Module 5 & 6. Entrepreneurship

Information Sheet LO 1.
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Subject: Entrepreneurship
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: HE 12 A, B, C & D
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph
MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers
PRODUCT DEVELOPMENT, OPERATIONS, AND FINANCIAL PLAN
CONTENT
The business plan will not be complete if the operations and financial plan are not included. These two (2)
play a crucial role in ensuring that the business is operationally feasible and financially viable. Even if the
marketing plan looks promising, the business will not be successful without a detailed operations and financial plan.
These two (2) will tell if the big idea generated through product development process is realistic.
This Module 6 & 7 will introduce you to the fundamentals of product development and the operational requirements of a
business represented by the 4Ms-manpower, method, machine, and materials. You should learn the methods before
commercializing a product or service. You will understand how to identify and comply with the business requirements
before running an enterprise. You will also know the importance of crafting a business model as a blueprint of the
business operations. Last, you will be taught on how to account actual and future performance of a business enterprise
through preparation and analysis of financial statements.
1.4.1 Fundamentals of Product Development
Before commercializing a new product or service, the entrepreneur must focus first on refining the product or service and
validate its market acceptability. This new product does not have to be a totally new product. It can be a new product line
from the existing business of the entrepreneur, a product line extension, an enhancement, or a repositioning of an existing
product.
Product development is the process of developing, testing, and commercializing a product or service with the ultimate
objective of solving the problem of the primary target market. It is composed of four sequential steps:
1. Developing a product or service description,
2. Creating prototype,
3. Testing the prototype, and
4. Validating the market.
Product or Service Description

The product or service description simply describes how a product or service works and how it benefits the customers. A
clear product or service description is important because this will serve as the blueprint of all business operations.
Therefore, the entrepreneur has to take note of the following regarding the product or service description:
1. It should directly address the primary target market in a personal manner using everyday language. The
entrepreneur should put himself or herself in the customer’s shoes, where the products description will be
addressed to.
2. It should highlight the features that will cater to the customer’s needs or address the customer’s problems.
3. Realistic superlatives should be used for the product description. Motherhood statements such as “world-class
service or product excellence” may not matter to the customers at all.
Creating a Prototype of the Product or Service

After defining the product or service, you may now proceed with one of the most exciting but also very challenging parts
of product or service development: the creation of a prototype. A prototype is a preliminary model or sample of a new
product or service that is created to test a product or service process. This is an exciting process for the entrepreneur
because he or she will be able to see that his or her ideas will soon become a tangible reality. The entrepreneur’s creativity
and ingenuity will be used in creating the prototype.
According to Entrepreneur, creating a prototype lessens implementation/commercialization risks and provides the
entrepreneur a bunch of advantages as follows:
1. Creating a prototype enables the entrepreneur to engage in trial-and-error, provides room for improvements, and
refines the functionality of the product design or service process. It is very expensive and risk-intensive to
commercialize a product without creating a prototype.
2. Creating a prototype provides the entrepreneur a window to test the performance and specifications of various
materials and service processes. Every detail of the product or service should be scrutinized, and all flaws be
addressed right away before commercialization.
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3. A prototype helps the entrepreneur effectively describe the product or service to the product team. Members of
the product team include the marketing, operations, engineers, suppliers, business partners, and legal and human
resources. It provides the product team the information needed to create the right product or service as planned.
4. Creating a prototype elicits respect from stakeholders and customers. At the same time, a prototype gives
credibility to the entrepreneur. Some entrepreneurs only present vague and big ideas but no details as to its
feasibility and implementation.
Creating a prototype is the stage where the entrepreneur can experiment, develop, and make some improvements in the
potential product or service. The objective of the entrepreneur at this stage is to verify if the product or service concept
will work at the simplest, fastest, and cheapest way.
One technique for creating the best prototype is by studying the competitor’s product or service. The entrepreneur will try
to scrutinize the parts and functions, as well as the design and other attributes of that product, in hopes that he or she will
be able to address some problems in the competitor’s products and come up with the most efficient and effective
prototype.
As of the services, the entrepreneur may try availing the competitor’s services and will take note of their operations, such
as service delivery, location, facilities, and ambience. He or she will then take note of the pros and cons of the service to
create the prototype, simulate the service by trying it with his or her friends or relatives, and then get their feedback. Some
entrepreneurs create a video presentation or a miniature prototype, so they will be able to explain the details, if the product
is to be viewed by a panel of specialists (e.g. engineers, developers, scientists). The scope should be related to the
entrepreneur’s budget. After creating the prototype, he or she should be ready to test it.
Testing the Product Prototype

All the efforts exerted in the creation of a prototype will be put to waste if the prototype will not be tested. Testing the
prototype is a vital process before an actual product or service is launched to the market. Testing the prototype will
uncover the final loopholes that need to be fixed before commercialization. It gives the entrepreneur a leeway to examine
and scrutinize the prototype and provide feedback as to what can be improved before the launch.
These improvements and changes must be completed first before moving forward to the next step. For the prototype that
has already been refined, testing it for the last time after the changes have been made will validate its readiness for
commercialization. The following testing methods are applied by the entrepreneur.
1. Focus group discussion – the participants will provide relevant insights about the new product or service. The
objective of the FGD is to identify errors, deficiencies, and issues that may impede the success of the product.
Participants also need, to provide suggestions and practical solutions on how to improve these deficiencies.
2. Legality and ethical test - Prior to launching, the entrepreneur must ensure that the product or service complies
with all relevant laws and regulations and has a necessary license or permit to operate a particular business. For
example, food products must be cleared first with the Bureau of food and Drugs (BFAD)) before they are offered
to the public. The entrepreneur must also make sure that the manufacturing/production of goods or offering of the
service does do not generate ethical issues such as being threats to health, safety, and environment.
3. Safety test - The entrepreneur must ensure that the product safe to use, safe to be consumed (food and beverages),
and safe to be applied (cosmetic products). The product should not in any way harm the customer or put the
customer in peculiar situations. In services, the entrepreneur must ensure that the processes to be performed by the
service provider must not be detrimental to the safety and health of the customer.
4. Product costing test - The entrepreneur must examine every stage of the manufacturing process or every process
of the service blueprint to evaluate and finalize the costs involved. This is the time when the entrepreneur can
match the expected costs versus his or her budget. Modification in the manufacturing process or service blueprint
can still be made at this point to align with the cost objective of the entrepreneur.
5. Component test- Each component of the product or service must be tested independently to identify component
failures for goods or service failures for services. Any failure identified must be redesigned and tested again until
it becomes fully operational and functional.
6. Competitors 'product / service test — The entrepreneur must test a similar line of products or the competitors'
product or service itself to compare and get the best practices to be applied to the new product or service.
Testing the product prototype is mandatory to ensure that the product or service will not fail the customers and
will deliver its definitive purpose. This will elicit customer satisfaction and, eventually, customer loyalty and retention.
This is the time to prove that the concept formulated by the entrepreneur will work and is feasible in real life. All the
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mistakes accounted for and the improvements to be fixed should be performed first prior to commercialization of the
product or service.
SELF-CHECK # 1: REFLECT UPON / DISCUSSION FORUM
Based on what you have observed:

Do you think Philippine entrepreneurs test their products or services first before launching them to the public? Why?
Validation of Market Acceptability
Validation of market acceptability is the process of finding out if the intended primary target market will be
buying the product or availing the service. Market acceptability is a critical factor that the entrepreneur must validate
before launching the product or service, because this can strongly suggest if the business will be successful or not. It
either validates or disconfirms the perception of the entrepreneur about the suitability of the chosen primary target
market. It also tests whether the value proposition and unique selling proposition are appropriate or there is a need to
improve on them.
This is also the time to deeply understand the value that the product or service brings to the customer and their
prospective purchase behavior, because it helps the entrepreneur build a more relevant and meaningful product or service.
This process is the last step before the product or service can be introduced to the market. The following objective
questions are more likely to be answered in the whole process of market acceptability validation:
1. Will the primary target market like the product or service?
2. Will the primary target market buy the product or service when it is already in the market?
These questions can easily be answered if the entrepreneur will perform the following activities:
1. Use the most strategic marketing research tool (FGD, survey, observation, interview, online survey, e-mail,
or a combination of these research tools), wherein the entrepreneur can get the most relevant answers in the
cheapest way possible.
2. Prepare relevant open-ended questions that answer the objectives . Do not go around the bush and be
straight to the point. Keep the questions to a minimum because the target market might get bored and not
finish the whole questionnaire.
3. Find market experts who also target the same market but are not directly competing with the entrepreneur.
For instance, a market expert sells cars to a specific market segment and it so happens that an entrepreneur
sells real estate. The entrepreneur can leverage on the knowledge of the market expert regarding that market
segment because they almost have the same demographic data requirements. The entrepreneur can use these
data to improve the product or service.
4. Collate all the data, analyze them, and prepare a summative report that answers the questions that were
mentioned earlier.
1.4.2 THE 4Ms OF OPERATIONS

The operations plan is an important part of the business plan because it simply states the details in operating the
business. Operations management, on the other hand, controls the implementation of the business plan. A strong
operations plan should have the four operational aspects—called the 4Ms of operations:
 the methods, or the processes to be followed in effectively manufacturing or delivering a product or service;
 the manpower, or the right human resources who will handle certain business operations;
 the machines, or the technology used in efficiently operating the business, and
 the materials to be used in creating a product or performing a service, which includes supply chain management.
METHODS
The methods aspect represents the day-to-day operations of a business. It describes how an entrepreneur will run the
business from all facets of the business such as the manufacturing of goods, service delivery process, distribution of goods
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and services, logistics for delivery of goods, and inventory management, to name a few. The entrepreneur has to be very
detailed in formulating these processes and must ensure that the customer experience will be pleasant and seamless.
Internally, the processes must also abide with industry standards and policies where the business belongs (e.g., ISO
certification).
The entrepreneur must also set standard operating procedures (SOPs) both in manufacturing goods and rendering of
services. These must be monitored to validate compliance. The entrepreneur must also critically consider the effects of
these processes to the environment and to the public.
Manufacturing of Goods (Schaper and Volery, 2004).

The entrepreneur who will engage in producing his or her own products will have to consider the basic guidelines
and principles in manufacturing.
Manufacturing is the process of translating raw materials into finished goods that are acceptable to the customer's
standards. It consists of three elements:
 Inputs - the materials or ingredients to be used in creating the product
 Process - the transformation phase where inputs are processed by manpower and machines to come up
with the final product
 Output - the final product of the process stage, which is intended to be sold to target customers
Here is an example for the production of palay or rice.
http://www.platinumglobal.co.uk/wp-content/uploads/2013/08/rice-growing-process.jpg
The entrepreneur must also consider the most efficient manufacturing site in which the manufacturing process will take
place. Depending on the entrepreneur's objective and financial capacity, he or she can opt to have any of the following
manufacturing sites:
 Home-based: Most startups do not have financial capacity to establish a manufacturing site. Thus, their only
option is to manufacture goods at home. This option is the cheapest and highly flexible. The entrepreneur can
start with products that are usually manageable to be processed at home such as food products and customized
clothes.
 Commercial space for rent: This is advisable if the business really requires a commercial space for the
processing of goods and if the home option is not viable anymore. A commercial space gives the entrepreneur a
more specialized and suited manufacturing site than manufacturing at home. However, this is more expensive
than manufacturing at home and requires long-term commitment because the entrepreneur will need to sign a
lease agreement.
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 Commercial space purchase: This option requires the biggest amount of capital expenditure, but it also
provides the entrepreneur substantial freedom and flexibility to design and run the commercial space. Compared
with renting, purchasing a commercial space is considered more of an investment than an expense.
Once the entrepreneur has chosen a manufacturing site, he or she should consider location, where the delivery of raw
materials and finished goods will be conducted. The transportation routes from or to the manufacturing site should be
efficient, so that the delivery of raw materials and finished goods will be seamless. The location should also be accessible
to major types of transport vehicles. Last, the location must operate in an environmental-friendly manner so as not to
contribute to various types of pollution in the environment.
The internal layout or the floor plan of the manufacturing site must also be critically done by the entrepreneur because it
affects the efficiency of the business operation. Each space should be maximized to save on manufacturing costs
(specifically overhead costs). An efficient floor plan illustrates how raw materials and finished goods can efficiently be
transferred, processed, and released from one processing unit to another. There are two options for the floor plan: (l) the
product-based layout, where the facilities are prearranged according to the flow of the manufacturing operations, and (2)
the process-based layout, where the facilities are grouped according to their function.
Last, the entrepreneur must prepare a manufacturing process flow, which serves as a step-by-step guide of the
employees and the manufacturing equipment. The objective of the process flow is to ensure that the right inputs are
properly used in production, that the process is performed according to the set standards, and that acceptable outputs are
produced. Not having a process flow will result in inconsistencies in the process, high expenses, and disagreements
among employees.
The entrepreneur's ultimate objective for all the operational processes is to ensure that maximum efficiency is met—
from the requisition of materials to processing them into finished goods up to the distribution to the customers.
Service Delivery Process

The entrepreneur who will engage in a service business must be more meticulous when it comes to the service
delivery process. This is because services are intangible, and the only way the customer can appreciate the service is by
remembering how pleasant his or her experience, Moreover, a seamless service saves the entrepreneur a huge chunk in
operational costs.
Service entrepreneurs must prepare a detailed flow chart of the service business, which is also called a service blueprint.
Every process in the blueprint must be relevant to the service business to minimize wastage. The service bottlenecks
must be addressed immediately to void customer complaints. Bottleneck is a part of the process where there is an
apparent inefficiency and where the customer waits longer. The service entrepreneur must develop scripts that the
service provider will follow to serve the customers better and to establish standard processes.
In terms of the floor plan, the service entrepreneur must design it according to the most efficient way in performing the
service, which can be based on the internal structure of the service business, service delivery requirements, or customer
requirements. For example, a barber shop should place the receptionist in front so that customers can easily inquire of
the service that they avail.
Distribution Method
One of the basic processes to be considered thoroughly is the distribution process. Distribution is the process of bringing
the products or services to customers.
In selling physical goods, the entrepreneur must plan the location, the processes, and the distribution of the products to the
customers. The entrepreneur may also buy the finished goods from the manufacturers and plan how to distribute them
efficiently to target distribution centers or the customers.
Distribution is not a straight process from the entrepreneur to customers; thus, the term supply chain or distribution
channel was coined. The manufacturer will deliver the products to the distributors, to the wholesalers, to the retailers, and
then finally to customers. Each member in the supply chain will have a fair share in the profits, which may be squeezed if
the supply chain grows longer. This is why there is a tendency to impose higher markups on the product price. It is now
up to the entrepreneur on what distribution channel strategies he or she employ depending on the product or service he or
she will offer.
As mentioned, there are certain people involved in the supply chain. First is the manufacturer. The manufacturer handles
the invention, development, and production of the product or service. Entrepreneurs can be manufacturers of a product or
service. Most often, budding entrepreneurs become manufacturers they introduce a new product. Most established
products or services in the market are owned by top corporations. The great thing about being a manufacturer is that
entrepreneurs can manage the entire supply chain. Manufacturers take charge of acquiring materials, production and
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delivery schedules, product quality, and inventory or safety management. Manufacturers also handle product delivery,
marketing, and selling. Because of this, manufacturers often seek the help of distributors or agents for the distribution of
goods.
Distributors are entrepreneurs who often buy products or services to the manufacturers and sell them at a markup price to
either wholesalers or retailers. Distributors buy the products in bulk for a discounted price. The bought products or are
now by the distributors, so many damage, spoilage, or other liabilities to the product will be their sole responsibility.
Distributors become wholesalers when they sell the product to another distributor.
Agents, on the other hand, don’t own the products or services because they do not buy these from the manufacturer.
Instead, they negotiate with buyers as to how much or how many are to be sold, so the manufacturer will be able to
deliver the goods directly to the buyer. Agents get the commission for every product sold. Some agents do consignment,
wherein agents get the products in advance to demonstrate them live to the customers. If unsold, agents just return the
merchandise to the manufacturers. They are not held liable for any damages or losses incurred.
Manufacturers turn to distributors when they have limited resources or they don’t have people with expertise in selling the
product. The distributor or agent can assist the entrepreneur/ manufacturer in the (1) sharing industry knowledge,
behavior. and activities of the primary target (2) pertinent rules and regulation imposed by the government, (3) best
practices in marketing and selling the product, (4) best practices in operating the business, and (5) their respective sticky
relationship with business associates such as suppliers, financial institutions. or retailers, to name a few.
Payment Process
The entrepreneur must also establish a seamless payment process. Generally, there are no problems if the customers pay
in cash. But there are instances when they do not want to pay in cash and are usually attracted by flexible and customer-
friendly payment term such as credit cards, installment plans. or a simple accounts payable or pautang. The entrepreneur
must ensure that credit partners are seamless and that the customers are aware of the terms and conditions of the credit.
Some entrepreneurs put point-of-sale (POS) machines in their shops to accommodate those ill pay through their credit or
debit cards, For traditional ones. they put the credit purchase in a ledger and indicate the due dates. Once the due date
arrives, the entrepreneur has to collect payments from the customers. The objective for all entrepreneurs is to ensure
efficient collection of accounts receivables and avoid bad debts, lie or she must conduct due diligence first before
allowing a customer to purchase via credit.
MANPOWER
At the beginning of the entrepreneur's business, he or she usually maximizes himself or herself. his or her partner, or his
or her family members to handle all the aspects of the business. But as it grows, the entrepreneur will need the expertise
of qualified employees that can handle operational functions, so that he or she will be free from daily activities and can
thus focus on the strategic and management functions of the business. The entrepreneur needs to plot a table of-
organization based on his business objectives. Each position has to be relevant. To verify if a position is really necessary,
the entrepreneur must devise a detailed job description and job qualifications of the future employee. This will be his or
her basis in deciding whether to hire an employee or not. The entrepreneur must be very keen in selecting and hiring an
employee. He or she must ensure that due diligence is performed to check the background of the applicant. Manpower is
one of the highest costs of operating a business but is also the most instrumental to its success. Having the right people
encompasses a myriad of advantages.
Job Description
Job description enumerates the duties and responsibilities of the potential employee, including the scope, limitations, and
terms and conditions of employment. The heading of a job description is the job title, which is the summary of what the
employee will do. The entrepreneur should devise a respectable and decent job title because the title boosts the self-
confidence of the employee.
After the job title is the compensation and benefit range, which details the potential salary and benefits that the employee
will get. Next are the duties, which clearly describe the job that the employee will assume with allowance for
flexibility. Duties are usually high level descriptions only. Responsibilities and accountabilities follow next, which must
be communicated well to the employee so that he or she knows what to expect with the job.
Work schedules, including work hours, must also be clearly indicated in the job description. The specific days and
working hours must be written so that the employee will be able to align the work schedule with his or her personal
schedule. Work schedules are highly driven by business requirements (e.g., a security agency business will need to
indicate the work schedules of the security guards it will hire).
Employee Qualification
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In hiring suitable employees for the job needed, entrepreneurs will have to look for the following criteria:
1. Educational background — This gives the entrepreneur an idea on the degree of the candidate's knowledge of
basic things. However, it is not the sole factor in selecting a candidate.
2. Work experience — This will tell him or her what to expect from the applicant and what he or she can potentially
contribute to the business based on his or her past positions and experiences. This will also establish the training
needs of the candidate.
3. Specific skill or knowledge — This one is important especially on technical jobs that require high proficiency. It
will be easy for entrepreneurs to place highly skilled people into specialized jobs because they can help right This
is also less expenses because entrepreneurs don't have to train them thoroughly to acquire such skills. Examples of
potential candidates that have specific skills or know ledge are engineers, architects, scientists, accountants, and
information technology specialists.
4. Work attitude — This deal with the worker's integrity and how he or she deals with his or her coworkers, bosses,
and customers. Entrepreneurs also need people with relationship skills because communication is important in
applying their expertise. A good work attitude involves being punctual, having good leadership and
communication skills, being a team player, making ethical decisions, obeying superiors, and being passionate and
dedicated to the company. Entrepreneurs, however, will decide what they are looking for in selecting the best
candidate.
Preparatory Selection of Job Applicants

Once the job description and employee qualifications are finalized by the entrepreneur, he or she now preselects a set of
candidates for the positions required. Yv"hen the business is already sizeable, entrepreneurs usually establish a human
resource (HR) department that will handle the selection and recruitment of candidates. The entrepreneur can initially
choose from his or her personal list of trustworthy people whom he or she thinks can contribute to the business venture. If
this list does not exist, he or she can turn to employment agencies or Manpower agencies that can do the job.
Headhunters help companies find a set of people suited for their requirements. They usually charge a finder's fee once the
entrepreneur has decided to accept an applicant. Manpower agencies, on the other hand, recruit temporary employees
under a short contract, usually on a six-month period. The entrepreneur can also opt to advertise job vacancies via print
such as general circulation newspapers or other publications if the intention is to promptly get a candidate from the public.
If the intention is to hire candidates with specific knowledge or skills, the entrepreneur must turn to magazines or
publications of the specific industry where the prospect belongs (e.g., The magazine BluPrint if the entrepreneur wants to
hire architects).
One viable option is to consider recommendations and referrals from friends, relatives, or business partners with an
untainted reputation. Recommendations from those with doubtful characters should of course not be considered by the
entrepreneur. Another is to look for his or her business networks, or the people whom the entrepreneur has worked with in
the past. This is a better way of preselecting the employee than the traditional way(interviews)because the entrepreneur
already knows the work ethics and qualifications of the potential employee.
Last, one of the revolutionary ways of preselecting potential employees is through digital media. With the power of the
Internet, an entrepreneur can easily post job vacancies through his or her Web site, social media accounts, e-mails, online
affiliates, search engines, Podcasts, or blogs. He or she can also choose to advertise via mobile through either show
message service (SMS) or mobile application, or simply mobile apps.
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Fig. 4.4. A typical classified advertisement page on a newspaper.

Source: https://topclassifiedsblog.files.wordpress.com/2014/08/classifieds-ads.jpg
Selection of Job Applicants

Once the potential candidates are pooled, the entrepreneur must now do the difficult task of screening them and picking
the most qualified and most suited for the job. Preliminary screening can easily be done because the entrepreneur will just
need to refer to the required qualifications and eliminate those who did not qualify. The entrepreneur or the HR
department can now conduct a series of interviews for the shortlisted candidates with the objective of getting the most
qualified candidate for the job. Some established businesses even conduct qualifying examinations in Math, English, and
Logic before they hire an employee. Some may give qualitative examinations or psychology tests that require the
candidates to answer in essay form or in multiple choice. Here are some common questions being asked in an interview.
However, it will be up to the entrepreneur or the HR personnel to ask relevant questions to the interviewee.
1. What are your strengths that you can contribute to our organization?
2. What are your weaknesses that can prevent you from working effectively in our organization?
3. What exactly did you do in your previous job(s)? How will these past experiences contribute to our organization?
4. What were your significant milestones in your previous job(s), and why do you consider them as such?
5. Can you discuss the things you know about our organization? Why are you interested to join our organization?
6. What are your career plans for the next five years if given the chance to work with our organization?
7. Can you describe your work ethic? How do you work with a team and with your superior?
Depending on the business requirements, the entrepreneur or the I IR personnel will ask mores pecific questions related
to traveling out of town or overseas, of working at night or at odd hours, working on holidays and weekends, willingness
to do other functions. and so on. Both the entrepreneur and the candidate must set realistic expectations for both In
reality, the entrepreneur promotes the business to a candidate by stating how good the company is and how great it is
working for them. Conversely, the candidate also sells himself or herself by citing his or her work experience or
educational background. Both parties should be aware of this in the interview process. Nevertheless, it will be up to the
entrepreneur or the hiring manager to decide based on the responses given by the candidate and his or her credentials.
Table 4.1 shows a list of basic requirements for a candidate to be considered for specific positions.
Table 4.1. Educational background, specific skills or knowledge, and work experience needed in selected positions
Educational Background and Specific Skills or

Position Knowledge Work Experience
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Operations manager for a • Preferably has a degree in Business Worked as a member of

retail store Administration major in Operations operations staff or as an
Management; having a operations manager in any
Master's Degree in Business Administration is a industry
plus
• Knowledgeable in MS Office applications
and six sigma (a disciplined approach for
eliminating operational defects), and has
good leadership
English teacher for • Has an Education degree in Worked as an English teacher

foreigners English or languages in a university or worked in a
call center as a trainer
• Eloquent speaker and a good listener, patient
with students, adaptive to foreign cultures
Fast food crew • High School graduate Physically fit, pleasing
personality, customer-service oriented Worked with a fast food
chain or restaurant; those
without experience are still
qualified because training
will be provided
Baker • At least a high school graduate and with Worked as a baker before
TESDA certification
• Physically fit, efficient, and fast worker
Job Offer
Once the entrepreneur or the hiring manager has been convinced already of the credentials and the interview answers of
the candidate, the job contract is now prepared. A job contract generally summarizes the terms and conditions of the
candidate's employment with the business.
It usually includes the following details: (I) rank or position of the candidate, (2) a list of responsibilities or deliverables
and its scope and limitations, (3) the salary and benefits including vacation and sick leaves, (4) work schedule, (5)
probationary period if any and qualifications to become a regular employee, (6) the duration of the contract, and (7)
resignation procedure (e.g., 30-day notice or leave immediately).
Employee Development
Training people is one of the biggest investments of an entrepreneur or a businessman. Therefore, he or she must devise
strategies on how to keep employees satisfied working in the company. Training starts with employee orientation.
Employee orientation is usually a one- to two-day session that summarizes the history of the business, its vision and
mission, policies and procedures, culture, and norms of the business. This also includes introduction to the co employees
and superiors, the tour of the work place, and the discussion of daily responsibilities and accountabilities including key
performance indicators (KPI) and key result areas (KRA) of the employee. KPIs and KRAs are the bases of the
entrepreneur for rating the performance of the employee—if the employee is exceeding expectations, meeting
expectations, or seldom meeting expectations.
For startup entrepreneurs whose budgets are tight, they usually conduct on-the-job training (OJT) as the most practical
tool in training the employee under a supervision of a team leader or manager. This will spare the entrepreneur the cost of
further classroom training because the employee is already productive and exposed to the real job and what he or she
experiences from the on-the-job training will serve as a learning investment. The manager's role is to closely supervise,
train, and monitor the initial performance of the new employee and provide him or her constructive feedback on how to
efficiently and effectively deliver the job. There should be a check and balance especially during the first few days of the
OJT. Constructive feedback should be given by the supervisor to the employee, and all errors committed should be
rectified immediately to prevent recurrence.
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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
Other practical options that the entrepreneur can use as training tools are the buddy system and mentor-mentee training
programs. The buddy system is a training program wherein an expert team member is assigned to assist a new employee
in his or her function. The objective of the expert employee is to train the new employee until he or she masters the job.
The mentor-mentee program, on the other hand, is a training program for supervisors, wherein they will be mentored by a
senior executive or senior officer of the business. The objective is to train the supervisor to handle key decisions and
strategic tasks that will eventually become part of his or her job once he or she climbs the organizational ladder.
Entrepreneurs must prepare a succession plan to ensure business operations continue even in their absence or the absence
of key employees, or when they decide to resign or retire.
When the employee is already familiar what he or she does on a daily basis and the supervisor already noticed a
substantial improvement in the employees’ performance, the entrepreneur or the management should now take the
employee to the next level. The entrepreneur can send the employee for further training through extensive leadership
training, part-time or full-time bachelor's or master's degree programs, or short-term technical: specialized courses.
One of the emerging and practical training development programs these days is enrolling online learning programs or
Webinars (seminar on the A Webinar is a practical way of learning because the entrepreneur or the employee does not
need to go abroad or out of town just to get the necessary training. It is also very flexible because the entrepreneur or
employee can learn at his or her convenient time or place. The employee can also expand his or her horizons and be
rotated in different areas of the business (e.g., from marketing to operations or vice versa).
The entrepreneur can also conduct internal training program led by competent subject matter experts to discuss the
intricacies of each department to the newly hired employees. "10 keep abreast with the external factors, the
entrepreneur can send himself or herself or the employees to attend international or local symposia, workshops,
conferences, and seminars. Internally, the entrepreneur must also conduct annual strategic planning and include key
employees to devise tactics and strategies for the business in the next coming years.
Employee training and development is a major thrust of every entrepreneur because employees are the best assets of a
business enterprise. For one, this human resource aspect helps the business reduce costs; remember that whenever
employees commit errors as a result of lack of training, the business incurs unnecessary cost. As a result of employee
training, productivity also increases because as the employee learns his or job every day, he or she becomes more and
more productive. Moreover, the full potential of employees is optimized especially when their skills and talents are
recognized. These will result in the increase in value-added contribution of the employees. Employees will also feel
important and needed: therefore, they will continue to be motivated and committed to the business. Indirectly, they also
become brand ambassadors of the business who promote their products or services to their circles.
Another upside of training is that employees build camaraderie when put together in one training session. This elicits
smooth working relationships with one another, especially if the role of one employee coincides with another employee.
All of these result in a positive line (net income), because reduced costs and increase in productivity mean increase in
revenues.
The greatest challenge for all entrepreneurs is constantly motivating and keeping high performing employees. Because of
their track record and achievements, they can easily transit to other competitors, which means all training investments to
high-performing employees will be gone, higher costs for training new employees, potential decrease in productivity, and
customers transferring to competitors as well. Therefore, entrepreneurs and the HR department must devise an effective
talent management program to gain the employees.
Here are several strategies for talent management:
1. Providing employees with a very competitive salary package that includes guaranteed bonuses, performance bonuses,
commissions, and other monetary incentives.
2. Nonmonetary benefits such as medical coverage, different types of leave: vacation lease, sick, leave, emergency
leave, birthday leave, maternity or paternity study lease), decent and notable job titles, flexibility in work schedule,
awards and recognition for excellent performance, inspirational leaders, transparency and fairness in employee
performance evaluation, and channels to which employees can provide constructive feedback without the risk of being
fired.
3. Additional (optional) benefits such as annual trips (international or local), work-from home opportunities,
scholarships, transportation and communication allowances, free meals and drinks, fitness programs, sports programs,
and other work-life balance programs.
Entrepreneurs must be able to be objective when evaluating the performance of employees. They must be focused on
the business objectives and if the employees are able to meet these objectives. They must do all possible strategies to
save high-performing employees because losing them outweighs the salaries and benefits that you will spend on them.
On the other hand, nonperforming employees must be motivated by the entrepreneur to make them more productive,
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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
unless replacing them is necessary or when these employees find better career options. Nonperforming employees are a
liability to the company.
MACHINE
Most businesses would not be able to operate without the aid of machines. Machines can be described as the "best friend"
of manpower in producing goods and offering services. They go hand in hand. Sometimes, machines can even replace
employees. Machines have become one of the 4Ms because they are a very important aspect of goods and service
production, and they have changed the way entrepreneurs conduct business. Machine are not only limited to physical
equipment but can also pertain to new technologies that hell business operations become standardized and seamless.
Without machines, business operation will be cumbersome, costly, and with low quality.
Equipment and Other Facilities
Depending on the product that the entrepreneur produces or the services that he or she offers, the facilities must be
strategically placed in the manufacturing site or in the service delivery area. The entrepreneur must prepare a facility plan
that details the most economical way to manufacture the product or offer the service by placing the facilities where they
can be efficiently used.
The sizes and shapes of the facilities and equipment affect the entire operations process, so the site must adapt to how big
or small the pieces of equipment are. The site must be conducive, well-ventilated, and well-lit, so that the employees can
manage the machines efficiently. There should be fire exits and safety reminders on how to use the facilities to ensure
safety of the employees. The equipment to be used should all be compliant with safety requirements to prevent accidents.
For pieces of manufacturing equipment that are complicated to operate (including delivery vehicles), the entrepreneur
must ensure that the employee went through rigorous training or certifications to operate them. The entrepreneur must
also allocate space for the storage or equipment, including the parking of delivery vehicles. He or she must also be aware
of the power consumption of each of the equipment to analyze the cost of producing the goods. Ultimately, the goal of the
entrepreneur is to maximize the pieces of equipment to their full capacity to minimize manufacturing or service delivery
costs.
Telecommunications and Information Technology

Regardless of any business the entrepreneur will venture into, telecommunications and information technology equipment
is mandatory. These pieces of equipment include mobile phones or smartphones, tablet computers, phablets (phone and
tablet in one), landline phones, laptops or desktop computers, POS machines, software programs, and business Web sites.
These tools aid the entrepreneur in making business processes fast and convenient.
Here are the advantages of having telecommunications and information technology equipment in a business:
 Landline phones — order-taking, telemarketing, and teleconferencing with business partners and customers
 Mobile phones (smartphones tablet computers, phablets) — mobile application for order taking, mobile
application payments, mobile marketing, social media marketing, teleconferencing with business partners and
customers, marketing research, mobile banking, and Internet promotions
 Laptop and desktop computers — order-taking, Internet marketing, making conference calls with business
partners and customers, marketing research, online banking preparing reports such as financial statements,
business case, inventory reports, and legal and compliance reports.
 POS machines charging customers debit or credit card, tracking sales, storing data' analyzing purchases
 Accounting and inventory software accounting all business transactions and profitability, monitoring sales and
inventory
 Website -- order-taking, 24/7 marketing, having online conversations with customers' tracking cust01ner activities
online, collecting customer information
The responsibility of the entrepreneur is to protect these pieces of equipment physically and against fraudsters who will be
using this information to align or steal from the business. These machines carry confidential information. Therefore, they
should be protected with strong passwords and used only by authorized employees. Employees must be trained to keep
every piece of important information confidential, including passwords. Software programs must always be updated and
checked against viruses and hackers. POS machines must always be in working condition and must be referred to the
banks when not properly working
There must be a business continuity plan (BCP) should machines not work properly. The entrepreneur must select reliable
suppliers for these machines so that contingencies arise; they may be able to provide immediate replacements or repair
them quickly. The entrepreneur can also negotiate with suppliers to provide discounted prices for bulk purchases.
On the information technology side, the entrepreneur must appoint two or more reliable information technology experts
whom they can call whenever there are issues encountered in the software and computers. Both physical and nonphysical
12
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
equipment should be covered in the event of loss of property due to fortuitous events and accidents, machine breakdown,
manual faults, or interruption of business.
MATERIALS
Whether the entrepreneur will offer products or cater services, he or she must pinpoint several dependable suppliers of
quality raw materials and supplies. The supplier must have a consistent and sufficient amount of raw materials and
supplies that can accommodate the demand of the entrepreneur. In short, the selection of suppliers depends largely on how
the suppliers will not cause interruptions in the production of goods or serving the customers. From the onset, the
entrepreneur should decide on what route to choose when it comes to materials requisitioning. Options include the
following: (l) manufacturing own products or the original offer services; (2) outsourcing of manufacturing or service
activities to a third party; and (3) purchasing own product or service from present suppliers.
In manufacturing the entrepreneur’s products or offer services, a huge chunk of capital must be prepared because all the
expenses in manpower, machines, and materials will be borne by the entrepreneur. entrepreneur must have studied the
business feasibility thoroughly. as the risk is larger with this option. A set of competent employees must be employed to
handle the machines or service to the customers. But these challenges can be augmented the entrepreneur can be very
specific in the details that he or she wants for the product or service He or she can also closely monitor the quality of
products or services, strategically design the production or service blueprint, as well as its schedule, and be more flexible
in deciding on the production quantity on the marketing Side, the entrepreneur ill also have the opportunity to build his or
her n brand identity. Most importantly the profits will all go to the entrepreneur or the manufacturer.
Outsourcing is the process of appointing a third-party manufacturer to do the manufacturing operations of the business.
These third party companies already have an expertise in handling and manufacturing these products, supplies, or
inventories, and because they manufacture, they produce goods in bulk. These drive the companies to create products or
services tailored to the entrepreneur's needs at a lower cost. Some outsource companies offer to provide the services for
the entrepreneur.
Outsourcing provides the entrepreneur a chance to provide the operation details to the third party. No changes in the brand
name and identity will be implemented because the entrepreneur still holds the rights to such. Outsourcing saves the
entrepreneur from buying expensive machines, renting locations, or hiring manpower, as the operational aspect of the
business will be transferred to the third party. This scenario, however, poses risks, especially when the outsource party
closes its business, when it runs out of supplies, when it breaches the service-level agreement, when it produces
substandard products or services, or when the service stops. profits are also shared with the third party, which does not
happen when the entrepreneur creates the product in his or her own. Also, because it knows how the entrepreneur 's
business works, the third party can easily shift to other companies. The entrepreneur, therefore, must protect its product
through a trademark or a patent, and a noncompeting agreement or nondisclosure agreement. A patent is the right to
protect the entrepreneur regarding the product or service. A trademark, on the other hand, is a sign or symbol that helps
distinguish the product from others. A nondisclosure agreement (NDA) states that the third party will be given full access
to any confidential information provided that it should not be disclosed to anyone else.
One option that an entrepreneur has is to make use of multiple outsource parties. Having multiple outsource parties can be
an advantage because of the following: (l) it helps continue the operation even if one of the third party stops; (2) the
entrepreneur will have greater bargaining power on the price and scope of the product, and (3) the entrepreneur may have
a choice to switch to other parties if one of them does not perform well.
Purchasing finished products from a manufacturer or offering the services of another company is another viable option
for the entrepreneur. In this setup, the entrepreneur canno t own the brand name of the product or service. Moreover, the
manufacturer or the original Service provider is to sell to the entrepreneur's competitors. In short, the entrepreneur is
just one of the many distribution hubs of the manufacturer or the original service provider. This setup is prevalent in
distribution businesses, retailers, sari-sari stores, and franchises.
Same with outsourcing, buying finished products or offering services of another company spares the entrepreneur of the
costs of machines and full-time manpower. Therefore, the entrepreneur can use his or her funds for other purposes. This
setup also allows the entrepreneur to buy and sell a broad range of finished products and established services. Switching
to another manufacturer or service provider will be easy if the sales of the products or services are not good. However,
the entrepreneur will have a hard time establishing a unique selling proposition because all the competitors offer exactly
the same products or services. They usually compete on the indirect aspects of the business such as customer experience
or physical attributes of their business.
Another disadvantage is that the manufacturer or original service provider can just easily take the entrepreneur off its list
when it wants to. The manufacturer or service provider can also charge unreasonable prices to the entrepreneur or, worse,
go directly to end customers and give them lower prices to bypass its relationship with the entrepreneur.
13
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
Logistics
Entrepreneurs/manufacturers can also venture into distributing their products on their own without the aid of a distributor
or agent. This is where the entrepreneur must understand and implement efficient logistics management. As discussed
earlier, the entrepreneur/manufacturer is responsible for manufacturing, warehousing, transportation, inventory
management, marketing, and selling the product or service.
Warehousing is storing the finished goods manufactured in a facility until they are distributed to end users. Warehousing
cost is usually substantial. Therefore, the entrepreneur should think of ways on how to reduce the cost of warehousing by
either buying an economical warehouse or renting an inexpensive space.
Transportation will also be a major cost in logistics management. It is the process of efficiently transferring the products
to retailers or consumers. The entrepreneur/manufacturer must purchase energy-efficient vehicles that can carry a
reasonable amount of merchandise to prevent inefficient trips. The entrepreneur/manufacturer can also use the presence of
distribution hubs. The distribution hub is where the entrepreneur/manufacturer combines the goods before delivery to
retailers or end consumers. Consolidating different products in the distribution hub elicits efficiency because, more often
than not, a manufacturer carries multiple products. Instead of delivering per product to retail outlets, the
entrepreneur/manufacturer can consolidate all the products needed by the retail outlet and deliver just once.
Inventory should also be tracked religiously by the entrepreneur/manufacturer. Each of the inventories in the warehouse,
distribution hubs, and manufacturing sites should be monitored. The law of supply and demand must always be taken into
account. There shouldn't be a surplus of inventory especially if the entrepreneur is selling perishable goods. The
entrepreneur must be knowledgeable about the life span of the products that will be sold. The entrepreneur/manufacturer
must also ensure that there is enough space to store and stock inventory, depending on storage requirements (e.g., product
is required to be stored in cold temperature). To protect the products from fortuitous events, the entrepreneur must insure
them with a reliable insurance firm.
It can be surmised that the entrepreneur is not selling well if there are too many products left after a long period of time in
his or her inventory, or he or she is producing more than what is demanded by the customers. The key with inventory
management is understanding the historical and current demand data as well as future trends to avoid unnecessary costs in
producing too many products. Bear in mind that making too many products can incur manufacturing costs, storage costs,
and costs of spoilage.
REFERENCES:
DIWA Senior High School. Entrepreneurship 2016. DIWA Learning Systems Inc.
REX BOOKSTORE. Entrepreneurship 2016.
Entrepreneur and Entrepreneurship Definition (investopedia.com)
Entrepreneurship Aptitudes Test (psychtests.com)
Introduction to Entrepreneurship | Boundless Business (lumenlearning.com)
Chapter 1 – Introduction to Entrepreneurship – Entrepreneurship and Innovation Toolkit (usask.ca)
Introduction: Entrepreneurship | Encyclopedia.com
https://www.marketingtutor.net/10-types-of-pricing-strategies/
https://www.yourarticlelibrary.com/marketing/promotional-mix/top-5-elements-of-promotion-mix-with-diagram/48643
14

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Information Sheet LO 1.

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

PRODUCT DEVELOPMENT, OPERATIONS, AND FINANCIAL PLAN

1.4.1 Fundamentals of Product Development

Product or Service Description

Creating a Prototype of the Product or Service

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

Testing the Product Prototype

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

SELF-CHECK # 1: REFLECT UPON / DISCUSSION FORUM

Based on what you have observed:

Validation of Market Acceptability

1.4.2 THE 4Ms OF OPERATIONS

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

Manufacturing of Goods (Schaper and Volery, 2004).

Here is an example for the production of palay or rice.

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

Service Delivery Process

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

Preparatory Selection of Job Applicants

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

Fig. 4.4. A typical classified advertisement page on a newspaper.

Selection of Job Applicants

Educational Background and Specific Skills or

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

Operations manager for a • Preferably has a degree in Business Worked as a member of

English teacher for • Has an Education degree in Worked as an English teacher

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

Telecommunications and Information Technology

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

MODULE 5 & 6: Developing a Business Plan Subject Teacher: TVL-HE Teachers

REX BOOKSTORE. Entrepreneurship 2016.

Entrepreneur and Entrepreneurship Definition (investopedia.com)

Entrepreneurship Aptitudes Test (psychtests.com)

Introduction to Entrepreneurship | Boundless Business (lumenlearning.com)

Chapter 1 – Introduction to Entrepreneurship – Entrepreneurship and Innovation Toolkit (usask.ca)

Introduction: Entrepreneurship | Encyclopedia.com

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Module 5 & 6. Entrepreneurship

Module 5 & 6. Entrepreneurship