note if yo
u'\le made
meeting th contac t w \th each c t it o r w h e
competiti\l em at industry e\le . om thpaet in fo' rm th e r as a c u s to m e
e ana\ysis n a ti o n n e a th t ro
wi\\ he\p yts. H a ~ ': ( r e op f r by
competiti\l
e c\imate. ou qu1c y e how much y o your
se o u do k n
o w abo u t
vo u r
3 : KNOW
'T H E IR 'T
ARGET C
USTOM ERS
Next, iden
tify the cu
~!e~~~n~~~~~uti:t: stomers t~
a t your c?
trying to re
ach.
~~:~;~~:~~- mpe n1o•r s te n d to a tt ra
~ii~e~a~~
• a es cw
9
t. You can
e b s it e , blodo th is
~r~~t:~11 g,
~:1~\~u fi
g ~ re o u t
SOME QU who they
ES 'TIONS Y ar
COMPE'T OU 'TO A
l'TOR'S 'T NSWER
ARGE'T M AS Y O U
ARKE'T: ATTEMP
T T O ID E
• Based on N T IF Y Y
your com O UR
custome petitor's
r does th m a r k e ti n
h im or he e v ie w e r g messa
r? What is h a v e to b e ge, wha
What's the their age fo r th e s e t k in d o f
ir professio ra nge? Whe message
infer? You n re do th e y s to a p p
're essenti , if any? What othe have to b
e located
eal tt
character a\\y trying r custome ?
to r demograp
• Do th e who best represents come up w
ith a "b u y hics can y
ir m a r k e ti the person e r person ou
marketing n g m a te r your com a", a
materia\s ia ls a p etition is
form of th specifica\\y p p e a r gendered? tr y in g to
rea ch
e \anguag refer to m T
other mark e they use en or wom his ju s t means : do
eting con , the imag en? This the
• Are th e could be
e y ta r g e ti tent. Or do they ap s, and illustrations in the
their pricin n g lo w , m peal to a b in th e ir a
g informa iddle, or roader au ds and
discounts, ti o n, inc\udin h ig h in c d ience?
sale, afford g how the o m e c u s to m e
income cro ab y p r s ? Look
wd. Also \o le, or cheap, t~en th hrase it . If they us at
a brochure ak at the ey ~ren't e words lik
or onl~ne b m ta rg e ti n g e
• What
is th e m a anner._ Are arketing matena\s th e high
m messa the y ~ th e m s elv
common c gmg of th ttention-grabbing o es w h e th e r it's
a pet sitte usto_mer problems e ir m a r k e r
ti n g m a te elegant?
r going thro ?r goals_ d r ia ls ? Wh
difference ug o t~e
between a h a nval business y often refer to? L at
updates, a brochure e brochure. et's say y
nd anothe m T h ou're
The group r brochure phasizing frequent ere is a huge
o e m re al-time on
are often f clients who are att phasizing pet pam
focused on racted by pering and line
for more p the safety frequent re grooming.
am a a
appearanc pering and groom nd welfare of their \-time online update
e. ing service p
• Do th
ey have s are focu ets, while those loo s
s s ed on com king
segm e n ts., someparate n:'ark~tin fort and
· etimes, yo g messag
u might se es
e a stark d _for d if fe r e n t
ifference b
etwe
ts th ei r .
co m pe tit or m ar ke bu si ness fo r one t customer versus ho
w they
es en t th em se lv es pe of cu ty pe of
pr · to an ot he r ty e, if you're
tr yi ng to sell serv at h tu to r to ;ig ohme~ For exampl
'~~s _as a m o are
st ru gg lin g to pass su bj ec ts yo u' ll ;c ool _students wh y
e, r m at h ing a completel
di ffe re nt pi tc h th yo u w ou ld to th os~ st d e mak n_eed additional help
an u . ents who_
w ith th ei r SAT at h so th at the cou 1 t,g,ous universities. ly
Your
m es sa m ~ ge t in to pres
g stud Y help you final
ge to th e st ru gg lin hil en ts m ig ht be closer to "I' ll
te st s! " W ar ke t will be
p_as~ yo ur m at h r m es sa ge to the other m
you ge t i~ t~ ou , be sure to
si m ,l~ r to "I 'll he lp th e s_ ch oo_l o_f your dreams!" Also omer
no te if yo ur co m
pe tit or does with th ei r own cust
some th ing similar
se gm en ts .
PR IC IN G
4: L IS T T H E IR
. . . ices. Include
D on 't fo rg et to lis t ho w yo ur com
or s pn ce th ei r products and serv
such as prici ~e t,~ product and
ot he r in fo rm at io n al lm en t plans, pricing fo r
, as well as sh~g
_o r in st th ei r prices
ur worksheet howservices.
se rv ic e pa ck ag es
co m pa re w ith yo
ur s- if yo u' ve re f
p,ndg
a a Y set rates
fe es . No te in yo
fo r your products
and
RATEGY
R MARKETING ST
5: IT EM IZ E TH EI
s independently
or s w ill be ru nn ing yo ur businesse '
yo ~ a nd yo ur co m pe tit
ll be ;1 oi ng he ad to head.
Th o~ g~ re you'
of th e areas whe
m ar e mg is on e execute
e re so ur ce s or th e opportunities to
ve th the
ss~s m ig ht n? t ha ting is essentially
Mos~ sm al l busine iv e m ar ke tin g plans, bu t yo ur marke ur m essage
de ta ile d an d ex pa
ns
Th e m or e th ey are familiar with yo
ur cu st om er s' se e. oose you.
m es sa ge th at yo it, th e m or e lik ely th ey are to ch
ity w ith
an d fin d an af fin ting
ta nd in g no t ju st of yo ur own marke
unders
po rt an t to have an
This is w hy it' s im co m pe tit or s as well.!
ur
m es sa ge s, bu t yo THE
M AR K ET IN G W ORKS. ANALYZE
H O W THEIR
D EC O N ST R U C T
FO LL O W IN G : Make
oc hu re s, po st er s, billboards, etc.
as br e high qu al ity
ng m et ho ds such aterials. Do they us
• P ri nt m ar ke ti e co nt en t bu t a/ so th e m ocopied?
no te no t ju st of th an d in co lo r or were th ey ju st phot
e th ey glossy of yo ur
in k an d pa pe r? Ar m ed ia ch annels where each ? How
S oc ia l M ed ia . N ot e th
e so ci al
an y fa ns or fo llo wers do th ey have
m
• a presence. How
co m pe tit or s ha ve th ei r posts get? bsite? Is
co m m en ts or sh ares do in yo ur competitor's we
m an y vi si to rs se e
W eb si te . W ha t's
the fir st thing there is, what does
it emphasize
te , a1 1d 1if
• on th e w eb si views and
th er e m uc h te xt ss ? Do th ey have customer re
tit or 's bu si ne atic and
ab ou t yo ur co m pe gn as w el l. Is th ei r website st
e no te of th e de si ? Apart
te st im on ia ls ? Mak io n an d ot he r interactive features
es it have anim at e site
m in im al is t, or do fe at ur es of th e site itself, does th
copy, design, and u th in k yo ur pote
ntial customers
fro m ju dg in g th e ch te rm s th at yo
va nt sear
ra nk well fo r re le
~t' try dr,,rtr) ' 1 r J'1'1 fl f(
th r•r Vfi1 ll ,.:, ' 1 ' .,
- dl'Y'iadc lea . d e if any r;f /')!Jr , '; rr r,, . •·
ing han '" " -:in '~e.- . r.t.,,
? If you're se Il t Ool wallets ,_
could use • d leather i
h for "handma e d hoW oftr,;n fr, t ,;prJ,;t:(-,~ i I
searc , pages.
are in the first ,ew - ompanY blog?
If thr•y o, ·~ ·e
- r• blog postc., I
Blog. Do they have a c_ I media shares on th - Hnr· in fr;c,af ne'//'.,p,J f;'· "'> ' .
• there comments or soc1a any of their ads on th.. ~·ir a<Y ,,; it tr..1 ,/jr ,::i ' ,
•
. .
Advert1smg,
Have you seen ctirJn on
? What is the call-to-a . - A
.. .J'
there cou pvn'., ,:,tt..dr,r ';r! i,
in the yellow pages . ck out a website t r_c 7 ,
number visit a store, or che th y promoting •
the ads; What product features are e r competitors hold an I r~C. iJrr r ';;
Promotions Sales, or Events. Do you t new customers? Do tr1'-".; / ottu·,:
• ' eant to attrac
sales promos, or events m t 7
trade' show~ or sponsor third-party e~~~e~· businesses or indi 1✓1dua ls 7 /Jr o'
• Partnerships. Do they partner wi thd hat do they typically cross- pro ,.1"'0 tt
types of partners do they choose an w
with these partners?
Next, find out what makes each competitor unique. This is their 1\competit i te
advantage," the aspect of their business that could help them outperform you ar.c
the other businesses on the list. What do they offer that the other businesses or
the list don't? Why would some customers pick them over you or your other
competitors?
• targeti~g an underserved market (these are the people whom most of your
competitors don't address or explicitly sell to)
• targeting a highly specific market
• lower prices
• frequent discounts and promos
• location
• a long company history
• a famous or high-profile founder
• an interesting company story (interesting f . .
by the media) ou nd ing stones tend to be profiled
• compelling marketing (such as memorabl .
• large online audience via their website bl~ imagery~ taglines, or jingles)
• broader range of products and service~ g, or social media accounts
The same goes for their weak serve You better too td
nesses. Do th e1r
for you? Will they. be able t o over . w u o
cometurns
It affect your b usiness if a co mpetitor P
eaknessesea~fi5~nt
thesett~aknesses an opportunity
Jf you need additional Inform . eir weaknesses i~toIf so, how will
competitor's product or serv·ice
at1on
. Se
for this port·
ion lo k
strengths?
social media and see what peo arch fo_r their bu/ for any reviews of each 0
weakness and strengths basedple on wh asaying
are Th'is can
. ·custom
t their helpname
mess or products n
you see a business'
-
product.share is the portion of a market controlled by a particula r company or
Market
PROMOTION
The Product Promotion is the disseminating the information about the product,
product line, brand and company to the prospective buyers with the intent to
generate sales and develop a brand loyalty
The Promotion is the fourth element of the marketing mix (Viz. Product, price,
place, promotion) which Is considered as a mode of communication that business
adopts for achieving the specific set of objectives such as:
l I
1. Informative promotion
2. Persuasive promotion
3. Reminder promotion .
4. Buyer Behavior Modifications
THE BASIC p SE OF PROM S T O PERSU
ADE
PES O f SAL CUSTOMERS la
U RPO OTION I TY
BUY AND PR y INCLUDES
IMARIL THREE ES A C T IV IT
Y:
-Advertising
,
-Personal S
elling, a nd
-Sales Prom
otion.
The importan .
ce of pr~duct
promotion he 5 in th e fa c t th a t n o fi rm
.
market witho effectively an can s u rv ive
other market ut reach1_ng the ~u stobm
players 1f no u ersfits are offe d could n o t c o m p e te wit in th
nique ene 1 red to th e c h
u s to m e rs .
There are sev
e
p ro m o ti o n s ral types of promotions
(Advertising, su
li n e p ro m o ti press release ch as above _line
o n s (trade d s, schemes,
iscounts, free d is c o u n ts , e
bies, awards tc .) a n d b e lo
REVIEW , e tc .) w th
Q U E S T IO N S
1. Discuss o
n consumer id
en
hy it is import tification o f a business
2. Explain w
venturing into an
t to perform
business a c o m p e ti to r'
3 ,. Describe s a n a ly s is b
the reasons p e fo re
romotion is k
STUDYUNK ey to a busines
S s
-www.entrep
reneur.com
w w w .s c o re .o
rg
www.bplans.c
om
~ O P IC THR
EE: MARKE
TING PLAN
LESSON N IN
E
OBJECTIVE
S
1 . E x p la in v
a ri o u s pricing
strategies th
RICING SJ:R a t a bus·
A'iEGY •ness e n te r
I t,
,, r is e can use
ri c in g s~rate
gy refers to..._~ {'
ri c e th e ir g o all o f ~he vari
o d s o r servic ous methods
in g s li k e : e~~ -~~.,s, an a th a t smau
ll-encompas
sing term th .
busanesses u s
• M a rk e t c o n d a t can e to
it io n s a c c o u n t fo r
• Ac tio ns th at co m e . or s tak e
• Ac co un t se gm en ~ ttt
• Tr ad e ma rg ins
• In pu t co sts
• Co ns um er s' ab ilit y t
~:.Y
• Pr od uc tio n an d di st ib 10 n co sts
• Va ria ble co sts
us efu l fo r n ns can va ry
Pr ici ng str ate gie s ar e oo ~r; :er ou s ~e as on~, though those reaso
an y. Ch ow yo u to
fro ~ c~ mp an y to co mp wh ~ the ng ht pn ce fo r a pro du ct will all
ins if tha t's lar be lie f,
m~~•mrze pr of it ma rg ou tt yo u wa nt ~ do. Co ntr ary to po pu
't alw ay
pn cm g str at eg ies ar en se rvi ce at
s ab you ma y op t to
pro fit_ margins._ For:_ instance,
se t th e co st of a go od
or
to ma mt am yo ur ho ld on ma rke t
fro a low pn °:
mp eti to ter rit or y.
sh ar e an d pr ev en t co rs m encroachrng on yo ur
. . . on
the se ca se s, yo u ma y be wi flin 9 to sa cn fic e pr ofi t ma rg ms m or de r to foa.Js
In . Bu t ac tio n lik e thi s.
co mp et itiv e pr ici ng st be ~r ef ul ~h en en ga gin g in an
Al tho ug h it co uld be
usel
of
O
~ ;u
1 0 ?o ur busmess, it also ~~ Id en d up cri pp
th
lin g yo ur
at yo ur
co mp an y. A go od ru le
e~ be r wh en pn an ghigpr od uc ts is thbu sin es s
e um ~: em h bu t yo ur
cu sto me rs wo n't pu rch
as ice It to o
yo ur ..,, v.. tUc t if yo u pr tow. '
, it too
t be ab le to co ve r- e~penses if yo u pr ice
wo n
IN G STRATEGIES
EXAMPLES OF PR IC
KET PENETRATION
1. PR IC IN G FO R MAR
rk et so
e fik eiy loo kin g fo r wa ys to en te r th e ma
ow ne r, yo u'r to at tra ct
As a sm all bu sin es s re we ll-k no wn . ?e r:e tratior! s-...racegies aim
co me s mo eti tor s.
th at yo ur pr od uc t be s on go od s an d se rvi ce s th an co mp
er pr ice
bu ye rs by offering low
pr od uc t fo r $1 00 . You de cid e
to sen
th e
a co mp et ito r se lls a
fo r ins tan ce ., im ag ine th e sa le.
m ea ns yo u'r e going to ta ke a loss on
pr od uc t fo r $9 7, ev en if ft sin es se s an d ca n
at eg ies dr aw at te nt ion aw ay fro m ot he r bu nn
Pe ne tra tio n pr ici ng str en es s and loy alt y, wh ich can th en lea d to Jo ng -te
aw ar
he lp inc re as e br an d
co nt ra ct s. l Jo ss of income
be ris ky be ca us e it ca n re su lt in an initia
o ive pr of its
Pe ne tra tio n pricing ca n
als
ve r, th e inc re as e in aw ar en es s ca n dr
fo r th e bu sin es s. aver tim
e, ho we
ng ru n, af te r
ou t fro m th e crowd. In th e Jo
an d he lp sm all bu sin
es se s sta nd r re ffe d th e
sin es s ow ne rs ca n in cr ea se prices to be tte
pe ne tra tin g a m ar ke t, bu et .
sit ion WJthin th e ma rk
st at e of th e pr od uc t's po
G
2. EC ON ON Y PR .IC IN rketing
"'n o- fri lls • ap pr oa ch th at involves minimizing ma esses,
a
This pricing str at eg y is ch as po ss ibl e. Us ed by a wi de ra ng e cf busin
ns es as mu g ai m s to
an d pr od uc tio n ex pe
su pp lie rs an d aJS Co un t re tai ler s, economy Pfidn
inclucfmg ge ne ric food
. _ PRIC
ES ICINl!f~
..G
Designed
to help bu
sk1mmm sin
Involves s esses maximize s
etting rate ale
s high du s on new produc
compan
y then lo
An exam w e rs prices ring the ln ts and se
p g lt r
when cur le o f this ra d ually la l p h a se a l a pr vlces, p1 le<'
rently onlyis seen with th e ln as oompetltor goo oduct. 1 h
4K TVs an tro ds e
d HDTVs duct\on of new te appear on the m1
e xlst ~n th c hnology, a rk
o n e o f th
e benefits e maf!ket. Uke an S et .
rofits on e of pri K TV,
aity adopt- ce sklmmlng ls tha
nsumers. ers before t It allows
N businesse
evelopme ot only does prloe dropping Prices to s to max\m
n t o
t introduc osts, I t also skim ming help a t t r act more lz
e y o u r pr c ates an a small b 1)111ce-sen e
oduct re
to the maIllusion of qua u sin ess recou s lt lve
PSYCHOL rketplace. lity and e p Its
OGICAL xduslvlty
PRI ING when you
cholo ~
•
tamers t o •cm refers t.o tec
respond b hniques t
ased on e h a t mark
e rs ~
xample, s
motional
Impulses, rte 11
1~ enco
urag
umers tih e ttin g ttle price a t h e r t h an lpglca e
an settling of a l ones.
lt at $200 Watch a t $199 ls
, even '-b ough the proven to ~ \f• •· '
attr n~,........-
a,~.. .,_..,.1...... a c t
- ·
if ,. ,n fo r lh ic ..
small, One ey,frtnr on a P rk t r d 1:; th ~t
n the first m be r
nu ag th rnPrs t" nd t o Put more attention
an the 1:~n ,.,uhP
by cr ea tin g~ . , 90dl of
~crease demand dn fflu sfon of e ->t r:holog f pricing is
to
nhanccd va lue f:,.s e consumer.
IN G
6,BUNDLE P R IC
-
in g, small bu s1. ncsses 1I multi pl
With bundle pr ic se an
s w ou Id. f ace if th ey ite ~ f~~~~cts for a lower rate th
er each of
consum st fi o ~crh ased
~ r lo ca l fa A useful eYample
,dually.
this occurs a t yo di vl du al l esta urant Where ft' s cheaper to bu y a meal than
ite m ln
it Is to bu y each y.
.
g go od s an effl ce inv t .
Not only is bu nd lin n in th e ey es e~t,ve way to redu ory, rt can also in
cr ease
the value pe rc ep tio stom ers Custoen
cu
ce iv in g m or e ba ng fo r t~ yo ur y
as though
s~ al l bu;: rs feel ~ose to
they're re ende,rf buck . Man
st ra te gy a t th e esse~ ch
0 a product's life cycl e' es pecially if the prod
uct
implement th is
Is slow selling.
. th earn on th e
small bu si ne ss
higher-value ite
ow ne rs sh ou ld kee ·1
m s m u st m ak e
up 0
f \~'~d
at the profits they wer-value
s th ey take on th
hr e osseth
e lo
sh ou ld al so co ns id er 7I save in overhead and storage
product. T he y ts.ow much ey
e by pu sh in g o u t ol de r produc
spac
A L P R IC IN G
7. GEOGRAPHIC it's
po in t ba se d on the location where
tting a price fs, shipping
ic in g in vo lv es se gs like taxes, tarif
Geographical pr prices incl ud e th in
r th e changes in
sold. Factors fo nt .
sp ec ifi c re
costs, and lo ca tio n- and. For
d be ba sic supply and dem
icin g co ul to set a
ct or in ge og ra ph ic al pr cl ot hi ng . You may choose
Ano th er fa rfo rm an ce you do in
, im ag in e yo u se ll sp or ts pe ur co Jd -d im at e retail stores than
instan ce yo in
ic e p o in t fo r w in te r clothes in ar e m ore likel y to buy the dothes
higher pr know people e of demand.
at e st or es . You e to take advantag
your w ar m -c lim se t a hi gh er pr ic
nm en ts , 50 you
the w in te r en vi ro
ce,
A L P R IC IN G r product. For instan
8. P R O #O T IO N · d. nts on a particu la
le them to a
h coupons that entit
rin g ,sc ou uy One Get
o ot io na l pr ic in g in vo lv es offe with vo uc yersu or
co uld also entertain a "B
Pr m . e yo u r cu st om er s .
as an add-on.
VOU can pr ov id o ff th e go od or _s_ervrce.ro~uct Pr
certain pe rc en ta ge ta ck in g on an ad di tio na l P
r instan~e, you m
ay run
One" ca m pa ig n, ho rt-term ef fo rts . fo Memorial Day ... 1 r"
_
. can b e s ded holiday, Hke
ig ns ners can
Promotional pr ic
in g ca m pa
er an h~ ~~ ;r m offers, busine~s_ow
ic in g st ra te gy ov nal pricing also
a Promotional pr e de al s as 5 roduct. Promotio
ri ng th es
Weekend. By of fe ci te m en t ab ou t
aP
te bu zz an d ex
9enera
ince n ti vi ze s cu .
st o m e rs to act la
a c o n s u m e r's now be fore ,t's to o te · T h is p ri c in g s tr a te g y
fe a r o f missin play s to
g o u t.
9 . VALUE P R
IC IN G
V a lu e p ri ci n g
recession, fo occurs when e xt e rn a l fa c s . s h a rp in c re a
se
rce th e small to r ,_ lik e al
sales . b u si n ess to p ro vi d to it s c u s to min c o m p e ti ti o n or d
e va ue e rs to m a in
ta in
T h is p ri ci n g
s tr a te g y w o rk
e x c e ll e n t "v a s because cu
lu e " fo r th e g st o m e rs feel
d o n 't ca re h o ood o r servic as th o u g h ~h
w m u ch a p ro e. The a p p ro ey a re
fe e ls th e y 're d u c t costs a co a ch re c o g n iz e th re c etiv in g an
m p a n y to m a s a
g e tt in g an e xc
e lle n t va lu e b k e , so lo n g a t cuS o m ers
y p u rc h a si n g s th e c o n s u mer
T h is p ri c in g it .
s tr a te g y could
b e n e fi c ia l to c u t in to th e b
re ce iv e "s o m o tt o m lin e , b
is seen in th e e " p ro fi t ra th u t b u s in e s s e
fa sh io n in d u s e r th a n no p ro fi s m a y fi n d it
d re s s e s th a t tr y . A co m p a n y t. An e x a m p
th e y sell fo r m a y p ro d u ce le o f v a lu e p
$ 1 ,0 0 0 . T h e y a p ro d u ricing
th e n m a ke u c t li n e o f h ig
T h e u m b re ll a m b re ll a s th a t th h -e nd
s m a y co st m e y s e ll fo r $
s e t a t a h ig h o re th a n th e 100 .
e r p ri ce p o in dresses to m
m u c h b e tt e r t b a k e . H o w e v e r, th
v a lu e fo r th e ecause cu st o m e rs feel as e d re s s e s a re
p ro d u c t. th o u g h th e y
a re re c e iv in
1 0 . C A P T IV g
E P R IC IN G
If y o u h a v e a
to c o n s id e r p ro d u c t th a
a c a p ti v e p ri t c u s to m e rs w ill c o n ti n u a
s tr a te g y is se ci n g s tr a te g y lly re n e w o r
. A p e rf e c t e u
e n w it h a c o x a m p le o f a ca p d a t
c u s to m e rs m
a k e a o n e -t im
m p a n y lik e D o
ll a r S h a ve Clu r e , ~o_u ,11 w a n t
p u rc h a s e n e
w ra z o r b la d
e p u rc h a se fo
e s to re p la ce
b. J
r a ra zo r. T h e W it h 0 1~ ~ ;~ n c in g
n , e v e ry m
th e e x is ti n g a
B e c a u s e th e o n e o n th e h odn th1 thv e C lu b ,
to b u y b la d e
c u s to m e r p u
rc ea o f th eera y
s fr o m th e c h a s e d a DSC ra z o r h a n d le z o r.
"c a p ti v e " u n o m p a n y as w , h e o r sh e h
ti l th e y decid e ll. T h u s , th e a
company. B e_ to b re a k a company h
u s in e s s e s ca v: a y a n d b u y Id s n o c h o ic
p ro d u c t d o e n in c re a s e p a ra z o r h a n ~ le e but
s not exceed n c e s so lo n g ~ rc u s to m e rs
th e c o s t th a t as th e c o s t o
f th o m a n o
A S S IG N M E th e r
NT: STUDE e s e c o n d a ry
NTS SHOUL
D RESEARC
H ON:
•
1 . S a le s ta c
ti c s
2 . D is tr ib u ti
o n s tr a te g y
3 . c u s to m e
r s e rv ic e
R E V IS IO N
Q U E S T IO N S
How does · ne
a b u s • s s e n ti ty id e n ti fy it s c
u s to m e rs ?
rn ,,,
What is m ea nt by th e te
hl ar ke t share'' a bu .
'"'etermine it of s1ness? E
" ><pla in ho w to
e cu st
f,cplain ho w to im pr ov on ie r serv ·tee Prov · ·
·ness
is1on of th e bu s1
•••••••
.,1 .. I..IIII I............... •· ••.. •••• ········
··· ··· ··· ··· ··· · I I I I I II I I I I
I I I I I I I
LESSON TEN
-----
Q_BJECTIVES
b .
1. Explain th e sa le s• ta rg et s of a us,ness .
• h ov e cust
2. Exp Iam ow to im pr om er service provisi
on of th e business
TE GI ES OF A BUSINESS
SALES TA RG ET S ST RA
cces sf u1sa 1es strategy?
at co me s to m in d wh en th ink ing about a su
Wh
sful sales
tin gs ta lki ng ab ou t coming up with a succes just
ee
We have all been in m "W e ca n sit aro un d planning forever or we can
says, on is a waste
strategy wh en so m eo ne An d, rig ht ly so . Strategy without ex~cuti
et hi ng ."
get going an d do so m
t, successful
of time.
po rta nt ly I be lieve in a well thought ou
I believe in st ra te gy . Mo re im ge ahea d
wh at ha pp en s wh en sales teams of all sizes for
seen
sales str at eg y. I ha ve
sh or t, it's chaos.
without a cle ar pla n. In
gy should de liver
gy , m ar ke t str at eg y or successful sales strate
A business st ra te
these cr itic al re su lts :
nd
ea r pr io rit ie s ev er yo ne un de rsta s
• Cl
er yo ne can measure
• Clear ou tc om es ev
er yo ne can followrd
• Clear gu ide lin es ev
ne can wo rk towa
• Clear go als ev er yo is best
decisions based bon what they
rs ma sh k e ause
d leade lfis h or ort -sighted, but ec
les te am s an re se
Without a st ra te gy , sa
t. No t be cause th ey a
at the m om en
tu re .
don't know th e big pic
en
works most effectively wh
where they are going. If
• is a ship. A strong crew for a shipwreck. '~v ..,;...,; ..
and k~ow
r
e be st an alo gy I ca n th in k Iof instructions, a recipe
' Th ve c.ea_r then that's
they are well tra ine d, ha missing,
ar e
any., pf those ele me nt s
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1
How wellones
like the is your
you company
have andpositioned
land new to
id; ro w .st.ing accounts, find new accounts
e;i
1
and product teams tog~ther to do the s.:o~~s omers? Pull your sales, marketing,
4. SET A CLEAR MARKET STRATEGY e been and what has worked start
Now that you have assessed where you haV
thinking about where you are going. consider the following questions
st
This is the time to think about a market rategY-
based on your work so far:
~~!~g
. ting accounts? I ?
• How much can you grow accounts to get_refer~~;itories with existing
• How can you leverage exis I e inside e,ostin9
. ase revenu
• How much can you 1ncre ,_ _ .15t. 9 territories with new
11
products?· . se revenue inside ex in
• How much can you ,ncrea
roducts?
.
·d e e x is ti n g te rr it o ri e s w it h exi stin
re o u ts i
you increase venue . g
. te rr it o . h
HoW much can .d e existing ri e s w it new
• ts 7 revenue o u ts i
produc c·h n yo • ease
How mu ca ·
u ,ncr
• roducts7 . t·,ng a c c o u n
P ue will be fr o rn e x Is ts , th e n
t fa st est reven e n s iv e n e w re v e n u
It is likely that t he cheapes , nd m o s t exp
. e Will
down th e line. T slowest a te rn to n e • 5 I w o u ld s ta rt this
refen-als, and ~~va he roducts in
ting sa les ne_w t
result from fo r new py
count plans fo r our to p 10 c11en s.
I
process withcularg
e ac
s CREATE CLEAR
REVE
NUE GOALS
·
When you com
. iven revenue ta
rg
t w it h t he m a rk e t s tr a te g y y o u ,v e
bi e s
created based onne your g sment o f th e past an n t s it u a ti o n , y
ou can
an asses Is fo r te rr it o ri e s d c ~ rr ; ·d u a ls .
generate realistic and m 1v1
revenue goa
N ow is time to o u r sales te a m h
go al s. Get your
think about wha
t support Y n e e d s to re a c th e s e
marketing team d
a plan. , sales team, an p ro d u c t te a m to g e th e r to
w o rk on
H an di ng yo u r
sales team new
quotas with no
disappointed an basis, in re a li ty1
d frustrate d. will le a v e a ll p a
rt ie s
The m a rx e t stra
tegy you create
,company and p d will help d e te
roducts to achie rm in e h o w y o u
segments th a t ea ve g ro w th . R e m n e e d to p o s it
ch need a clear e m b e r, y o u h a io n you r
positioning plan v e d if fe re n t m
. a ri k e t
• L a rg e Accou
nts
• Opportun~~es
• Opportumbe !" s! d e ex!st!ng acc~un~s w it h
s msade existing d
• Companies th te rn to n e s and if fe re n t p ro d u c t !l in e s
a t m e e t y o u r ,id m a rk e ts
o How will yo ea'I cu st o m e r p
u id e n ti fy th e m ro fi le
o How will yo ?
u make th e m a
o How w ill sa ware o f y o u r p
les a n d m a rk e ti ro d u c t?
o N e w Mark
ets, N e w Produ n g w o rk to g e th e r to ·
cts. ,~ ·• ,: i
PT'OSl)ect a n d
It is n o t su ff ic ie
n t to ask salesp s e ll
ma~~eti~g, and eople to fi g u re
p ro d u ct te a m s o u t th e P0Sitio
sItIon1ng st a te m need to wo~k to .
e n ts and v a lu e g e th e r to c
p ro p o si ti o n s th n tn g . The sale
a t m e e t reate s
• Ct;EAR A C T IO b u y e r P e rs o '
N PLAN each d if fe re n t n
nas or
e te n d to send e e c l.
sales r:eps o u t
s to be success to pnior;itize th
ful , it is ti m e to e ir w o rk
portura1ty p la n n im p le m e n 1
t a w e ll -f u ~
in g pr:ocess. n e : If YoU w a n
ty
onang funne1
a fl d o Ur ~
r
d
y o u k n o w h ow m u c h e n u e y o u neec, to g e t hwhere it :h o u ld
come
a t ;e v n
le s rep wm
oW th n e e d t s h oa
N
° a funnel th a hey inte~d to
rrom, e a c h s a re v e n u e . T h e y 01 ~ a t eor~ successful wo;~ngoww_tti h marketmg a n d
gen e ra te th a t upay e m
ts . goals
in g e x is ti n g le a d s th a P o rt specific
in d u d s the
mselve
re p s c re a te th . fu
coach th e m to ask the
When y o u r
s a le s e ,r nnel,
ti o n s :
es
fo fl o w in g q u
e?
h o f e a c h ty p e o f re enue do I need to mak
How mu c v
th a t present?
•
m a n y s a le s d o e s re
• H o w
e s th a t re present?.
~1 1 s d o nt? close
• How many d oe s th a t represe ne ed to make to
ti m e ny caJls d o I
• How m u c h 5 ti ng d ie n ts , h o ~ ma
• i~ ~~~i 1
9 1en on n
id e
i
mnd~ ontsex ew p ro d u c ts ?
a l c u s to m e
rs wm 1 n e e d to c all on to close
?
ext
• How man y n e w
n n e l along w it h the n
rep's fu xt
s e q u e s ti o n s on each te s a n d ~ o re a b o u t n e
e rs to th e u t d o s e da
c a p tu re th e a n s w o rr y less a b o
o n s a n d ti m e ii n e s . But,tews.
acti x t a c ti o n da th is
acti ons a n d n e s tr a te g y . A t the e n d o f
a le s
b a s is o f an a e c u ta b J e s ry o n e u n d e rs ta n d s , d e a r
th e es eve ear
n s te p s a re d e a r p ri o ri ti n fo ll o w and d
These seve wm h a v e v e ry o n e c a
r s a le s te a m
p r o c e s s , y o u ry o n e c a n measure, d e a
r guideHnes
e
e
o u tc o m e s e v hich e v e ry o n e can work:.
g o a ls to w a rd w
I S I O N Q U ESTIONS ? . .
REV tom e rs
ti fy it s cus f a busmess? Explam h o
w to
e n ti ty id e n
s a business rk e t s h a re " o
• H o w doem e a n t b y th e te n n u m a f th e bus·mess
W h a t is · · n o
• · 1S1o rov
e o u s to m e r se:rv1ce p
d e te rm in e it ~ p ro v
• h o w ~·t:O 1m
• ExpJam
S
STUDYUNK
p re n e u r. c o m
-w w w .e n tr e
ra
www.score.o
.com
www.bpJans
BOARD OF DIR EC TO RS
r management team. If you don't have a
A board of dire cto rs is ano the r par t of you
tion. But even a one-person business
board of dire cto rs, you don 't need this informa
ness owners who might be willing to
could ben efit from a sma ll gro up of other busi
accountability that comes from an
provide you with the fee dba ck, support, and
advisory board.
nd
rmation as in the ownership a
This section provides mu ch of the same info
management team sub -se ctio n.
• Name
• Expertise
• Pos ition (if the re are positions)
• Inv olv em ent with the com pan y
• Name . r certificates
• Tlt:le ducat1on o
fon suc h as e ular }
I eed ed, r~ you need
• Bad e.gr oun d info rma our business , as-n
• Services pro vid ed to '! (i.e . retamin~r,dea
1for the wor
• Rel atio nsh ip info rma tion king the
rien ce rna
f\.fflJI..JIP'- r,t\ \v\\ y, e•.
" ovrr whrlrnln ~ p t Glolly
4
11 vau'r ~
r.~N,,u \\KCn o Iiu' ,Ill<.,
1\n~,...on 1)11r.\nr< ut w, \\ mtl ' ii," l < ',11 III . I' •I
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u
I po\n\ of lhl~ ,,{\ r:\~o, \o yo, ll '1[' \t ll nGI l ho Ge wh o wo, k with
~er\\011 Is 10 • , \n chm ge f" I n \ You c11
w
on1, ' o
h O
~ w
\C OU ()\ w\\\ ''• \1 111n ,1 l'l
bC {\1"d\"9 yo l1 1f'd 1 ' li i.!f we on lh
\\
nekgrolmd nnd s \dl\ th~\ w~,, ,' ,,~r.on\ \\\)U\ \mJ t O , iJ ucccm, of th e hu :.lll" fl!l.
o, ~ •
s
1 0 f th e bus\"r.ss \111 ,, t hb h, n ,-c<,., \on you•II wont t c)
~!e :~ P ~ ,~ ~ ~ Pu ' updat c Uyou
\ Pam m b ,.~ :..
dd\t\onn\ b<\\n
r ch nllgcs, o\ ~";~~
:~~ ~ em t?r ~ 't ."' lv•'4"' ~ny
,"'l e
\t,g, nwnrds o 1
,o ~ 1 d;;~ •~'hnl be MIii' Ihe ~
bu sInesi. ,
use lt h\gh ., ~ , ce o
t'eat resouroe \\gh\'S t'.hc !;\<\\\ s ~nd ex,pc1 u and your te
l'.O refe1 to w
hen set! \< ng p \cnblldty and marketinam ofter, it can be a
u . g opp ort unit h:s.
~N~GEMEN
T TEAM B
USINESS PERSONNEL
tt u a u re the
managem
ent team sec
m a ll busine t\on to lnc\u
ss, indudlng de an organlz
ployees. B departments atlonal chart
io g , dep a
wners. Spedfrraphical information abortument managers and of your
t y
hip p e r c e n ta ou, th e o w n e r , a n d
rour owners
,, , responsib
ilities wlll be
. Biograph\ca g e a n d e x a c t ly a n y other
a ~ .•· The cre \ w h a t y
dentials of ln fofimatlon o o u r d a v - to-
v,ce, such a an
s a n acooun y advisers who wm be n your m a n
tant and a la a t y o u r sld a g ement
wyer. e p ro v ld in g
u should de expert
anagement vo te o n ly a b o u t one ip
sedtion. B u t in th e e da ra g ra p h tO
d it will requ th
lre some fine each perso
sse tonp~II n yoca p ro fi
it ~ ;~ o u ld b le In th e
m e a n d tide, e one s u b s
E d ta n ti v e para
fo rm a ti o ucation and graph,
n an d Pn.m a ry p ,o .:
,e s s1o n a f c -
responsibi\i t:\es a
v id in g n a m • -..;;.uen..ua als
e s a n d ti tl e t and s
ra g ra p h sho
uld proc
s s h o u ld b e Your s m a ll
business o m e p e r s o n a I
eed • th
w it h ease if e e a s y p a rt
• vou • .,...L.
Education include:· u e m o s t ro b u
1
certificationtt eclentials
s. Emp1o ., ; . . st part of y
our
company a ff
w o rt h menti
il ia ti o n s
oning. S k il
!~,:nt
tndud,ng C.O
highlights. a
llege
~;c"d ma1or,
.
truly excels l s there Is and a n y
someu, _k the
at
serve as a s o r is k n o : ~ 5 Pec::ia
0
la s t o r la s t re le v a n t
ubliminal m lties ~ n g tr tw o ti tl e s a
business. en or.* Mota
b
u ly s te ll a r
in
nd
ssage th a t thA l~ eaning th o s s o m e o n e 's
e th in g s th p a st
'-y c•a~ at someone '
np bel i s h m e n ts w
re p e a te d a '# h ic h c a n
t your sm
wh ·ich m a y . ythi
P e rs o n a l in s ig h ts , ' . include aninin ng from community
• . e o n e t
I t to som
1nvo v e m e nh e re so tr y t s r~intikoni t
ale for jo gY our comp any. You have a lo-
of wha t co can
mark of a ading
o f la ti tu d e . ' on. If o oth ' . n ermsed by it h nveys the so meone re
e rs ss
d o, e n e rg e ti c pplan Will by u re impre ' c ances are
ss
y o u r busine e too.
G AND NEL IN A
T T R A IN IN M O TIO N OF PERSON
RE CRUITMEN PRO
BUSINESS . romotions
n c y p ro c es s and cnteria f or appo•rntments and p ruitment
tr a n s p a re ' shared se. . .
olicy docume
nt. Rec
To enhance n te d a n d e lr n e o r p
w of
shou Id e
b docume th e re c ru i~ :: iu id cess as _follows: Revie er.
e li n e s c o u ld d e s c ri b e
e s v a c a n t \P r?1 re v ie w e d b y the anag m
guid beco m I w1 l b
e
hen a p o s t
vacancy: W post has
rm · W h c1
..
s1 on to re cruit for the rvice co-
fo en the d~ e se
r u it m e n t re q u eits t t • b e c o m p leted by thth
e c
• R n m a d e a re c ru w ill re e
bee m ff~ n re que~t form d by th e m anager befo
c o o rd in a te ,
/ fi n a n
ce o rcer m and srgne
enced. ons and
.
n t p ro c e s s is co m
c if ic a ti o n : Job descripti to ensure
re c ru it m e o n spe each post
ri ~ ti o n a n d pers wed and prepared for erience
d e ~ ~
• T h e jo b c1f1cat1ons will be rev
ie
th e s k ills , q ualities, exp
t es
p e rs o n spe a n d a d e q uately reflec u ti e s a n d responsibiliti
d on
th a t th e y a
c c u ra te ly
fo r th e p o st. As roles, e s c ri p ti o n a n d / or pers
d d updated to
te s re q u ir e advertiseme
nt, jo b
hecked and·
a n d a tt ri b u , w h e re a n m u s t b e c
r ti m e e; they b. Job
c h a n g e o v e re a lr e a d y in existenc u ir e m e nts o f the jo
n a
t th e c u rr e n
t re q ust be
s p e c if ic a ti o a rl y re fl e c a n d a d v e rt isements m
y c le cifications
e n s u re th e rs o n n e l spe rdinator.
c ri p ti o n s a n d p e
n d o r [r e s p onsible] coo ly and as wide
ly as
de s n a g e r a a s o p e n give
y th e m a dvertised f the jo b and
a p p ro v e d b n t: Vacancies will be a e ove~all ~ u rp o s e o
me will state th
A d v e r ti s e e n t . .
• p o s s ib le . T h e a d v e rt is e m
m e th o d o f applrcatron_ rmum o f tw o people
q u ir e d y a mrn
a n c e o n th e re g will be undert.fa.kefn b . .
rt'.
c le a r g u id s ti n
ti n g : S h o rt li n spee r ,c a ,o n .
k e n by a m rnrmum o f
th e p e rs o u n d e rt a .
• S h 0 IS n c e d a g a in s t l be
a n d re fe re te rv ie w s wil .
1ficat1on.
d s e le c ti o n ·· In p e rs o n s p e c
• a g a in s t. th e
In t e r v ie w an r e~,, erenced e ta k en up. c o m mencement
.
• an d nces w il l b g p ri o r to
tw o p e o p Ie h c k s · Referets a re s u b je c t to v e tt in
p o s
:rencef c e,. b.l e,
• ReefE tt in g : I a p p ,ca
V
•
NT:
A S S IG N M E
es .
e n ts to re s e a rc h o n : e ra ti o n o f it s e m p lo y ~ n rn Kenya
o
S tu d . s d o re m u n o f a business o p e ra ti >
n ts
th e b u s ,n es . eme -~ (j,:;--, .
s
1. H o w d o e s ta tu to ry requ,brusiness
nd
2. Legal a to a
g s e rv ic e s
3. S u p p o rt in
KS
S T U D Y L IN
n e u r. c o m
w . e n tr e p re
LESSON TWELV
E
MANAGEMENT
TOPIC FOUR: OR TIONALAND PLAN
GANISA
OBJECTIVES
. a
1. i. Descn.be th e re m u n e ra ti o n n d in c e n ti v e s fo r
personnel
2. ii. Highlight th e su rvices o f a b u s
pport se in e s s e n ti ty
REMUNERATION
AND INCENTIV
ES FOR PERSO
NNEL
The term '4\compe
nsation" refers to
an employee rece the combination
ives in exchange o f ~ a g e s, sa !a ri
wages o r an annu for work. Compe e s a n d b e n efits
al salary, plus bo nsation m a y in cl
group health care nus payments, in u d e hour1y
coverage, short-t ce n ti ve s a n d b e
retirement saving erm disability in n e fi ts , su ch as
s account. A tota su ra n ce a n d c o
components. An l compensation p n tr ib u ti o n s to a
~empl oyee compe a ck a g e can h a v
components in ad nsation p la n " co e se ve ra l
cfrtion to the man nectivety re fe rs
w h a t purpose em ner in which th e to a ll th e
ployees receive ca co m p e n sa ti o n is
se bonuses, sa la ry p a id a n d fo r
H O U R L Y WAGE in cr e a se s a n d in ce n ti ve s.
COMPENSATIO
N
Employees da
which are calruss ified as non-e m
lated on an houxe pt receive w h a t
x ce ss o f 4 0 hours rly basis and re q J
p er week. Overtim . e m p oy.ers u s
e is o n e u ir e o u a ll y ca
m p lo ye e s w h o h
ave a collective ba v e rt i~ e p a y m e ll w a g e s ,
Jed a la b o r u n io rgaining a aoci a n t fo r w o rk in
n co n tr a ct - have h a lf ~ m e s th e h
riod. wages ;~ e e m o u ri y rate,.
e n t w it h m a n a g
se Y co n tr a ct te ement -
rm s fo r a c e rt a o ft e n
r example, a sam in
ple tabor union con
m b er s, licensed p tra
lumbers and appre ct
7 .9 5 a n d $ 1 5 .5 0 nticem fY require
, respectively, p e m p lo y e rs to p
ee m en t. u rs u a n t ti t~ m b
e rs h o u ri y w a g e s o a y m a st e r
e te rm s o f a co lle f $ 1 9 .7 ,
W U M . S A IA R Y I
ct iv e b a rg •5.
COMPENSAno am1ng
N
ough th e re are sa
laried empJoyees N I" "•
fo re , e n ti tl e d to h ":'..!....•
o ve rt im e p ay th O
e wt a~e a ss ifi e d a s
' er;rn sacl la ,, n o n -e x e m p t
d
ry g e n e ra lly re fe an ,
rs to a n a n n u a
l
salary the em plo ye e rece
ives or a
method of employee com en .
·ire ov e rt·tme pa y. Fo r instanc :at1oln tha~ ?oes not
requ
ed to de scr ibe a wo rke , t he ref ere nce to a "sa lai ed mp oyee is
generally us er Who do es not re ce1. ve overtime pay.
PLANS
RETIREMENT SA VI NG S
nity to pa rticipate in
tio n sce na rio giv es employees the opportu
A sample co mp en sa tributi ons to
ore d 40 1k pla n. Em plo yees designate pre-tax con
the em plo ye r-s po ns nt of th eir
ch pa ych eck . Fo r em plo yees who contribute 5 pe rce
be deducted fro m ea nt of the employee 's
wa ge s, the company matches SO perce
gross_ sa l~r y or utions equa l 2.5
n. In oth er wo rds , the employer's matching contrib
co ntr ibu tio
gross salary.
percent of the em plo ye e's
tion is
ou nt of tim e be fore wh ich the employer 's contribu
Vesting ref ers to the am ywhere from one to fiv e
ail ab le to the em plo ye e. Vesting periods range an er the emplo ye r
fully av me ans that for the first year aft
e-y ea r ve sti ng pe rio d the mone y
years. A fiv yee 's 401k plan, 20 percent of
ibu tio n to the em plo
makes its co ntr
ployee.
actually belongs to the em
, and in subsequent years,
sec on d ye ar, 40 pe rce nt belongs to the employee vested and
In the
rce nt of the em plo yer's contributions become
60 80 and 10 0 pe pleting five
em plo ye e. If the em plo yee leaves his job before com
av~ilable to the ested employer's
priate portion of the non-v
years, he for fei ts the appro
co ntr ibu tio ns .
INCENTIVES
RA ISE S, BO NU SE S AN D
a
tem is usually what drives ed on
Th , rformance management sys receive an nual raises bas
ployees
1
e em p o~er s Pe, salary increases. Em d. rf
compensa tio n p 1an s
d rat ing s. Fo r exa mp le, an outstan ing pe ormance
~ kin an t salary increase.
pe, ,or ma nc e ranres ult g . 5
in a pe rce n
appraisal could a
e cash incentives based on
b s and incentive plans includ ployee's share based on a
1 ee's gross salary or an em to employees whose
Sample em p oyee on~o • t d for distribution
percentage ofpo the, emp Y desig na e .
bonuses and
cre tio na ry ol of fun ds succes s. Many exe cut ive
dis .b t d to business the bottom line or even increases in the value
performance co ntn u _e provemen.t 0 f
incentive s are tied to 1m
of sha res for pu blicly held companies.
. a f: N ~
l".'lff
,; OUP t-tEAt.Tt-f ,.-,1
I (fl • qrfJIJP ~b,' th ',,r!; t-J,:ndlf•. 111,m ~ , '·mt,1,, (
,, 1n r: u , r,-m iu ,,. ,v1r1q ,1 pr
,rt l() t1 ,,11h e, /
I t1on pl,H' rn• 11 11
rn , ,,
r, tot,, Ccm p11nt,a J
'. ~ ,,~rortlon th1•tOlt1 1 rn()nthlf P J'r<•miurrt', for <.;rnp I
r•
r>
;J
llY• , hi r ,, /' t •
pti•mium to I), ,,durt,·d frr,m t,-durt,;d frorn pr
c - 1, J/ ln<,<1rnf.;,
'II C ,,r , Ot t)','\
,, pl,1n•, dr u' • I
TYPES OF SE RV IC ES
asses what we
e of se rvi ce s. The following list encomp
You can of fe r a wi de ra ng e services
t it is by no me an s ex haustive. So me of thes imary
found on th e m ar ke t, bu of th em se lv es ; ot he rs ar e an cil lar y to a pr
in an d , and then you
could be bu si ne ss es th ey 'll let you know what they need
ur cli en ts;
se rv ice . Lis te n to yo
ov ide it.
can decide if yo u can pr
• Word pr oc es sin g
• Tape tra ns cr ipt ion
• Ph on e- in dic ta tio n
• De sk to p pu bli sh ing
n
• Sp re ad sh ee t de sig
rs an d re po rts
• College pa pe
.
• Te lep ho ne an sw er ing a rd ing
fo rw
• Mail re ce ivi ng and
• Packing an d sh ipp ing g
lis t m an ag tm e; ~d billin
• Da ta ba se /m ail ing k prepara ,on
• Bo ok ke ep ing , ch ec
• Re su me pr ep ar at ion
• Pr oo fre ad ing
, .
• Pr int br ok er ing iving
d re ce
• Fax se nd ing an
• Ph ot oc op yin g
• No ta ry
ch d aintenance
• In te rn et resea.r n an m
• Web pa ge de sig
• Ev en t pla nn ing
• Co ns ult ing
• Tr ain ing
TA RG ET MA RK ET
7
or t se rv ic es busine
sines s su PP ss: the
our bU . sed bUSI ·nesses; an d la rg e
Kets for Yd
broad mar ercial an horneba
you have thf,e~ srnall
cornrn
general pu!'.c, in di vi du al cl ie nt s
corporat10 blic," we rn Who are not
"general pu nts of ~a n ar ke t ar e people
th is m ne eding
General pu bli C, BY
h two larges t segm e
students.
• businesses. T r:tio
n and college
resurne prepa lly w ri te th e do cu
. a resume rnaY m en t and
. b hunter ere ating or updati~gt·ng.
a~ ua ne ed you to as si st in w
A JO . nd pnn 1 , he or she m Yte is lo riting
bring rt to yo u for IIlayEv
out a m en t ra w ' th e re su m e market
th
the content as we . en when e unemtoP 1be oy
un em p lo ye d to ne ed a re su m e.
eo le don't have
. •gnificant because
,s s, P P .
. tit ut io ns In. th e U ni te d S ta
te s w ith a
There are thousa nd s Of higher-learning ins ho u h m
collective enrollment f m illions of st ents. Alt an y st ud en ts pr ep ar e
o I es enouud gh of them Wt-~ tu rn to a pr of es si on a l wor
reports and papers th d-
processing firm to ma ~m;~-: m~rket substantial.
e '
Students working on such as gr ua te
particula_rly lon~o~a~
dissertations , are stron e;:~ervice. A ndad th es es
, of co ur se , onor
graduate, they may co g candri~tes fi r assi ce th ey
me bac O you stance w ith th ei r
re su m es .
In addition to stude
(think professors whnts, the academic commun.ity m ay a lso be a
o so ur
their books and artic need word processing, ed iti ng an d pr . ce o rvf business
les). oo fr ea di ng se ic es for
• Small Businesses.
Chances are, the m
this category. These aj or ity of yo ur cl ie
are companies th at nt s w ill fa ll un de
~dministrative suppor re qu ire se cr et ar ia r
t but do not have th l an d
~tme e~ployee. Or th e m on ey , sp ac e
ey may prefer to ou o r ne ed fo r a fu ll-
,~~est 1n the talent an ts ou rc e sp ec ifi c ta
d equipment necess sk s ra th er th an
htnn
de g te ary to ge t th e jo b
man d.mporary employees can be do ne ri gh t. And
more co st ly th an
sm al l bu si ne ss es
' needs
As the number of sm
all businesses c t'
market. And the lis
t of services th on
persona_! ~reference in_ue~ t? gr ow , so
s. As you deve~~ u~ 15 do es yo ur po te nt
,n a pos1t1on to m e • ltmtt~d on_ly by ia l
ake suggestions th~t yo ur im ag in at io n
scope--of the work yo ~~ti_onsh1ps w ith an d
u do for th 111 sm al l bu si ne ss es
em. increase th e vo lu m , yo u 1 ll be
~ypically, small busin e- -o r ev en ex pa nd
esses turn t b . the
·
,rocessin ~ ·
g, ,axing, Photocopyi o us,ne
nanagement, dictat ss support services
ion and tr ng, s_hip
ping, de sk to p pub1 f f d
anscr,ption. · h' ir m s _ol_r wo1· r
• Large Corpora ts m g, m a, m g 1s
tions E . t
and administrative
a •. Ven fairly large Ic
company has a tern st .
ss , ants rnay be
can handle in-housePorary sit op ~r at ,o ns
th uat1.on Whe ca nd id at es f With fu ll- tim e se cr et ar ie s f
EJNDING A NICHE .
lt's a good
number idea to
of very select
valid one or
reasons formore k market groups to target. There are a
choos·ey
a very specific market segment, you c~~~a~l:ell-defined_ market niche. BY targeting
and customer service system to meet thats r your.service menu, mar~eting efforts
marketi ng efforts and gain a reputation w·theg~hent s needs. You can refine your
areas--which means you can charge mor~ ;~. / ~dustry for expertise in certain
earns mor f . .• • '" a out it: In the medical field who
e~-a am1 y ~ractItIoner or a neurosurgeon? The neurosurgeon, natu~ally
1
because hes a specialist, and what he does requires greater skill. '
your business plan to calculate, hoW rnuc~ PUii d M<1rtup nurnb,,r ,,,J~ ,,, •.r,E cir; ,5€
and tht>n flgu rr• out how mut h You h<ivc, / ou n"',d to ',tart yo •.r Jde., J OP': -~~i-: -,
sta1 t Playing With the number~ unct ll<:cid1i You _don't h;,v,, ,,11 tr~e cash, /',, ''="'1 tr.
~
OPERAl'JONs g Wh,,t You r..,n do 'llltt-,,:,,JL
I
As a solo operutor, expect t . 'I ,
O
business management a f,P<inct at least one.
bigger Your business 00 ;~hadm1nlstratiori lliqrk fowrth of Your tirn.,, on 9":"'3"'-:_
managing them rather tho e more Peop1; You heting, Purchasing "lnct b'II: ·,:; •. o'3
n actually doing the ave, the n)ore tirne /OLJll s~-s.-,;
Work Yourself. Witti four emula ,ee,;
---LOCATION
....,,.,
A.s YOU ,·, 11sld,·r ttw \SSli<' ,,f Inc,1t1011, i,_,:l1\l , 1 t, ,w thlil\lS 111 1,1111t1. 1>nµc11dln<I on the
1
s~c1fic servlc'<'S , •NI 01f,•1 ,md 111-ll'i--,'\ you tm11d, ym1'1l posslhly Im dn,1lh1q both
111th the gencr-11 put,11c, wlw wtll 11,,,,d ,1,-.-,1ss to your ot'flcn, 111011\1 with sni,111-
business owners ,111d ni.11i.1q,•1s 111 1,,111or n,rporntlon~ who ll"IY ntso w.u1t to visit
your faci Ii ty or h-1 v ,, ttwh <, , ploy,,,,s ,, r ,, 1n,1ss,in\1,:1· pick up ,mcl dd 1v,1r work.
11
In any business, but ,,,;p,•ct,illy In t1,1s on<', :, profllssto1inl 1111.100 Is ,1 ~rltlc,11 clement
of success. Homeb:is,•d l'~"•rat1t,ns
. .,,~, i·v, n1 , ~ ,cl 111
tl 11. y ncc,,pted todny's uccnll$O
!,un•)llcr~ worldtinvc
bus111,1ssthey (In
~ ~ pr<'f<'I' <1oulh1<1~ w 1 11011t
ac ' many custon1er'- 85
11
.. ·).. µl l•tl' · you ~ttll noocl
• r• · to present the
1
t overhead and ,·,111 \ht'l'<ifor,·
faower - ~ t•Vt'll
b ·Idi.il!lll " thoUClh
' ' you• c·Iwo.,t...: . work fron1 your
...... to
I ppearance of being ,1 s,•rlollS 11 ~ 1:: ss, •. '
1 1,,; 011
siir<i It's ,, 11tnt I$ conwotlblc
house. And if you opt for a con1mc1 d,1I lo,,.,tlllll,
, ,. f tht' N,,oclntton of Bt1slnoss Support
with your goals.
ln the mld-1990S, about h:ilt t hC 111<'lll bl>I ;· o s ,cl ; bY the turn of tlJ!' cnnwrv, an
Services Jntorn'1t1onal tAl3SSl) wert' i,oinoi>"• ' ·,1-~on op,,rul1011s, "Many of our
estimated 70 percent wc1 c ho111d,nsud, oiw· I'' 111 ·\ 1,,ir nvcs bY ,novlng back to o
1
prev\ouslv offlce-bnscd n1cmbe1 s nr,, sl11 PllfV 11 tc;i•~
,,xcc,uttvc dtroctor. "ThCY
tl t h I IS no onCJ ~
res\dent\;il \octitlon," says Lynct\l' M, 51111th, 1\ 1· ~·. ,· ,· t·l)C exception b11t the norm ,
1 d ltl b h g
acknow\od9'-' '" " omcbascd bllS nqs:, • 1 Liq,na , ssock1tc w · 1 e ' ·
In the perception
" of clients, thcro no 1oni1cr I~ ' s · '
(I'''
kC <Jrowtli challcnglng, smith
homebasu · d
Wh\lC co11.::odh'9 th:,t operntlng frotn 1101110 can 0,na dltlonal n,cons of hlrln9
" 11011 , one cannot expund throu~h th tra
10
, br< Jnt rar t rJu f 11c,rv
ali';,tlf t(J ,U
. 's brcorn1n9
rnor'' re
However, it the
employees, ·ption--to o rs."
espec1·ally transcn
Billing
'din g on 1o r:1ppr<Jdth 1,;
·t cornf'S to dect h t othr•rurr orn
Inc om e &
u have a number of op f.10 nsI wh en I f d ou t w a pant';', ,Jr'•
call around, in decide •11hat thr; / tlr. m t tr) "-;r
J ,
MARKETING
It 's so mething man
w he re y,aur crea !ive_ side can shininge.to build a successful Y
M ar ke
pe do
op letin lst a-~ ar ea
gn' es se nt ia l 1f you're
go
l!k e to do , bu t 1t s ,
Profitab) b
e usmess.
immediate
rts don t produce an s at precisely the
1
ur m ar ke tin g ef fo
1scouraged ·1f yo ne wr n have a need fo r yo ur
service
D on 'tonbe d- th at so m eo al, attractive
resp se. It 's ra re bu t if yo u pu t to ge th er a profession when they
ac t th em , on file and call you
~ o m e n t yo u co nt th e in fo rm at io n
ag e, th ey 'll ke ep ve the need. It' s not
in fo rm at io n pa ck ue w ho m ay ha ar.
u- -o r th ey 'll re fe r yo u to a colleag a response fo r months--or even a ye
ne ed yo ne ra te
s co nt ac t no t to ge
un us ua l fo r a sa le are Issues
si c m ar ke tin g pl an her,; , bu t there
ho w to cr ea te a ba you need to know as
you
You ca n fin d ou t or t se rv ic es th at find out
to bu si ne ss su pp phon~ company to
an d id ea s sp ec ifi c ec k w ith yo ur lo ca l
e, plan to
. F or ex am pl e, ch date and, 1f poss_1bl_
~ e lo p yo ur pl an ct or y di st rib ut io n ill be an
its ad ve rt is in g de
ad lin e an d di re
cl ud ed . Yo ur Y el lo w Pages l1st1ng w
ss in tim e to be in e early day:5, so do
n' t ge t so
la un ch yo ur bu si ne s es pe ci al ly in th
of ne w.b us in es rtunity.
im po rt an t so ur ce sk s th at you miss this oppo
r st ar tu p ta
di st ra ct ed by ot he tin g m at erials are ~rofe,ssio
nal
.~r " all yo ur m ar ke
t po in t to be su re is area
-.c
A no th er Im po rt an or t se rv ic es th at do a grea_t JOb ~n- th
pp
t. M an y bu si ne ss su
15 nng a
an d le ~r -'. "'° rf ec e sa m e fo r th em selves. Consider hi
te n fo rg et to do th
fo r th ei r cl ie nt s of
I ,ou WI·th \i OU r ma r-~er"'c-
rofessional ,~ n trade-out tha will benefit "ou bet~.
, •ter to he P ) t
nd/or P
graphic designe~ a be able to nego
tiate a
pac kage·, you m Y
ADVERTISING
osJECTIVES
--- a.
c ti o n fa c T t·
O u tl in e p ro d u d e v e lo ~ ~ •e : an~ capacity gy
1.
E x p la in h o w
to
c u ct ao ; an d operation strate
2. b. ro d u c ti o n p ;: O th
3. c. E x p la in th e p a ff e ts e P~oducts ss
D is c u s s th e re g u la ti o n s
e;pa ng t~ p er~t •ons of a busine uction
4. d.
e te rm in e h o w to p re p a re e ra ion ti m e ta b le / prod
5. e. D
s c h e d u le
SINESS
C IT Y U T IL IZ ATION IN A BU
N D CAP A
F A C IL IT IE S A
PRODUCTION to which an ente
rprise or
n is th e ex te nt
it y u til is a tio p between
a_ ci ty u ti l~ za ~ion o r c a p a c c a p a c it y . It is the relationshi l output
Cap a lle d p ro d u ct iv e t, and the potentia
u se s it s in st e q u ip m e n
a nation in st a lle d
p ro d u ce d w it h th e lly used.
outp ut th a t is
ce d w it h it , if c a p a c it y was fu
p ro d u
which co u ld b e of potent ial econ
omic output
th e pr op or tio n ~evel
ty u ti liz a ti o n ra te m e a su re s en ta ge , th e ca pacity utilization
The ca p a ci e d . D is p la ye d
as a perc
omy or a firm at
a given
a ct u a lly re a liz a t is in an ec on
th at is ll sl ac k th
ov id es in si g h t in to th e o ve ra rate is:
pr fo r fi n d in g th e
T h e fo rm u la
po in t in ti m e . ion Rate
u t ) x 1 0 0 = Capacfity UtilizIat
tp ill be
ct ua l O u tp u t/ P o te n ti a l O u h du ctio n facilities that w
(A .
o u ld also e n lis t all t e pro
si n e ss p la n sh
This p a rt o f b u
e ss .
used in a b u si n deral,
C T IN G O P E R A T IO N S. . to comply with fe
S AFF E 5
R E G U L A T IO N m ~a ;;~ eg islative bodies a~
d
ss re qu !r ~ co w hi ch .
m e n t re g u la ti o n s on busi
ne
m 1 15t ~re
n im pact the ways in of their
All g o ve rn g u la ti o n s ad theY dispos e.
, a n d lo ca l st a tu e s an d re es . Some regulation~late hoW action,
st a te
d o u t b y re g u la to ry ag en ci s; ot he r~ reg f industry and trans
ca rr ie p a y ta xe 0
ort in co m e and
b u si n e ss e s re.p ju s t a b o u t an y ki nd
ls o r w as te . For
e xc e ss m a te ri a e n t re g u la n s on
tio business.
g o ve rn m
th e re a re s1NE S~
T REGULA T IO N S O N su
ERNMEN
MAJOR GOV
3 1111 <) , .. ,,.v, n bar,lc categories
1
1 10
,r,,111 e out w, ,,11 I
might 11 ,.,.1r1 Y"" 011
. n quw;t Ions almost al"."ay~
11wyPt 'nn •nt r•i uulnt lo d Ing them - -knowing
Yow t,w Im, owneiu,
w f ,,iv
oov,.
1111~: tt1nr1 mert~lywptr rct up your business to
nd ho . .I •
thNn, ,l . f headc1ches w h en it comes
lnC&b ;ix '
I , most smnll bllb t thcro•~ mm••
IJ~glo with tax.er,:;:
to pay, w~1•••~~•~:JJ tll you ,I ton 0
which J1u '" • ·c tax p:iymcnt ., , , ' k
oooount I~1 ~~~~ gov•••orn1•nt
ch•.•· '
3
h to pay fed era I taxes. Most
5
Um~ tow c ti, llw United Stnlc~dl~g on the state in which t he
Every compony rcglste,ed pa1Y1,~ tat~ 1axc&,
I have towit Id blcdcpenfdlng
Avo taxes-or deciding not to
companies witl II so •d l hcsc m,1 unavo d • d potential ja II t me.
company is rcgistcrc . Ith hefty pcnaltlcs an 1
l~lght - comcs w . .
pay them ou u fo~med your business. In t his
th kl ds of taxes you'll pay dcpends on how'»nl<'
. me yo propneto, => h ,pc; pay tax es
But rde nt au businesses are treated the ~a f' 11 rundown of the different taxes
rega , no t'onr Heres a u d t fil
diffi?rentlv than, say, s-corpora ' ,;·etermlne what your business nee s o I e.
for business
Despite structures to
the differences help you
between eac h kl nd of business, there are a few general
tcnns you should know :
• Income tax: Most businesses flle an annual income tax return. Businesses
must pay income tax as they earn and receive income, and then file a tax
return at the end of the year.
• Estimated tax: Estimated tax payments offer an alternative to paying
income tax throughout the year as your oompany earns money. Sole
proprietors, partners, and S-corporatlon shareholders must usually make
~ mated tax payments if they expect to owe $1,000 or more once they file
their retum. N~te that corporations are usually required to make estimated
tax payments ,r expect to make more than $500 . . . ,
• Emplovrnent tax• c or more in llilcome. •
taxes related to h~vi;m~anies th at have employees are expected to pay
and Medicare taxes fid!r:~1
th
°"
eir Payroll. These include Social Security
unemployment tax• For mo n~~me tax withholding, and federal
Tax:s for Small Bu~inesse/e n or-rnation, see the IRS page on Employment
• Excise taxes: Excise taxe!, ,
~;mspemcific 900ds, and are o~:, ~:ofdl wd hen Your business makes purchases
1
c i t i z e n workers ir e m ployees h
ave
c a te gories ea
ch wit
S t th e
• Non-U ~ m u s t v e r if y th a a r e several e m p lo y m periods o f stay (fo r e n t
~ploye d S ta te s . T h
ere
n s , a n d a u th o
ri z e d
m te n d it io ).
In t h e U u ir e m e n ts , c o id e n ts o r citizens e n :i o n or_
welfare
r e n t r e q a l re s ff e rs p
losure,
diffe h o a r e n o t le
g
f y o ur co~pa
n y o
~ fi d u ciary, disc e c u ri ty
e s w y : .I o
e m p lo y e e b e n e f it s e c u r it bJect to a w id e rang etirement Income S e
ye e su ee R
• E m p l o p l a n s , y o u m a y b ts u n d e r th e Employ ertain
b e n e f i t r t i n g r e q u ir e m e n m a y n e ed to file c
s , you . See
and repo a s u n io n employee
e rs in s p e cific ways
ation.
s in e s s h it h u n io n m e m b fo r m ore inform
w s it e
Ac t: e la ti o n s s ' web {FMLA)
n s : I f your bu g e m e n t S ta n d a rd e d ic a l L :a v e Act s of
• Unio a n d h a nd1 e ~ a n
a
e : T h e F a m il y a n d
M
to p ro v id e .12 week ption o f
r e p o r ts cal leav ployees th o r ado
e o f J..ab<> ~ ·t h 5 0 o r m o r e em ployees fo r the b ir
the O ff ic
li g ib le em hild, o r
i l y a n d med . a v e to e y e e o r a spouse, c
• F a m s e r n p J o y e ~ e ~ ' le lness o f th e emplo d or
r e q u i r e b - P r o t ! s e r io u s il n o ti c e s to be share ings
e
u n p a i d , jo t h L
s requir
a b o r s~a~e ( fo r example, alco
hol warn
a c h il d , o r fo r e n t o f isor is an
e o e p a r tm r e m p lo y e e s view e d a w s Poster Adv get
p a r e n t~ s o r nw o r k p la c e fo ) . F o rt u n a te ly , th d y o u c an use it to
rs : de r s need, a n
• p o s t e in th es h in g r e m in h ~ ost~rs yo~ le languages.
pos te d w h ic
r m in e m u lt ip
d - w a d e te p r in te d copies m
and han
t o ·c a n d
e a s Y weacYtrox11
e1
fr e e
s
Rosr ~ w
. _ arty vendors, or _ other
t ·tors, third
These arP e the issues illll.!kYst
w1·th .,ts CornPelaWS,
, --.....
n consp1 ·res ftrust
ul of an , . .
Any time a ~mp; ~ay run afothe tollov,11ng,
t pa 1 . es with competitors-even
refevan . rties,
address, su ch as • Discusstn . g pnc
~ stnve to
Conspiring to fix mar
ket prices.
I ce
II marketp a. . favorable product P
rices from buyers When
.
• , it affects
., sma . n·· securing
. a•minat10 . h other businesses regarding the
• Price d1scn . can't. tions wit .
other companies o cott: Conversa titor or supplier. reements between
• cons~iring to!
boy::
potenti_al_
0~ another com:eor custo_rners: A~rkets are illegal. This
4. ADVERTISING
A good advertising strategy can do wonders for your business. But before you dive
in, you'll need to make sure that you're playing by the rules and government
regulations. For example, you have to make sure the daims in your ads are not
untruthful or purposefy deceptive. Using testimonials in your ads comes with
additional regulations. Violating these rules can result in fines which defeats the
purpose of your advertising in the first place" '
ONMENTAL REGULATIONS
6. ENVIR e ntal protection Jaw
s
u s e nvi ro n m '
~ c q u a in t yo urself with vario pe ci ally pe rtinent jf you 're
to es
You m i~ h t need r m d u s tr y o r business. This is ing with claims to be natural
y o u n yt h
depend_mg on e a n in g p ro d ucts 1 food, or a vironmental rules and regulati~ns
, cl n
marketing, s a y e n d ly . Y o u 'll fi n d dozens of e te level.
ga nic, o r e c o -f ri e ss , both a t th e federal and sta
or usin
c t y o u r sman b
that m ig h t a ff e to m ak
ss is
e sure your busine yo u r
re so urce
1s a great to consul t
ll B u si n e ss G a te w a y a t yo u may also need
The EP A S m a l la w . N ote th requi rements
n ce w it h e n vi ro n m e n ta a ke su re yo u m e e t th e ir
in complia l p ro te ct io n a
g e n cy to m
n ta
state e n v ir o n m e
as well.
ve personal
7 . PRIVACY u p am as si ng a ton o f se ns iti s and
e s w in d y o f rule
. ff n d e m p lo ye As a re su lt, th er e a re a va ri et
s
.
it h st
a ~ pJoyee cure th is data.
Busanesses w th pl oy er s ~ u s t sa ve an d se
b o u t e ir em
information aab o u t how e m fo rm at io n, includin
g S od al
regula ti o n s p ri va te in mbers, o r
~ n empJoyee's on s, cr ed it card, bank nu
an a m e h e a lth
co nd iti spreading
sc Jo se s ep bu sinesses fr omt· F
va rl o u s la w s e . I -ing sens,·t·1ve .in ,o rm a 10 n. ?~
ss dJ st to ke
If y o u r b u si n e ad dr es l
5
'd o
xi 4=
e r, os 1ts
S ec u ri ty n u. mt bry n o t eom n y lo ye es ca n sue fo r disc nt ab ili tv A ct (HIPAA) proh1b
~ , a n d Acc . . ou
p e rs o n a ) h 1s
n , b u \ Pra n ce P o rt a b ili tv , s1on.
th is in fo rmtha H e a lt h dnasuta w it h o u t a p a ti e n ts perm1s
ti o
ea lt h lace, th e
in st an ce , e f- h ts to pr iv ac y in th e workp
th e re le a se o d sp ec ifi c ri gh to m o n ito r th e
ir business
h a ve cl ea r an s' pr iv ile ge s
5
th e empJoyer
lt h o u g h e m p Jo y: ~ a g a in st
A nc
. h ts a re baJa
rag
ve as a bu si ne ss to
t rig ht s You htath at m . .
d wha nt ab on tto nn g t o Your
derstan ns OU
nt to un and tra pare
. It' s ;mporta be
operations. es c1ear
monitor employe , and to
employees.
MITS
uc eN SI N G AND pER on bu si ne ss so fa r,
nm en t re gu l~ t 1~~ ns
5 but
s. ~~:::;...-- 11aws and gover le st at to co ns id er fo r yo ur
e re gu a th ei r ow n
We've focuse d on fed era n' t amP re qu ire m en ts for
that doesn't meant that there are I overnrnen ts ha ved as th . f d
tate and 1oca g t to
un de rs ta n ei r e er a I
small business. Manv,:e
ju st as importan
businesses, and theY
rts.
counterpa . 7 ,, In de ed , in m an y st at
. "do I need a business 11 es
ce:~ =t ~. This ca n be
You might be wondering
da
and JocaJities, yo~ , business Hcensg_ ~od
do neein heavily regula
important for busme_sses
sta te
ted in u;
optr ie s su ch as ch
pa rt ic ul ar ly
ild ca re or health.
si n~ ss or ev en re vo
Without the proper licen s can fine yo ur u ke yo ur
ses,
authority to operate.
9. INSURANCE
in th .e g o p era
3. Expla th e v a r io u s r egulat,ons a ff eetin
s s
4 . Discu
ESSON F OURTEEN
L
N
! F I N A N C I A L PLA
X
TOPIC S I
s
ES t s o f a b u s in e s t it y
OBJECTIV t io n c o s s en
t e r m i n e p r e - o p e r a a p it a l o f a b u s in e s e s s
De g c u s in
t h e w o r k in io n s o f a b
1. i. D e s c r i b e c a s h - f lo w p r o j e c t b u s in e s s
he fa s
2 . ii . E x p la in t e p o t e n t ia l r is k s o z a t io n o f a b u s in e s
h li
3 . ii i. E x p la in t e p r o p o s e d c a p it a
in t h
4 . iv . E x p la
5. v. se
enterpri of the
E N S E S n ta l to th e crea ti on
EX e s incid e iness
RATING d expense e d in s ta rt in g a b u s
PRE-OPE es, co s ts a n
in c u rr
- a tiv e fe d e x pe nses ce
.
s tith g fe e s c o s ts a n
p o rt e d o n th e balan
e inv e as been re
Means t h a n d e
7
y b e fo re in c o m e h ,
Compan curred
h a t a r e in •
t s it ie s , m a rk e ti n g ,
Co s t plies, u ti J the
They are ll , r e n t, office sup th e c o s ts to keep
p a y ro entially
, •
sheet.
These co n -
s t
:a
s :~xes.
_ Jude it
e m s li k e
o p e r a t in
g e x p e n s e s are ess
i n s u r aenscser u n n in 9 •
•
b u s tn
APITAL
... ~ N G C
wo~
oetween _a ,:;on•di~~entorie ,, ... ratln9 ••
S o~ e ra ti n g current as
npaid bills) a ; as accoun ~~le- Net oP~ce betwee
n ,~
sets
ts pa to the differe ses th ~ a tio n s a re th e same and
iabilities,, s~c •ditYand ref~~s In rnanY ese ca 1us in v e n to ri e s ,
ompanY s 1tqu1 t liabiht1es. ca eceivable p less
t . g curren . accoun ts r
nY cas h plus penses
nd opera '"
~e derived from co mdpa less accrued ex ,
ccounts payable an
AL RISKS o f AB us1NESS
. O"fENn
. ess can face. T h e most common ones are
.
ese are the possible ns that a bUSI n
ks
s explained below
llEVISIOI\I QUESTIONS
~
What is the pre-operation costs of a business
1. Explain the cash-flow projections of a business
2, • · \< of a business
3. Explain the potent1a1 ns \ r tion of a business enterprise
4. Explain the proposed capt a ,za
LECTURE FIFTEEN
FINANCIAL MANAGEMENT
M£AN1N
cessarY to start, run and expand a business.
Business finance refe rs to the funds ne . . ortant to re alizeethat some
various sources
sources ofOf
When looking for busin~stse ~hile it ,s ,mp
anceothers ot There
marys~m~ ar are..
of which
b appropna reneu
finance may e ·1able to the entrep ·or source of capital
business funds ava, nal savings are a ma~tained from former
. Personal finance-
·n savings/ .savings
peros~alftxed d e posit be oounts ' sale of personal
m~y ace
during
1)
employment, mo neystage.di
the start-up
save The pers
assets such as land.
ADVANTAGES .
. sine
It is the least expenstve . e no interest is paid.
It does not involve lega pro
I cess of acquiring
It allows for flexibility on the use of funds
DISADVANTAGES:
ii) Family and friends contributions - The family may provide fun~\
and/or free without necessarily taking up a share of the business. Sometimes, it
do not require to be
possible
paid to then
back, thisfinancial
ask for would be a form offrom
assistance equity capitalIf they
friends.
1
-
ADVANTAGES:
-
Funds can be made available to the entrepreneur without condit ions.
The funds may . ~:
1 1
carry itt e or no risk to the business
Re-payment Period may not be fixed.
family and friends may contribut
e to them anag
ement of the
' -11esS·
~~,1
~DVANTAGES:
.
TheY might interfere in th e busmess mana
. gement
TheY might claim part of th e profits. ·
~
venture capital is a type of private fund· .
high potential for profitability and grow;;gVmamly provided for start-ups with a
institutional investors and high-net worth ..in de~~udre capital typically comes from
1v1 uals.
--
ADVANTAGES:
i) Entre~reneur~ can enjoy value addition activities that come with the capital e.g.
mentoring, business alliances, management assistance.
and innovation.
DISADVANTAGE: . I t·
the borrower to the lenders condition thus limiting
Venture capita iesking certain personal decision.
•·
i) f m ma
entrepreneur ro
the
. ns
from th ese .mst1. tutIo
ii) An entr epreneur can get diffe rent type s of loan s
DISADVANTAGES:
gISADVANTAGES;
1· 11 J lonll ,
1t is siniplc t o ol>t ,, '
.-, JloW',:
COMM ERCIAL BANKS. j( /01 1/tb ,ti<' ii'• fo
Adwmtaqes of con11 1/l'I r./. i/ /J,J/1
, m oun t,,, of 111ort<'Y·
Ca n ,~nd out lnrgt ' 1 I
• •- 11NJOl lr1 t< :(,
. I can Im I,.. I r
Rcpi.1) ment per ioc b I u•,lm.:!;', opur,Jt. on ,.
They aIso Off Cl • non - fln,inc 1cii udvlco on )
Business records are essential for survival of any business. Records are important
for various reasons such as taxation, decision making among others.
The following are some of the basic records that an entrepreneur should use
THE CASH BOOK.
r--,--..;;;;;:...:.:..::::.::.::~~~j~ r£as~ ] an k -D - --
- ·- ate_ .l'i!_rticulars Fo Cash Bank
f URCHASES
·~
Ii)
The details co\umn records the pcrscm or oro,mlmtl()ri that '/Jld th0 cy;1, 1J·,
on cred\t.
The amounts column records the value of goods purc.hc1c1.:d.
-□~!!!i:==========p~i~~=====
.--
\ Date . ===t \ oetails
Amount
I d a daily basis .
.. ) s-a•lp.,e~s 1·oo~uroa. credit are recorde on
I\ ~ oods sold on ·1 and amount colurTH),
hiCh a II g
This is a dlarY in VI
I it has
t;
d te detal 5
three columns:~~: whom goods were sold on
n,es of pers
.ou rna the na
Uke a purchase ~n records
- colu
The deta' 15
credit. . 0 urr1 31
ales
0
fas
Format
. . he books of accounts
Recording business transactions 1n t
BOOK KEEPING
... can be exoressed in money,
T~1s · t-a ,....·sact-1·ons
· ·ti"' \ 0 , es reco rd"mg a 11 ttie . · snicn · t-ief'Y"' ·m th e
ur and e"' ~ering
~ sing r 0-n t"c> business act \ t es as tne \ occ
~pprop Z\te b00,-.s.
Systems of bookkeeping
There are two systems: the sing le ent rv and t he doub le e,..,try. The double entry
is "'10st common l\ L.sed in industrv and commerce.
1. The principle that every transaction has hvo parts, therefore two entries are
made in the books of account in respect of each transaction .
1. !the pr)inci~le that the value of the item (s) com ing in is equal to the value of
1 em{s going out.
r
Type of accou:::
n:-t _ __