The Entrepreneurial Mind

Review Notes
THE ENTREPRENEURIAL MIND

INTRODUCTION
When we imagine an entrepreneur, we often think of a visionary with savvy business

smarts destined to be a big success. On the contrary, what sets successful entrepreneurs apart
isn’t just their business plan. Oftentimes, it’s the characteristics of the entrepreneur themselves.
Research shows that successful entrepreneurs have a unique way of approaching problems.
This is the entrepreneurial mindset. This mindset shapes how successful entrepreneurs act and
view the world around them. It’s also essential to their creativity and success.
The entrepreneurial mindset includes a variety of admirable traits including the ability to
take initiative, adapt to change, find creative solutions and be comfortable with risk. People who
have adopted this mindset see challenges as opportunities. They view failure as a chance to
learn and let vision, not perfectionism, drive their actions.
“With this mindset, learners are able to recognize potentially profitable opportunities, generate
creative solutions to important problems, assess and minimize risk, gather critical resources,
and present solutions to interested stakeholders,” said Scott Livengood, instructor of ASU
Continuing and Professional Education entrepreneurship courses. This way of thinking helps
successful entrepreneurs make smart decisions and innovate in the face of challenges.
“These learners are also able to analyze the challenges and opportunities with creating new
ventures and can act to increase the likelihood of success in their own entrepreneurial
endeavors,” Livengood said.
The benefits of this mindset extend well beyond entrepreneurship. The ability to learn
from failure, think creatively and identify opportunities can foster success in all parts of your life,
even if you never plan to start your own business. To develop an entrepreneurial mindset, you’ll
probably need to change some of your current thought processes. Start by identifying which
parts of your current mindset need to improve. Then come up with a plan to make those
changes. This may involve changing your habits or developing the self-awareness to catch
yourself when you fall back into your old mindset. Another key part of the entrepreneurial
mindset is to never stop learning. So, try taking entrepreneurship classes to further boost your
entrepreneurial thinking. By creating a vision and acting upon it, you’re already one step closer
to thinking like an entrepreneur. If we are to address the issue of poverty with some degree of
success, life tells us we have no choice but to actively encourage entrepreneurial ventures.
Therefore, teaching students from all field of studies on how to develop an entrepreneurial
mindset is one way to encourage creation of more entrepreneurial ventures.
OBJECTIVES
After successfully completing this course, students should be able to:
1. Summarize the concepts of entrepreneurial process and approach.
2. Appraise their entrepreneurial attributes, qualities, skills and competencies in order to carry
out the concepts of entrepreneurial process and approach.
3. Generate business ideas through opportunity seeking, ideation, innovation and creativity.
4. Write a business plan along marketing, production, organizational and financial
management.
5. Participate in community building activities that aim for development in the socio-economic
aspect.
Review Notes
LESSON I
Definition,Origin and
Nature of Entrepreneurship
I.I Definition of Entrepreneurship
 Entrepreneurship as the ability to create and build a vision from practically nothing.
This vision requires a willingness to take calculated risks – both personal and
financial – and to do everything possible to reduce the chances of failure (Jeffrey
Timmons).
 Entrepreneurship as the willingness and ability of an individual to seek out

investment opportunities in an environment and be able to establish and run an
enterprise successfully based on the identifiable opportunities (Okpara, 2000).
 Refers to all the processes and activities involved in establishing, nurturing, and
sustaining a business enterprise. It is an economic activity that involves setting up,
operating, and taking the financial risks of a business.
1.2. What is an Entrepreneur?

It cannot be denied that there are still some who are confused with the difference
between entrepreneur and entrepreneurship. To further differentiate the two, different
definitions of entrepreneur from various authors are summarized below, as follows:
Description
Economist: An entrepreneur is one who brings resources, labors, materials and other
assets into combinations that make their value greater than before and also,
one who introduces changes, innovation and a new order.
Psychologist: Entrepreneur could refer to such a person as typically driven by certain

forces: need to obtain or attain something, to experiment, to accomplish or
perhaps to escape from authority of others.
Businessman: An entrepreneur appears as a threat, an aggressive competitor. The
Review Notes
entrepreneur maybe an ally, a source of supply, a customer, or someone
good to invest in.
Capitalist Entrepreneur is one who creates wealth for others as well, who finds better
Philosopher: ways to utilize resources, and reduce waste, and who produces jobs others
are glad to get.
Robert Nelson Entrepreneur as a person who is able to look at the environment, identify
opportunities to improve the environment, marshal resources and implement
(Professor):
action to maximize those opportunities.
1.2 Origin of Entrepreneurship

 Its origin remains to be unclear, but there are indications that the term entrepreneur
or entrepreneurship originated from the French verb entreprendre which means “to
undertake”.
 There are also other terms an entrepreneur has, that it can also be translated to
mean, “between-taker” or “go-between”
 Shefsky (1993), in his book Entrepreneurs Are Made Not Born, defined
entrepreneur by dissecting the word into three parts: entre means “to enter”, pre
means “before”, and neur means “nerve center”
1.3 Entrepreneurship as a process and approach

 Entrepreneurship is also described by renowned scholar, Albert Shapero, as a
dynamic process and an approach.
 As an approach, the entrepreneur considers the business opportunity as a
chance to solve the problem rather than solving the problem itself.
 Entrepreneurship also is a dynamic process of innovation and new-venture
creation through five major dimensions – individuals, organization,environment,
process, and institutions.
On the other hand, entrepreneurial process is supported by two factors according
to Albert Shapero:
1. Initiative: An individual or group takes the initiative. This may refer to the
entrepreneurial attributes an individual need to work for the available resources.
2. Organization: Resources are brought together in organization to accomplish
some objective (or the resources in some organizations are recognized).
1.4 Socio-economic benefits from Entrepreneurship
Entrepreneurs have proven over and over again to be the pioneers who convert
ideas into products and dreams into reality and eventually help the economy. There are
eight socio-economic benefits from entrepreneurship, as follows:
Review Notes
1. Promotes self-help and provides employment. Through entrepreneurship, the spirit
and culture of self-help, self-reliance, and self-sufficiency among citizens of nations is
addressed.
2. Mobilizes capital. Venturing into business means releasing or mobilizing capital that
would fire up the economy.
3. Provides taxes to the economy. The entry of entrepreneur into the world of
business means tax sources for the government.
4. Empower individuals. The real indicator of economic well-being among citizens and
the masses are in some ways gauged by the amount of financial resources that every
citizen accumulates.
5. Enhance national identity and pride. It is not only the entrepreneur that directly
benefits from his/her entrepreneurial endeavors, but the country also takes pride in the
honor that goes with it.
6. Enhance competitive consciousness. Innovation, being the essence of

entrepreneurship is a catalyst to a consciousness and culture of competition, which, in
the long term breeds quality and global competitiveness.
7. Improves quality of life. The entrepreneur’s penchant for innovation and

development of new product, as well as creation of new markets, redounds to the
betterment of the products and services.
8. Enhances equitable distribution of income and wealth. With the entrepreneurs

succeeding in their respective endeavors, chances are that equitable distribution of
income and wealth can be likewise expected.
1.5 Main Theories of Entrepreneurship
Entrepreneurship Economist Description

Theory
Innovation Joseph Alois Schumpeter Entrepreneurs take the stationary
economy to a new level of development by
adding innovation and creativity of their
own. Schumpeter also stated that
entrepreneurs bring innovation in two ways
namely:
1. By reducing the cost of production
2. By increasing the demand for certain
products
Economic Richard Cantillon An entrepreneur acts as both ‘producers’

and ‘exchangers’. An entrepreneur’s action
greatly affects the supply chain of raw
Review Notes
products being collected, to become an end
product for consumers.
Sociological Max Weber Entrepreneurs should accept the system of

a society for the development of themselves
as well as their startup.
Psychological They are based on the personal

characteristics of a typical entrepreneur:
1. Locus of control: Any entrepreneur’s
success can be an outcome of internal locus
of control as well as the outer locus of control
i.e., his or her Inside abilities and support
from outside.
2. Theory of personality traits: The inborn
qualities of an individual are the one that
naturally makes them an entrepreneur.
3. Theory of need for achievement:
Entrepreneurs are driven by a need for
achievement and it eventually makes them
succeed.
Opportunity based Peter Drucker The entrepreneur always searches for

change, responds to it and exploits it as an
opportunity
Resource-based This theory states that entrepreneurs need

resources to start and carry their businesses
Anthropological Entrepreneurs should consider the social

and cultural contexts. Entrepreneurs can
find possibilities that present themselves as
difficulties because of the social aspects of
business activities (social or environmental)
The five steps of entrepreneurship
Process of stage Venkat Rao
development according to this theory are:
1. Simulation for stimulation of
entrepreneurship
2. Identifying abilities and capacities of
entrepreneurship
3. Expansion and development stage
4. Publicity foundation/Promotion
5. Feedback
Review Notes
LESSON II
The Attributes
Of an Entrepreneur
II. The Attributes of an Entrepreneur

Starting a business can be exciting and scary at the same time. When you hear
stories about how many businesses go broke or how many relationships fail due to the
pressures of starting a business, you can be forgiven for wondering why anyone would
even contemplate it.However, for whatever reason a person starts a new business, there
are several attributes or traits that most successful entrepreneurs have in common. Here
are some of the attributes and characteristics of an entrepreneur.
1. Self-awareness. He knows who he is, what he is good at and what he likes to do.
2. Self-motivated. The characteristics that gets him going and keeps him moving when
he is in business.
3. Courage. Willingness to take risks and chances.
4. Confidence. He is aware of his capabilities and he does not doubt that he can
accomplish the most challenging task on hand.
5. Positive Thinking. Entrepreneurs think of success and bright ideas.
6. Patience. The capacity to accept or tolerate delay.
7. Decisiveness. The entrepreneur goes with his intuition and trust that he is doing the
right thing.
8. Experience. Whether or not one’s experience is directly related to business he is
planning to start, it is a key component for growth.
9. Knowledge. One has a better chance of succeeding by knowing, as much as
possible, about factors such as business basics.
10. Information-Seeking. To assure accomplishment of his entrepreneurial goals, the
entrepreneur continuously seeks information that concern his business.
11. Perseverance. He must be willing to persevere during the rough times.
12. Drive. One must believe in his goal and be determined to succeed.
13. Risk-taking. They prefer tasks that challenge them. They are not afraid to take risks.
14. Innovation. Entrepreneurs are creative. They do things in new and different ways.
15. Opportunity-Seeking. An entrepreneur readily identifies opportunities for going into
or to improve his business.
16. Demand for efficiency and quality. Setting high but realistic standards of
excellence for himself, he finds it difficult to compromise on those standards.
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17. Systematic planning and monitoring. The entrepreneur sets what are to be
accomplished, and meticulously assesses how today’s activity can contribute to the
accomplishment of his long-term goal.
18. Persuasion and networking. The entrepreneur easily establishes a network of
personal and business contacts around him.
2.1 Skills Needed by Successful Entrepreneur
1. Creative thinking. Creativity leads to invention, which leads to opportunity. To

identify real-world challenges and answers, one should think outside the box.
2. Critical thinking. Critical thinking entails more than just finding a solution; it also
involves making decisions, thinking from several perspectives, analyzing and
evaluating current data to find the best and most efficient solution.
3. Effective communication. Entrepreneurs must use communication to begin and
expand their businesses. Make direct touch with clients to learn about their needs
and feedback.
4. Financial knowledge. It’s important to understand how to manage your company’s
finances. It’s important to recognize your financial condition because it will
determine the outcome of your risks
5. Smart business management. Entrepreneurs need a good strategy. You must
continue to research business concepts and learn how to target your market.
6. Valiant. Entrepreneurs must deal with risks regularly. Entrepreneurship includes
genuine risks such as bankruptcy and failure. Even natural calamities and
environmental threats.
7. Stress management. Success requires perseverance and effort. You must remain
calm, focused, and optimistic. Keep your physical and emotional well-being.
Maintain a healthy work-life balance.
8. Time management. Entrepreneur must learn to manage your time to lessen the
stress caused by your workload. Time is a precious asset. To prioritize your duties,
use four-quadrant methods. You can save a lot of time by setting time boundaries
9. Flexibility. An entrepreneur must be able to quickly adjust to new market conditions,
rapidly changing technology, and fierce competition. The key to being flexible is to
always learn new things.
10. Technical skills. To promote your product, you must understand how to use
various designing software, apps, and social media platforms. You don’t have to
master them, but understanding the basics will be beneficial.
Review Notes
LESSON III
The Entrepreneurial Mindset
III. The Entrepreneurial Mindset

The global economy is creating profound and substantial changes for
organizations and industries throughout the world. The changes make it necessary for
business firms to carefully examine their purpose and to devote a great deal of attention
to selecting and following strategies that have high probability of satisfying multiple
stakeholders.
3.1 Individual Entrepreneurial Mindset

An entrepreneurial mindset is a set of skills that enable people to identify and
make the most of opportunities, overcome and learn from setbacks, and succeed in a
variety of settings. Examining this mindset provides an interesting look at the
entrepreneurial potential within every individual.
Common Characteristics Associated with Entrepreneurs

A review of the literature related to entrepreneurial characteristics reveals the existence
of a large number of factors that can be consolidated into a much smaller set of profile
dimensions. For example, the following is one of the list of common characteristics that
has been compiled:
1. Total commitment, determination, and perseverance. Total dedication to
success as an entrepreneur can overcome obstacles and setbacks. Sheer
determination and an unwavering commitment to succeed often win out against
odds that many people would consider insurmountable.
2. Drive to achieve and grow. Entrepreneurs are self-starters who appear to others to
be internally driven by a strong desire to compete, to excel against self-imposed
standards, and to pursue and attain challenging goals.
3. Opportunity and goal orientation. Opportunity orientation is the constant
awareness of opportunities that exist in everyday life. They are goal oriented in the
pursuit of opportunities. Setting high but attainable goals enables them to focus their
energies, to selectively sort out opportunities, and to know when to say “no”.
4. Taking initiative and personal responsibility. Entrepreneurs willingly put
themselves in situations where they are personally responsible for the success or
failure of the operation.
5. Persistent problem-solving. Entrepreneurs are not intimidated by difficult
situations. In fact, their self-confidence and general optimism seem to translate into
a view that the impossible just takes a little longer.
6. Seeking using feedback. Entrepreneurs also have strong desire to know how well
they are doing and how they might improve their performance.
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7. Internal locus of control. Entrepreneurs do not believe that the success or failure
of their venture will be governed by fate, luck, or similar forces. They believe that
their accomplishments and setbacks are within their own control and influence, and
that they can affect the outcome of their actions.
8. Calculated risk taking and risk seeking. When entrepreneurs decide to participate
in a venture, they do so in a very calculated, carefully, thought-out manner.
9. Integrity and reliability. Integrity and reliability are the glue and fiber that bind
successful personal and business relationships and make them endure. Integrity
and reliability help build and sustain trust and confidence
3.2 Corporate Entrepreneurial Mindset

The new century is seeing corporate strategies that are focused heavily on innovation.
Peter Drucker described four major developments that explain the emergence of this
economy.
1. The rapid evolution of knowledge and technology promoted the use of high-tech
entrepreneurial start-ups.
2. Demographic trends such as two-wage-earner families fueled the proliferation of
newly developing ventures.
3. The venture capital market became an effective funding mechanism for
entrepreneurial ventures.
4. American industry began to learn how to manage entrepreneurship.
Re-engineering Organizational Thinking

To establish an entrepreneurial mindset, organizations need to provide the freedom and
encouragement required for employees to develop their ideas. Five important steps for
establishing this new thinking follow:
1) Set explicit innovation goals. These goals need to be mutually agreed on by the
employee and management so that specific steps can be achieved.
2) Create a system of feedback and positive reinforcement. This is for potential
innovators or creators of ideas to realize that acceptance and reward exist.
3) Emphasize individual responsibility. Confidence, trust and accountability are key
features in the success of any innovative program.
4) Provide rewards for innovative ideas. Reward systems should enhance and
courage other to risk and to achieve.
5) Do not punish failures. Real learning takes place when failed projects are examined
closely for what can be learned by individuals
The Nature and Concept of Corporate Entrepreneurship

The major thrust of corporate innovation is to develop the entrepreneurial spirit within
organizational boundaries, thus allowing an atmosphere of innovation to prosper.
Review Notes
 Researcher Shaker A. Zahra observed that “corporate entrepreneurship maybe
formal or informal activities aimed at creating new businesses in established
companies through product and process innovations and market developments.
 William D. Guth and Ari Ginsberg have stressed that corporate entrepreneurship
encompasses two major phenomena: new venture creation within existing
organizations and the transformation of organizations through strategic renewal.
3.3 Cultivating Entrepreneurial Mindset

 Successful entrepreneurship must be experiential, be able to build confidence,
have a social meaning, present a social challenge and improve quality of life.
 Deep experiential learning helps with life skills, and educators’ experience and skills
matter when they deliver entrepreneurship programs.
The five most important entrepreneurial factors are:

 Innovation
 A futuristic mindset
 Risk-taking ability
 Adaptability
 Commitment
Individual characteristics of entrepreneurs include:
 Ascribed characteristics
 Achieved characteristics
 Learnable characteristics
 Demand and requirement characteristics
The five characteristics of entrepreneurial mindset are:
 Engaging the energies of everyone in your domain
 Pursuing the very best opportunities, rather than exhausting yourself
and our organization by chasing after every option
 Seeking new opportunities
 Focusing on execution and adaptation
 Pursuing opportunities with enormous discipline
Qualities making up an entrepreneurial mindset are:
 A clear and achievable vision, even if the resources may not be in an
entrepreneurs’ control
 Self-awareness
 Confidence
 Self-motivation
 A willingness to take calculated risks
 A willingness to listen to others
 A lack of fear of failure
 A willingness to work hard
Review Notes
LESSON IV
Opportunity Seeking
And Ideation
IV. Opportunity Seeking and Ideation

A person with a creative mind has several business prospects. All businesses
begin with an idea, and it is believed that creativity, via innovativeness and the ability to
offer something new to the market, distinguishes a typical businessman from an
entrepreneur. A wise entrepreneur may choose to run a small or large firm, but it is
critical to follow the process of discovering and analyzing many choices in order to
generate ideas that may be turned into a lucrative business venture.
4.1 Search for Business Opportunity

In selecting a business, option should not be based on luck and immature
thinking, but on a thorough evaluation and systematic process. Start by developing long
and short lists of potential business opportunities.
In discovering business opportunities, the following factors on resources have to be

evaluated:
1. Markets. This refers to the number of prospective buyers, competitors, the price, and
the quality of goods and services that have to be analyzed. Business opportunities exist
in areas where consumer satisfaction is weak or incomplete.
2. Individual Interests. Business interest of individuals should match business
opportunities. For example, if one is a good cook, he could venture in the food business.
3. Capital. This serves as the fuel that keeps the business operating. The availability of
funds should fit the type of business to organize.
4. Skills. The entrepreneur should have the proper skills in the business he is going to
undertake.
5. Suppliers of inputs. It is important that there are steady suppliers of raw material and
other inputs to the business.
6. Manpower. The success of any business also depends on the efficiency of its
employees.
7. Technology. Entrepreneurs should be aware of the presence of technology to
improve their products and services, or introduce new innovations in the market.
Other opportunity-seeking processes that can guide a prospective entrepreneur as to
what kind of business to establish are as follows:
 Look at other successful entrepreneurs
 Respond to a problem area
 Home-based business option
 Linkage of resources
Review Notes
One best way to evaluate business opportunity is through Market Research,
which is defined as the study of all problems in marketing a product.
The steps in Market Research are:
1. Defining the problem
2. Marketing a preliminary investigation
3. Planning the research
4. Gathering the data
5. Analyzing the data
6. Reaching a conclusion
7. Implementation and evaluating decision
4.2 SWOT Analysis

The SWOT Analysis is also applied to be able to translate business opportunities
into profits. SWOT Analysis is a tool for evaluating the strengths, weaknesses,
opportunities, and threats associated with a particular product or service. In knowing this,
the entrepreneur must be able to have an idea or a precautionary measure even before
the start of the business.
Review Notes
Excellent knowledge about the life cycle of the products provides the entrepreneur
business opportunities to continuously start in business.
The following are the description of the various stages of a product life cycle.
 Introduction (Development). If consumer awareness and acceptance of
product are low, launch through the use of marketing activities, which make the
profit low due to cost of development and marketing activities.
 Growth. To meet the growing demand, product distribution is expanded. Sales
rise rapidly as product become popular.
 Maturity. Sales are still rising, but rate of increase has declined. At the latter part,
a sale reaches its peak, while profit begins to fall
 Decline. There is a sharp fall in sales volume, while profit curve becomes almost
flat or horizontal. There is also decline in the number of competitors. The only
survivors are those who specialize in marketing the product. Once product is no
longer profitable, it is eliminated from the market.
4.3 Ideation and Entrepreneurial Creativity

The beginning of an endeavor is ideation. This should be the first investment of
anyone who seeks to be an entrepreneur; and to be called an entrepreneurial business
opportunity, such idea has to be new, or if not, should be innovative.
The more idea a person produces, the more original and the better quality ideas one will
find among them. The most common ways of developing ideas are as follows:
 Recognizing the need. Develop an idea or a product that can satisfy a need,
and respond to the need by establishing a business concern.
 Improving an existing product. The result of consumer dissatisfaction to the
existing product could open the door to introduce innovations or improvements.
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 Recognize trends. Entrepreneurs should be able to recognize the opportunity to
develop a product and set trends that can make them leading entrepreneurs.
 Be aware of everything. There is no other way to know about what is happening
around you, but to research and read.
 Questions and assumptions. Anybody can question the relevance or quality of
any product or services, provided, that there is an effort to improve the product.
 Naming it first, then, develop it. If you have the idea, study it and develop it to
something that is worth the business.
Once you generate and idea, it has to be protected. There are many ways of protecting
your idea from being stolen or claimed by others, and losing the opportunity to be known
as the creator and the originator of the ideas. The following are the ways of protecting
your ideas:
 Confidentiality Agreements. It specifically provides that a signer will not share
the idea to everyone. This is typical agreement or contract where one should
ask advice to a patents attorney or those with experience and expertise in the
intellectual property rights.
 Patents. These gives the investor exclusive legal rights to exclude anyone else
from manufacturing, selling, importing, or using an invention using the life of the
patent.
 Trademarks. This is a word, name, symbol, or device used by manufacturers on
merchants to identify their goods and distinguish them from others sold in the
market. This should be send in conjunction with a business or a product,
otherwise, this will not be granted.
 Copyrights. A copyright protects the creative works of composers,
authors/writers, artists, and others. This is the easiest form of protection for
Intellectual Property.
4.4 The Concept of Innovation

Innovation is doing something different. It could be introducing either something new or
different. Innovativeness is a characteristic of an individual, team, or organization. This is
also the capacity to create ideas and develop them to usable products or services.
Review Notes
Impacts of Innovation
Efforts on innovation must have impacts — positive impacts. It must have a
positive implication that is supportive of organizational goals and objectives. The
innovative accomplishment exists if the following happens:
Effecting a new policy – creating change or orientation or direction
Finding new opportunities – developing an entirely new product or opening a new
market
Designing a new structure – changing the formal structure, reorganizing or
introducing a new structure
Devising a fresh method – introducing a new process, procedure, or technology
for continued use
The generation of idea and transforming it into a business

venture can make or break a potential entrepreneur. The
success of the business could lead to personal prosperity of the
owner and help the economic condition of our country.
Innovation is not only for a change, but also for the search in excellence, not only
in producing a product, but also in form of innovative systems and services. The
innovativeness and the creativity of an individual could be the greatest assets any
business could have, so this should be developed and properly taken care of.
Review Notes
LESSON V
Business Planning
V. Business Planning
Venturing into a new business or doing any form of innovation in a business
organization demands or necessitates a plan. A business plan that is well-researched
and well-done is by itself an insurance against the illusive success that every
entrepreneur is looking forward to.
It is the entrepreneur's guide and direction as to what should be done and how it
should be done. It specifies what must be accomplished throughout a certain period of
time. Planning and organizing a business demands an accurate assessment of
resources, skills, interests, and attitudes, as well as the needs of the community and the
level of competition.
5.1 Concept of a Business Plan

It is a written document prepared by the entrepreneur that describes all the
relevant external and internal elements involved in starting a new venture. It is an
integration of functional plans such as marketing, finance, manufacturing, and human
resources. - Hisrich and Peters
A business plan is a document that convincingly demonstrates the ability of a
business to sell its products or services to make satisfactory profit. A better definition: a
business plan is a selling document that conveys the excitement and promise of your
business to any potential backers or stakeholders. - David E. Gumpert
It is thinking ahead of objectives, strategies, financing, production, marketing,

profit prospects, and growth possibilities. However, business planning should be realistic.
This means planning is based on the available resources and is responsive to the needs
of the community. Business planning involves the attainment of goals and the ways to
accomplish such objectives.
5.2 Principles of Planning

Here are some principles of planning which have general application, particularly for
micro and small business:
Planning must be realistic. It must be based on the available resources: human,
financial, and physical resources.
Planning must be based on felt needs. The objectives of an entrepreneur should
fit the needs of the people in a community.
Planning must be flexible. Resource needs and economic conditions change.
Planning should be adjusted to such changes to be effective and relevant.
Planning must start with simple projects.
Review Notes
5.3 Stages of Business Planning
1. Unplanned stage. At the start of the business, the owner-manager is busy looking for
funds, customers, materials, and equipment. He has no time for planning. His entire
attention is devoted to the daily operations of his business in his intense desire to
survive.
2. Budgeting system stage. Eventually, the owner-manager realizes the need to

develop and use a budgeting system. Estimated income is made to facilitate the orderly
function of the growing enterprise.
3. Annual Planning stage. The owner-manager drafts an annual plan. He can either
use the top-down planning or bottom-up planning. In a top-down approach, he provides
the goal and let the employee comply with it. While in a bottom-up approach, he
encourages his employees to participate in planning the goals and strategies.
4. Strategic Planning stage. As the business enterprise becomes bigger, a long range
planning is needed.
5.4 Components of Business Planning

1. SWOT. The chances of product or service can be evaluated through the SWOT
analysis. Every product or service has its own strength, weakness, opportunity, and
threat. Planning should include the improvement of a product/service and in order to
survive competition.
2. Objectives. These should be specific and realistic. Such objectives can be daily,
weekly, monthly, and yearly.
3. Strategies. These are ways of accomplishing the objectives. Such ways are stated in
the financial, production, marketing, and organizational plans of the enterprise.
4. Time Frame. In business, time is gold. For this reason, an entrepreneur must be
efficient in time management.
5.5 Steps in Business Planning

1. Evaluate your personal resources and interests, and the resources of the
community.
Do you have necessary funds?
Do you have skills or management experience?
Does the government provide financial and technical assistance?
Are raw materials available?
2. Analyze your market.
Is there a good demand for your product?
How many competitors are there in the market?
What is your estimated share in the market?
Who are your customers?
3. Choose a proper business location.
Is it near your perspective customers?
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Are there facilities like electricity, water, transportation, and communications?
Is the place clean, decent, and peaceful?
Is it accessible to raw materials and other suppliers?
4. Prepare a financial plan.
What are your objectives?
How much money do you need?
How will you spend the money?
What are your expenses?
5. Prepare a production plan.
Is it economical to rent or buy production equipment?
Can you ensure or improve the product design or quality?
Can your production facilities meet demand?
Do you have inventory control?
6. Prepare an organizational plan.
What type of business organization is most suitable?
Do you know the corresponding laws, policies, and requirements of your
business organization?
Who will be the officers and employees of you enterprise?
What are their duties and responsibilities?
7. Prepare a management plan.
What are your goals and objectives?
What are your strategies?
Do you have business policies for your customers?
Do you have human resources development for your employees?
5.6 The Use of Business Plan

There are several reasons why a written business plan is necessary:
- to project general picture of the business project;
- to serve as a guide in implementing the business or project;
- to serve as a major input to investment decisions or major expenditures;
- to serve as reference or guide to policy formulation and development;
- to serve as a guide for operational matters;
- to serve as a reference for a bank loan o financing purposes;
- to determine/estimate the detailed technical and financial requirements;
- to serve as an over-all guide for the proponent or entrepreneur.
Importance of Business Planning

The importance of planning a business are as follows:
 planning can eliminate business risk;
 planning can minimize cost of production; and
 planning can detect the weaknesses of the business operations.
Review Notes
Planning can eliminate risk. The business can lessen the possibility of risk if it is well-
planned. In planning, the entrepreneur identifies and analyzes the possible risks and
determine the strategies and techniques to be applied in order to resist or lessen the
entry of such risk.
Planning can minimize cost of production. In planning the business, the entrepreneur
prepares a total project cost to determine the fixed assets, working capital, and pre-
operating expenses. The entrepreneur can also conduct costing of the products during
the planning stage in order to estimate the expenses to be incurred in the production of
goods.
Planning can detect the weaknesses of the business operations. During the
planning stage, a SWOT analysis is done to determine the weaknesses of the business.
All part of the business plan—from marketing to financial aspects should be reviewed to
identify what the entrepreneur or the business needs to improve to deal with its
weaknesses.
5.7 Marketing Plan
In preparing the market plan, the entrepreneur first

has to study the existing situation in the market, what
the competitors are doing in terms of product or
service lines, their promotional activities, the middlemen
who are handling their products, and their pricing schemes. After knowing
what the competitors are doing, the next step is to make estimates of the
supply and demand, literally counting the volume produced by the different
suppliers as against the volume needed by buyers.
Once the prospective entrepreneur sees good opportunities to go into the

business he has in mind, then, he should now prepare a detailed marketing
plan. This plan will show the target market or the specific group of customers
the firm wishes to serve. Knowing the type of customers and the situation in
the environment, the proponent will now describe the product features, the
promotional activities, the channels of distribution and the pricing.
5.8 Production Plan

In preparing a production plan, the following have to be considered:
1. Product specification. Describe the product, its features and benefits, among others.
2. Production Process. Describe the step by step process in creating the product. This
part also includes the flow chart.
3. Production Machinery and Equipment. Make a list of machinery and equipment
required with the number of units needed and the unit price of each.
Review Notes
5.9 Organizational Plan
The organizational plan follows the marketing plan and the production plan.
1. Describe the ownership of your firm. Will it be a sole proprietorship, partnership,
corporation, or cooperative?
2. Prepare the organization structure. This is usually done through the organizational
chart. The organizational chart is a useful tool to indicate the hierarchy or levels of
authority, that is, who is responsible for whom and who reports to whom.
3. Describe the duties and responsibilities of all those involved in the enterprise, the
required qualification of the tasks, the corresponding salaries and benefits, and the
number of personnel required.
4. Present the pre-operating activities through a Gantt chart. A listing of pre-

operating activities with the corresponding timetable of accomplishment is a useful
exercise so that you will know what these activities are, as well as their cost implications.
These pre-operating activities includes the ff:
TIME FRAME (months)

ACTIVITIES
1 2 3 4 5 6 7 8 9
Preparation of
business plan
Negotiation
for financing
Registration
of business
Setting up of
production
facilities
Other
activities
Start of
business
operations
5.10 Financial Plan

The financial plan translates into monetary terms the various plans you have for
the business. From the marketing plan, you can get information on sales; from the
production and organization plans, you get information on expenses. From these varied
data, you can compute whether your business can get money or not.
Among the financial schedules you are to present is the Total Project Cost, which
is made up of the following items:
Review Notes
Total fixed assets. Examples are building, land, and equipment purchased.
Working capital. the amount of fund you need to pay for expenses such as
materials and supplies, labor, and utilities needed for production within a
relatively short period (say 2 weeks or 1 month) after which the products can be
sold; thus generating funds for use by the business.
Pre-operating expenses. Examples are registration fees and fees paid to
consultants.
A. Source of financing. This section of the financial plan will simply indicate where the
funds for the business will come from. It may come from the savings of the
owner, or from borrowing money from relatives, friends, banks, and other
financial institutions.
B. Financial statements. The financial plan includes the following financial statements:
Income Statement – presents details regarding sales and expenses incurred will
be incurred by the business as of a given date.
Balance Sheet – presents details of what the business owns (assets) and its
value. It presents the equity contribution of owners and liabilities to creditors.
Cash Flow Statement – presents in detail the projected cash expenses and
disbursement for a given period.
In a financial plan, all the statements prepared are projections or expectations of

what the enterprise intends to sell or to spend, how much will asset be worth, and how
much will be put into business in terms of owner’s equity and loans from creditors.
Financial analysis basically consists of the computations of profitability, liquidity, and
marketability of the enterprise based on the information from the income statement and
the balance sheet.
Review Notes
LESSON VI
Start-up Operations
VI. Start-up Operations

Starting-up a business or operation is the most difficult, yet a challenging stage in
entrepreneurial ventures. A well-developed business plan means achieving at least half
of the business objectives even before doing the business itself. Putting the contents of
the business plan into concrete action means starting up the business.
A. Registering the Business

Before operating the business, certain governmental regulations has to be complied with
– efforts related to this matter is by itself the commencement of the real business. This
aspect constitutes the preliminary and preparatory task of establishing documentary
requirements to operate the business and as a legal entity. The entrepreneur has to
comply with the legal requirements as not doing so means an illegitimate business
operation.
B. Choice of Business Name

Business name refers to the registered business identity (or name) of the business
organization. There are no specific regulatory or governmental policies that need to be
observed and considered in the choice of business name. The only clear policy
insinuated by the government organizations concerned with business name registration
is that the proposed business name is not obviously misleading.
C. Money saving options at Start-up

Starting on a shoestring budget is common to every entrepreneur venturing into a new
business. Hence, it is a must that all options to save money must be explored to the
fullest. The following should be of great help:
 Organize or register a small business group at minimum capital requirement

required by law. This is important because dues, fees, and assessments for
registration are usually tied to the level of capitalization of the business. It is also
much quicker to organize and operationalize a small business organization than with
an organization with too many parties involved.
 Initially, use your home as an office or explore sharing an office or shop space
with another company. The option will result to substantial savings on overhead
expenses. Do some works like light carpentry, electrical, delivery jobs, or any forms
of tasks within your capability to do or deliver.
 Purchase used office equipment and machinery, but be wise and take extra
precautions in doing so. Preferably, buy it from friends, or auction houses or
Review Notes
surplus shops, and parties who can provide help and assistance on start-up
operations.
 Use part-time specialists or skilled workers. Specialists and skilled workers may
not be necessary on a full-time or daily basis; hence, it should be worth dealing with
them on a part-time or on-call basis. These guys can be paid on moonlight rates and
without mandatory budget requirements as required by law.
 Rather than hiring full-time and salaried personnel, begin sales efforts by
hiring representatives or agents. This can spare the entrepreneur or a fixed or
regular salary and other overhead budget which start-up stage cannot yet fully afford.
 Explore the concept of subcontracting. This means having your product

manufactured or produced wholly or in part outside your company. This will save
you the rental cost, machinery items, and other related costs to having a workplace
or plan of your own.
 If possible, make sure of family labor and other resources within your
households. Given proper motivation, they are just as efficient and effective as
employees you have paid for and they are in a position to sacrifice and work hard for
start-up organizations, unlike paid labor that are simply more concerned with their
salaries as workers.
 Make use of free public relations instead of paid advertising. Send out new
releases to your trade associations and government organizations, and arrange to
be interviewed about your product, company and prospects.
 Push your customers hard for prompt payment. After selling your products or
services on credit basis, convince them that it is better and divine to pay you on time.
 Make full use of technology where necessity for application demands. For
instance, full knowledge on personal computer hooked to an Internet system can
save you cost on accounting and marketing.
D. How to raise capital

This money coming from the owner’s personal resources is called the capital or owner’s
capital. Of course, the safest way to finance a business is with your own money. The
next safest way is to borrow money from close relatives and friends. Sometimes,
however, what can you raised from your personal resources isn't enough. When that
happens, you can start looking from outside sources.
E. External sources of capital

There are wide range of choices for borrowing money. These includes:
Pawnshops. You can get quick cash by pawning your jewelry and other valuables.
Credit cooperatives. These are popular and easy source of credits especially in the
rural areas. Usually, it lends an amount up to three or five times bigger than the money a
member has deposited in the cooperative. Interest charges are often minimal.
Review Notes
Money lenders. These are people who lend quick money without collateral, but charge
exorbitant interest rates. They usually charge about one-peso interest per month for
every five pesos they lend.
Lending investors. Lending investors are a cross between money lenders and banks -
they extend short-term loans to individuals and businesses with or without collateral.
Interest rates are higher than bank rates, but lower than those charged by money-
lenders – usually lending from three to five percent a month.
Formal sources of credit. Formal sources of credit are institutions that have the legal
authority or mandate to lend money to individuals and businesses. These include banks,
financial institutions, as well as certain government development agencies and
development-oriented, non-government organizations.
There are various types of credit available from formal lending institutions:
Short-term loans. These loans are payable in one year or less. Commercial banks are
those most commonly used sources of short-term loans.
Intermediate loans. These loans provide capital repayable in one to three years. These
are also available from banks and other financing institutions and backed by collateral
securities and is paid back in installments over the life of the loan agreement.
Long-term loans. These loans are extended to enterprises assured to exist over the
long-term period of loans – up to ten years. These are usually extended by private and
government banks.
F. Location
It should be one that should enable you to manufacture your products and sell
them at the lowest possible cost. Consider carefully which city or town will be best for
your business. Some areas may appear the same but may differ widely in terms of
business potentials. One of the first considerations regarding location is whether the
prospective site is residential, commercial, or industrial area. Not only would you need a
barangay clearance for the business, you would also need the tacit approval of the
residents or homeowner’s association in a residential area.
Try also to find out as much as you can about infrastructure development plans for a
particular area. Here are important considerations in deciding where to locate:
 Raw materials – How close are you from the sources of raw materials? Are the
materials bulky and difficult to transport?
 Customers – How close are you to target customers?
 Transportation facilities – If your raw materials and/or products are heavy or
bulky, examine the availability and reliability of transportation facilities in the site.
 Labor – Can you employ people in the vicinity?
 Power and other utilities – Are light and water available?
 Waste disposal facilities – Will there be a lot of waste by-products during
processing?
Review Notes
 Community – Are there rules, regulations, and restrictions that will affect
business like yours?
 The decision to own or to rent – Will you buy the site or rent it?
G. Acquiring machines and equipment

The kind of machines and equipment you need to acquire will depend on the
level of technology you have decided to use in your manufacturing operations. For any
given operations, there is a wide range of machines and equipment at your disposal,
ranging from the semi-manual or pedal-type, to the semi-automatic machines, to the
most high-tech and computerized devices.
The following guidelines in acquiring machinery may be useful:

 Before buying equipment, identify exactly what you need it for.
 Generally speaking, if your volume of production is low and your product designs
are
 expected to change from season to season, get a multi-purpose machine.
 Use of a specialized machine is indicated where a product with a special design
is to be
 manufactured in big quantities.
 Consider the price.
 Another consideration, aside from cost, is engineering features, such as power
requirements, maintenance, safety features, and flexibility.
 Consider, too, other terms of the purchase, such as after sales service,
assistance in installation, maintenance and repair, warranty, training assistance,
as well as promptness of delivery.
 Buy your equipment from a reliable supplier.
 Consult other manufacturers who have experience in using the same equipment.
 Consider also the option of having machines fabricated by local machine shops.
Review Notes
LESSON VII
Social Responsibility
VI. Social Responsibility Explained

The concept of social responsibility has various meanings to different individuals.
For instance, to a banker, his social responsibility is to lend money even to the poor
producers, and not only to the rich ones. To manufacturers, their social responsibility is
to create quality products and not to pollute the environment. To the rich, their social
responsibility is to share their excess wealth with the less fortunate. This is how simple
social responsibility is. By simply doing your objectives at utmost quality is an act of
social responsibility itself.
The entrepreneur must sell quality products at fair price. He must also be fair with
his suppliers by paying them on time as agreed upon. He must give reasonable profits to
stockholders for their investment. He must pay the correct amount of taxes to the
government. He must promote the welfare of the employees. Equally important is the
social responsibility of the entrepreneur to his community in terms of job creation and
environmental conservation.
Social Responsibility to Consumers

If there are human rights, there are also consumer rights. John Kennedy introduced the
four basic rights of consumers:
 The right to safety. This means products are safe for their intended use, contain
clear and complete instructions for their proper use and have been tested by the
manufacturers for the quality and reliability.
 The right to be informed. This refers to the availability of complete and correct
information about the use of products. For example, food products must contain
detailed information on their ingredients. Loans must provide the true terms of
payment and interest rates. Likewise, products must contain warnings on their
potential dangers such as in the case of wines, cigarettes, and drugs.
 The right to choose. It is the policy of the government to encourage competition
among sellers or producers, so that consumers can choose the best products in the
market. This is good because through competition, goods and services have better
quality and lower prices. If there is only one producer, the tendency is for the
consumers to be abused. For this reason, progressive governments are against
monopolies.
 The right to be heard. This is based on the concept that “customer is always right.”
Sellers should listen to their buyers and act immediately on their complaints. Good
business enterprises have their customer relations department. The job of this office
is to please their customers.
Social Responsibility to the Community

Businesses should see to it that they fulfill their social responsibility to the community
where they operate their businesses. Community development may include health and
sanitation, livelihood projects, cultural and sports development.
Review Notes
A. IDENTIFICATION
1. It is a process of creating something different with value by devoting necessary time
and effort, assuming the accompanying financial, psychic, and social risks and
receiving the resulting rewards of monetary and personal satisfaction.
2. A French verb which means “to undertake”.
3. It means “new idea”.
4. Under Entrepreneurship theory: Entrepreneurs should accept the system of a
society for the development of themselves as well as their start-up.
5. He is aware of his capabilities and he does not doubt that he can accomplish the
most challenging task on hand.
6. An entrepreneur must be able to quickly adjust to new market conditions, rapidly
changing technology, and fierce competition. The key to being flexible is to always
learn new things.
7. This serves as the fuel that keeps the business operating. The availability of funds
should fit the type of business to organize.
8. The success of any business also depends on the efficiency of its employees.
9. This refers to the number of prospective buyers, competitors, the price, and the
quality of goods and services that have to be analyzed.
10. This should be the first investment of anyone who seeks to be an entrepreneur.
11. These gives the investor exclusive legal rights to exclude anyone else from
manufacturing, selling, importing, or using an invention using the life of the patent.
12. Organizes and operates a business or businesses, taking on greater than normal
financial risks in order to do so.
13. A set of beliefs that shape how you make sense of the world and yourself. It
influences how you think, feel, and behave in any given situation
14. It should be one that should enable you to manufacture your products and sell them
at the lowest possible cost.
15. Defined as the tendency to generate or recognize ideas, alternatives that maybe
useful in solving problems.
Review Notes
B. Read and analyze the following statements and tell what stage of business planning
is manifested in each scenario. Write:
U – for unplanned stage; A – for annual planning stage; and
B – for budgeting system stage; S – for strategic planning stage
______ 1. Mr. Nero prepares projected financial statements to know the estimated
income of the business in the upcoming months.
______ 2. Mrs. Galvez sets an appointment with a financial institution to borrow money
for her initial investment with her new business venture.
______ 3. Mr. Chua asks his assistant to make and present a strategic plan of the firm in
the next five years.
______ 4. Mrs. Galvez mandates her newly hired employees to attend to a planning
conference in the next 10 to 12 months of the company.
______ 5. Andrew conducts a market survey to study his target customers.
______ 6. Noel starts canvassing materials and equipment for his prospected food
business.
______ 7. Andrew makes a list of supplies and equipment and its corresponding costs to
minimize overspending.
______ 8. Mrs. Galvez prepares a marketing plan in the next five to ten years.
______ 9. Noel never cares of his expenses. He focuses merely on how the product are
being produced to ensure quality.
______ 10. Mr. Chua asks his human resources manager to submit an annual
development plan of his employees.
Review Notes
References
Benefits of Entrepreneurial Thinking - ASU CareerCatalyst. (n.d.). Retrieved October 11,
2022, from https://careercatalyst.asu.edu/newsroom/career/how-you-can-benefit-
entrepreneurial-mindset/
Top 10 Entrepreneurship Skills You Must Have. (2022, October 3). NCFE India.
Retrieved October 11, 2022, from https://ncfeindia.org/entrepreneurship-skills/
Asor, W. 2009. Entrepreneurship in the Philippine Setting. Quezon City: Rex Bookstore.
(n.d.).
Kuratko, D. 2011. Entrepreneurship: An Introduction. Pasig City: Cengage Learning
Asia Pte Ltd. (n.d.).
Review Notes
Key to Correction
A. Identification
1. Entrepreneurship
2. Entreprendre
3. Innovation
4. Sociological
5. Confidence
6. Flexibility
7. Capital
8. Manpower
9. Markets
10. Ideation
11. Patents
12. Entrepreneur
13. Mindset
14. Location
15. Creativity
B. Stage of Business Planning
1. B 6. U
2. A 7. B
3. S 8. S
4. A 9. U
5. S 10. A
Review Notes

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When we imagine an entrepreneur, we often think of a visionary with savvy business

 Entrepreneurship as the willingness and ability of an individual to seek out

1.2. What is an Entrepreneur?

Psychologist: Entrepreneur could refer to such a person as typically driven by certain

Businessman: An entrepreneur appears as a threat, an aggressive competitor. The

1.2 Origin of Entrepreneurship

1.3 Entrepreneurship as a process and approach

1.4 Socio-economic benefits from Entrepreneurship

6. Enhance competitive consciousness. Innovation, being the essence of

7. Improves quality of life. The entrepreneur’s penchant for innovation and

8. Enhances equitable distribution of income and wealth. With the entrepreneurs

1.5 Main Theories of Entrepreneurship

Entrepreneurship Economist Description

Economic Richard Cantillon An entrepreneur acts as both ‘producers’

Sociological Max Weber Entrepreneurs should accept the system of

Psychological They are based on the personal

Opportunity based Peter Drucker The entrepreneur always searches for

Resource-based This theory states that entrepreneurs need

Anthropological Entrepreneurs should consider the social

II. The Attributes of an Entrepreneur

2.1 Skills Needed by Successful Entrepreneur

1. Creative thinking. Creativity leads to invention, which leads to opportunity. To

III. The Entrepreneurial Mindset

3.1 Individual Entrepreneurial Mindset

Common Characteristics Associated with Entrepreneurs

3.2 Corporate Entrepreneurial Mindset

Re-engineering Organizational Thinking

The Nature and Concept of Corporate Entrepreneurship

3.3 Cultivating Entrepreneurial Mindset

The five most important entrepreneurial factors are:

IV. Opportunity Seeking and Ideation

4.1 Search for Business Opportunity

In discovering business opportunities, the following factors on resources have to be

4.2 SWOT Analysis

4.3 Ideation and Entrepreneurial Creativity

4.4 The Concept of Innovation

The generation of idea and transforming it into a business

5.1 Concept of a Business Plan

It is thinking ahead of objectives, strategies, financing, production, marketing,

5.2 Principles of Planning

2. Budgeting system stage. Eventually, the owner-manager realizes the need to

5.4 Components of Business Planning

5.5 Steps in Business Planning

5.6 The Use of Business Plan

Importance of Business Planning

5.7 Marketing Plan

In preparing the market plan, the entrepreneur first

Once the prospective entrepreneur sees good opportunities to go into the

5.8 Production Plan

4. Present the pre-operating activities through a Gantt chart. A listing of pre-

TIME FRAME (months)

5.10 Financial Plan

In a financial plan, all the statements prepared are projections or expectations of

VI. Start-up Operations

A. Registering the Business

B. Choice of Business Name

C. Money saving options at Start-up

 Organize or register a small business group at minimum capital requirement

 Explore the concept of subcontracting. This means having your product

D. How to raise capital

E. External sources of capital