Segmenting the Market
performance in terms of revenue and expenses
 Most basic approach to determine target segment
is through demographics (gender, age, place of
residence, income class, etc.)
 Some general statistics for demographics can be
found online
 Specific Classifications – more details relevant to
targeted market such as psychological profiling and
lifestyle preferences of diff. customers’ segments
Financial Forecast/ Ratio and Measurements
 Financial Forecasts – monetary transactions that
the business is expected to engage in
 Result of financial forecasts will indicate the
feasibility of enterprise
 Financial Forecasting - creation of 4 critical
financial statements:
(1) income statement
(2) balance sheet
(3) cash flow statement
(4) funds flow statement
 Altogether comprises the income statement:
 Marketing strategy & action program should
translate into revenue or sales forecasts
 Operations strategy & production/service delivery
program should translate into forecasts of costs of
goods produced
 The rest of the Enterprise Delivery System should
translate into forecasts of operating and non-
operating expenses.
 The resources mobilized and held by the enterprise
are translated into forecasts of the balance sheet
(investments in the form of assets and their
corresponding financing in the form of liabilities)
 The flow of sources should be translated into funds
and cash flow statements
 Income Statement
 Is a financial statement measuring an enterprise’s
over a certain period
 FORMULA:
REVENUE – EXPENSES = INCOME OR PROFIT (LOSS)
 Revenues forecasted (quantities sold times the
prices they are sold for minus estimated cost of
goods sold corresponding to the forecasted sales
equals gross profit.
 From gross profit, the operating expenses will be
deducted to get operating profit.
 Then, taxes due are subtracted to derive the net
profit after taxes.
 If the enterprise has non- operating revenues
and expenses, these should be added or
subtracted from the operating profit before the
taxes are computed. Example:
 Balance Sheet
 More complicated because of 3 things: assets,
liabilities, equities
 Assets – all investments in the enterprise
including initial investments
 Assets include cash (on hand and in bank),
accounts receivable, inventory of goods,
equipment and machinery, facilities, vehicles,
etc.
 Liabilities & equity – financing the assets or
investments
 Liabilities – enterprise’s debts to suppliers, gov’t,
employees, and other financers
 Stockholders’ equity – investors’ investments in
the stock (or shares) of the business
 FORMULA: ASSETS = LIABILITIES + EQUITY
 The balance sheet equation means that
resources invested into enterprise in the form of
 liabilities & stockholders’ equity must be equal to
total value of the assets or the enterprise itself.
Example:
 Return on Assets
 Return on Assets (ROA)/Return on Investments
(ROI) – return of investments in the form of
assets
 FORMULA:

NET PROFIT AFTER TAXES

ROA/ROI =
TOTAL ASSETS ∨INVESTMENTS

Designing, Prototyping, and Testing Products

 Designing – rendering concept and translating it to

 Financial Ratios and Measurements its very physical and very real dimensions.
 Payback Period – how long will it take to get back  Prototype – product that should be ready for
his/her investments in the enterprise actual testing
 FORMULA:  Testing – thru potential customers with focus
group discussions (FGD), surveys, product demo,
PAYBACK PERIOD = etc.
TOTAL INVESMENTS  Product should be ‘perfected’
ANNUAL NET INCOME AFTER TAXES  Next is to assess how much resources are available
and what kind of set-up will work best
 Cash Payback Period – entrepreneur should add
back the non-cash deductions from the income
statement, which is the depreciation expense.
 The faster you are able to earn back the money
invested, the better it is for the entrepreneur
and the more attractive the business opportunity
becomes.

 Return on Sales
 Return on Sales (ROS) ratio – where
entrepreneur calculates how much profit the
enterprise is earning for each peso sold
 FORMULA:

RETURN ON SALES =
NET PROFIT AFTE R TAXES
SALES