Historical Development of Entrepreneurship
will read further
The Beginnings of Trade
• The original entrepreneurs were of course, the
merchants and traders.
• The first known trading between human took place in
New Guinea around 17,000 BCE, where locals would
exchange obsidian.
• Merchant- A person who trades in commodities
produced by other people.
• Trader- Is one who gains a livelihood from trading
goods or securities.
Entrepreneurship and the Agricultural Revolution
-The first big shift in entrepreneurship took place during
the Agricultural Revolution, which occurred about 12,000
years ago.
Entrepreneurship and the Invention of Money
-Prior to the invention of money, all entrepreneurship
and trade took place through the barter system. The
limits of the barter system were known as “coincidence
of wants”.
Entrepreneurship and the beginnings of the Marketplace
in the Medieval Period
-Starting in the medieval period, markets became more
popular. Larger populations required larger marketplaces
where they could purchase food, clothing, and services.
Mercantilism, Explorers, and the New World from 1550 to
1800
-During this period, entrepreneurs were known more as
merchants and explorers than as entrepreneurs. These
individual would raise capital, take risks, and stimulate
economic growth.
Modern Entrepreneurship
-Today, entrepreneurs are the lifeblood of economies all
over the world. Even in command economies like China,
entrepreneurs are valued for their contributions to the
economy and encouraged to innovate to compete with
companies around the world.
-Like all nations, the Philippines first main form of trade
was through direct barter exchange.
-When the Spaniards came to the Philippines, our
ancestors were already trading with China, Japan, Siam,
India, Cambodia, Borneo, and Moluccas.
Elements of a Business Plan
A business plan is a description of the business, a
road map that will help you get to your desired
destination. It gives you an idea of the obstacles that lie
ahead and can point out possible alternate routes. One of
the major benefits you will receive from developing a
business plan is getting to thoroughly know your industry
and market. A well prepared business plan will not only
assist in plotting a course for the company, it can also
serve as a vital sales tool.
The following are the major elements of a business plan:
Executive Summary
• Most important part of your business plan
• Must be clear concise and compelling so that people
• Should be written after you have completed the other
sections of your business plan
• Try to keep this section to around one page
Description of Company
• State company name, legal status and ownership
structure
• Mission statement – should provide focus for your
company and define your business for at least the next
few years
• Outline where your company has been and where you
are at right now. If you are a startup company describe
what your company intends to do. Only include
information that is relevant to the product or service you
are describing.
• How will this new activity add to or enhance your
existing business
Product or Service
• Describe your product or service – what is unique about
it and why will you be a success
• Indicate any regulations that will effect you and show
that you have or can meet the requirements
Market
• Outline the industry you are in, how you fit in and what
will be your market share.
• Who is your primary customer? What are the
demographics of this customer base? It is very important
to know your customers as success depends on you being
able to meet customer needs.
• Why have you chosen this customer base and how large
is it? You need to know that there is enough room in this
market for you and that it is not already saturated.
• What are the trends that are influencing and affecting
your market (customer base)? How are you addressing
these trends?
• Who is your competition and how will you be able to
compete? By knowing and understanding your
competition you will be able to better position your
product or service in the market place.
• If your business is seasonal (ie up- pick operation),
explain how you will handle this challenge
• What is the price of your product or service? How does
this compare to similar products in the market?
• How will you distribute your product?
Marketing Plan
• The marketing plan is very important - you can have the
best product in the world but if you have no sales, you
have no business.
• How will you make customers aware of you product or
service?
• Where will you sell your product (ie farmers’ market,
farm gate sales, retail, etc)?
• When will you launch your marketing plan?
Operations
• Where will your business be located?
• What facilities and equipment do you have and what do
you need?
• How will you run the business?
• How will you keep track of inventory?
• How will you keep costs down to remain competitive?
• What is your plan for growth?
• How does this business mesh with your existing
business? It is important that you keep separate records
for each different business you have. This way you will
know what is making you money and what is not.
Management Team
• Investors pay particular attention to this section. They
want to know that you have the right people for your
business.
• The quality of your people will determine the success of
the business.
• Indicate who is on your team, their qualifications and
responsibilities (ie production, marketing, accounting
etc).
• If you do not have people in these positions right know
because of the size of your business, provide a time
frame to put your team together.
• How will you overcome any labor shortages?
Financials
• Financial statements show where your business is at
right now and provides you with the information you
need to make decisions.
• It is important to keep your statements current and to
refer to them on a monthly basis.
You should include the following financial forms with
projections for three to five years:
Income statement
Cash-flow projections
Balance sheet
• When making financial projections, it is important to
explain any assumptions - how you determined the
figures you used.
• If you are looking for financial assistance, lenders will
want to know where you will get financing for your
business and how you will spend the money. They will
also want to see historical records for the past three to
five years.
Module 1
Importance of Entrepreneurship in Education
1. Entrepreneurship as a key driver to our economy
-It focuses in wealth and high majority of jobs created by
small businesses started by entrepreneurial minded
individuals.
2. Entrepreneurship is a lifelong learning process
-It started as early as elementary school and progressed
through all levels of education. Students discover and
develop opportunities and take advantage of these.
3. Entrepreneurship will energize school management
-School in the area of entrepreneurship must be
accessible, affordable and accountable of producing
successful students.
4. Entrepreneurship will transform learners to be
innovators
-Learners must be equipped with perseverance and
determination of an entrepreneurial mindset. They must
take ownership of their own success.
Entrepreneurship education aids students from all
socioeconomic backgrounds to think outside the box and
nurture unconventional talents and skills. It creates
opportunities, ensures social justice, instills confidence
and stimulates the economy.
The Concept of Entrepreneurship
⮚ Entrepreneur (Person) -derived from the French root
“entreprendre”, meaning to begin something and to
undertake. Person responsible for setting up a business or
an enterprise.
⮚ Entrepreneurship (Process of action) -science of
converting processed ideas into a remarkable business
venture.
-refers to the concept of developing and managing a
business venture in order to gain profit by taking several
risks in the corporate world. Simply put,
entrepreneurship is the willingness to start a new
business.
⮚ Enterprise (Object) -a business or company; project that
is especially difficult, complicated or risky.
Entrepreneurial Competencies
⮚ Locus of control – determine the state to which a
person agreed that their actions can directly affect a
situation or that they can control a result.
⮚ Specific goal settings – Should be motivated to set
goals, particularly business growth objectives. Goals that
are specific, measurable, and attainable. Realistic and
time-bound.
⮚ Self-efficacy – believe in their own ability or self-
confidence. Will persevere even in the face of setbacks,
will take negative feedback more positively and use
feedback to improve their performances.
⮚ Need for achievement – must have a high need for
achievement take responsibility for outcomes.
⮚ Layers of competency – universal competencies
occupying the bottom portion of the pyramid. Specific
competencies located near to the top.
⮚ Ambition – must be motivated, persistent, and
persevere even in the face of situational challenges.
Learners embrace new challenges while achieving to
exceed set expectations and standards.
⮚ Willingness to learn – often pursue opportunities to
acquire new skills and competencies.
⮚Strong initiative – they frequently work independently
to achieve task master, regardless of the extra effort
necessary to do so.
⮚ Adaptability and flexibility – must learn how to be a
highly flexible and adaptable often deal very well with a
unique ability to choose actions even without all
necessary information.
⮚ Willingness to take risks – not only are successful
learners willing to take consequences, they can also
identify and calculate risk.
⮚ Interpersonal skills – They are very insightful with
regards to the behavior of others- understanding motives
and actions, quickly aware of strong relationships, and
both verbal and non-verbal behaviors.
Industry wide competencies work competencies
1. Networking/collaboration
-Ability to build professional relationships.
-Perceived as trustworthy
-Can negotiate with competitors, & identify mutual
goals.
2. Creative/ critical thinking
-Easily identify what is missing from current product
streams and have imagination, creativity and empathy.
-Can analyze problems and creative innovative solutions.
3. Organizing
-Plan and prioritize work to ensure time is managed
effectively.
-When goals are not met, they take necessary steps to
get projects back-on track.
4. Checking, examining & recording
-Ability to maintain confidential records, easily locate and
complete appropriate forms and paperwork, detect
errors and make necessary corrections.
5. Planning
-Must be specific about the direction of their venture and
the strategy they will adopt.
6. Business principles
-Must understand the basic principles of business (e.g.
market knowledge, economic principles, and ethical
practices)
7. Computer competency
-Must be competent in the use of basic computer
hardware and software.
8. Workplace competencies
-The application of knowledge, skills, attitudes, values and
behaviors in the workplace.
-Many successful entrepreneurs place great value on
their industry experiences prior to launching their own
venture, as workplace competencies.
9. High-Growth, High-Value Entrepreneurship
-Entrepreneurs typically offer incentive compensation,
manage business operations, build a strong
entrepreneurial culture around determination and high
work ethic, and form effective boards of directors and
advisors.
10. Innovation & creation
-Apply their creativity to the formulation of inventive
systems and products. They have an “opportunity
orientation”-assessing changes in trends, identifying small
niche or group of markets, and seeking out opportunities
to improve services and products.
11. Marketing
-Competent in both executing strategies that promote
their products and establish client/customer
relationships. They conduct market analyses, set pricing
objects and customer objections into sales acceptance.
12. Business operations
-Entrepreneurs performs business operations that are
able to both carry out daily operations, such as
scheduling manpower and maintaining inventories of
goods and management human capabilities.
13. Risk assessment & management
-Can handle risk management and can take into account
legal actions.
-Stay informed of business laws and regulations, and
bond to determine ways to prevent themselves against
failure.
14. Financial management
-Competent at accounting and funds management
managing cash flows and preparing estimated and
projected balance sheets.
15. Problem solving and decision making
-They can generate, evaluate, and implement solutions to
difficult problems.
-They locate and utilize relevant information, and when
necessary, generate alternative solutions.
QUALITIES OF AN ENTREPRENEUR
1. Disciplined
-These individuals are focused on making their businesses
work and eliminate any hindrances or distractions to their
goals. They have overarching strategies and outline the
tactics to accomplish them. Successful entrepreneurs are
disciplined enough to take steps every day toward the
achievement of their objectives.
2. Confidence
-The entrepreneur does not ask questions about whether
they can succeed or whether they are worthy of success.
They are confident with the knowledge that they will
make their businesses succeed. They exude that
confidence in everything they do.
3. Open Minded
-Entrepreneurs realize that every event and situation is a
business opportunity. Ideas are constantly being
generated about workflows and efficiency, people skills
and potential new businesses. They have the ability to
look at everything around them and focus it toward their
goals.
4. Self-Starter
-Entrepreneurs know that if something needs to be done,
they should start it themselves. They set the parameters
and make sure that projects follow that path. They are
proactive, not waiting for someone to give them
permission.
5. Competitive
-Many companies are formed because an entrepreneur
knows that they can do a job better than another. They
need to win at the sports they play and need to win at
the businesses that they create. An entrepreneur will
highlight their own company’s track record of success.
6. Creativity
-One facet of creativity is being able to make connections
between seemingly unrelated events or situations.
Entrepreneurs often come up with solutions which are
the synthesis of other items. They will repurpose
products to market them to new industries.
7. Determination
-Entrepreneurs are not thwarted by their defeats. They
look at defeat as an opportunity for success. They are
determined to make all of their endeavors succeed, so
will try and try again until it does. Successful
entrepreneurs do not believe that something cannot be
done.
8. Strong people skills
-The entrepreneur has strong communication skills to sell
the product and motivate employees. Most successful
entrepreneurs know how to motivate their employees, so
the business grows overall. They are very good at
highlighting the benefits of any situation and coaching
others to their success.
9. Strong work ethic
-The successful entrepreneur will often be the first person
to arrive at the office and the last one to leave. They will
come in on their days off to make sure that an
outcome meets their expectations. Their mind is
constantly on their work, whether they are in or out of
the workplace.
10. Passion
-Passion is the most important trait of the successful
entrepreneur. They genuinely love their work. They are
willing to put in those extra hours to make the business
succeed because there is a joy their business gives which
goes beyond the money. The successful entrepreneur will
always be reading and researching ways to make the
business better. Successful entrepreneurs want to see
what the view is like at the top of the business mountain.
Once they see it, they want to go further. They know how
to talk to their employees, and their businesses soar as a
result.
IMPORTANCE OF AN ENTREPRENEUR
The role of entrepreneurship and an
entrepreneurial culture in economic and social
development has often been underestimated. Over the
years, however, it has become increasingly apparent that
entrepreneurship does indeed contribute to the
economic development. Transforming ideas into
economic opportunities is the crux of entrepreneurship.
History shows that economic progress has been
significantly advanced by pragmatic people who are
entrepreneurial and innovative, able to exploit
opportunities and willing to take risks. Entrepreneurs
produce solutions that fly in the face of established
knowledge, and they always challenge the status quo.
They are risk-takers who pursue opportunities that others
may fail to recognize or may even view as problems or
threats. Whatever the definition of entrepreneurship, it is
closely associated with change, creativity, knowledge,
innovation, and flexibility-factors that are increasingly
important sources of competitiveness in an increasingly
globalized world economy. Thus, fostering
entrepreneurship means promoting the competitiveness
of businesses.
Its importance can be expressed in the form mentioned
below:
1. Provides employment to the people
-People often hold a view that all those who do not get
employed anywhere jump into entrepreneurship, but in
reality, now a days most of the business are set by those
who have other options available with them.
2. Contributes towards research and development system
-Almost 2/3rd of all innovations is due to the
entrepreneurs. Without the boom of inventions, the
world would have been a much dry place to live in.
Inventions provide an easier way of getting things done
through better and standardized technology.
3. Creates wealth for the nation and for the individuals as
well
-All individuals who search business opportunities usually,
create wealth by entering entrepreneurship. The wealth
created by them plays a significant role in the
development of the nation. The entrepreneurs contribute
to the economy, in the form of products, and services.
Their ideas, thoughts, and inventions are also of a great
help to the nation.
FUNCTIONS OF AN ENTREPRENEUR
An entrepreneur frequently has to wear many hats. He
has to perceive opportunity, plan, organize resources,
and oversee production, marketing, and liaison with
officials. Most importantly he has to innovate and bear
risk.
The main functions of an entrepreneur are grouped in
three categories:
1. Risk bearing functions,
2. Administrative and decision-making functions, and
3. Distributive functions (responsibility of the organizer)
Risk Bearing Function
It is the most important and specific function of an
entrepreneur. Every business involves some amount of
risk. The production of goods and services is always
related to future demands. The future demand is
uncertain and unpredictable because it is influenced by
the changes in fashion or taste and liking of the
consumers. The price structure, value of money, climatic
conditions and government policies are some other
important factors that affect the demand of a
commodity. All these factors are variable and as such an
exact estimation of future demand is a difficult exercise
to work out. Since this unpredictable task is undertaken
by the entrepreneur; he has to bear the risk. If his
estimations prove to be wrong, then in the entire
business sphere, no other factor of production shares the
loss incurred by the entrepreneur. It is the main reason
why the entrepreneur becomes entitled for the surplus
that is remaining with him from the sale proceeds of the
product, after distributing the shares to other factors.
This surplus is termed as profit of the business.
Administrative and Decision-Making Functions
a. Conceiving the Idea of Business
-The entrepreneur conceives the idea of a business which
suits their nature, skill and resources. They make a
thorough (intensive and extensive) study of the condition
of market and business prospects. After making a
thorough study of economic viability, they decides the
business that they has to start.
b. Estimation of Details of Business and Implementation
of the Same
-After arriving at a conclusion about the nature of
business, the entrepreneur works out the details of
business, i.e., what, how and when to produce and from
where the resources are to be arranged. With all these
estimations, they make an all-out effort to give a practical
shape to his plans, organizes various factors of
production and sets them to function in proper harmony.
c. Supervision and Control of Business Activities
-The entrepreneur has to supervise and control the day-
to-day business activities to accomplish the business
objectives. For this they properly coordinate between
various factors of production. As the risk (success or
failure) of business operations directly affect the
economy, they keep a vision and control on the business
affairs and avoids unnecessary expenditures. They are
required to take a numerous decision and has to get
these decisions properly implemented.
d. Innovation
-Innovation is one of the most important functions of an
entrepreneur. An entrepreneur uses information,
knowledge, and intuition to come up with new products,
new methods of reducing costs of a product,
improvement in design or function of a product,
discovering new markets or new ways of organization of
industry. Through innovation, an entrepreneur converts a
material into a resource or combines existing resources
into new and more productive configurations. It is the
creativity of an entrepreneur that results in invention
(creation of new knowledge) and innovation (application
of knowledge to create the new products, services, or
processes).
Distributive Functions
The entrepreneur organizes different factors of
production and sets them to work. It, therefore, becomes
his responsibility to make proper allocation of funds for
each factor of production, i.e., each factor of production
must be properly remunerated. The remuneration here
refers to an important decision as to what should be the
share of each factor of production in the sale proceeds of
the entire product. The remuneration should be just and
equitable and the payment to each factor should be
commensurate, so that each factor is fully satisfied. If the
factors of production remain dissatisfied, they will not be
able to deliver their best to the entrepreneur. So, it is the
entrepreneur, who has to ultimately suffer. Hence, it is
very essential for the entrepreneur to perform
distributive functions with extreme care and caution.
Module 2
Developing Business Plan
“Business plan does not guarantee the results you want
to accomplish but it’s still a step closer to making things
work in advantage”
Factors to Consider of a New Entrepreneur
1. Know your Product or Service.
-You must believe on the product or service that you will
offer to your customer.
-Unique product that would satisfy customers’ needs and
wants.
-Customers want to try new products but it must be
better than those existing in the market.
2. Analyze the Market Potentials.
-The wider the market potential, the more chances of
growth and success.
-Entrepreneur must know his needs and wants and figure
out how to satisfy these needs.
-Analyze customers’ profile as to their buying habits, their
income, and social status.
3. Determine the Marketing Strategy.
-A unique product or service needs effective distribution
strategy to get customer into the basket of
demand potential.
-Customers must have access to the product when they
need it.
4. Know the Competitors.
-Know their strength and weaknesses.
-Develop new product and marketing strategy and turn
their weaknesses as new opportunity for your product.
-Continuous innovation and research would mean better
quality products or service.
5. Do not set on your Laurels.
-Landscape of business is continuously changing.
-Your initial success in your business activities needs more
proactive analysis for expansion and growth and
overcome possible competitions.
-Develop advertising and promotion strategy to penetrate
the wider market.
-Develop budget for expansion and diversification either
horizontally or vertically.
Environmental Scanning
1. Business Location for Small Entrepreneurs
-A retail outlet would need a site that is convenient to
prospective customers in terms of parking space or an
availability of transportation.
In choosing the location, the following factors must be
looked into by the entrepreneur:
a. Rent and Space – the cost of rent is a regular monthly
expense and it must be sustained with the possible
income that will be generated.
b. Terms of Lease Agreement – the term of lease must be
studied carefully as some owners of space might take
advantage of lessee.
c. Types of Goods or Merchandise – they need quick and
easy access to the store and would not spend a lot of
time to purchase their goods.
d. Income Level of Prospective Customer – a good barber
shop or a beauty salon with facilities of air conditioning
units and other amenities need to be located in the
community with higher income bracket.
e. Prospective Sales Volume – high density sales volume
need to be located in shopping area where customers
conversed to buy essential goods.
f. Municipal or City Ordinances including taxes and fees –
the location must not violate city or municipal ordinances
and the taxes and fees must reasonable for the owners of
business.
g. Location of the Area – the area must be free from
floods and other calamities that will endanger the
business.
2. Location for Small Industrial Plant or Manufacturing
Facilities
-Environmental factors in locating a manufacturing plant
or industrial facilities need to be studied carefully as plant
location is a great factor in the investment of funds and
its profitability in the long run.
The following are important factors to consider:
a. Land Area – the contour of the land, its size, and shape
must be suitable to the plant site.
b. Facilities for Expansion – the land area must have
ample space for plant expansion and provisions for
parking facilities for customers and employees.
c. Power and Utilities – availability of power supply and
the cost of electricity involve in the operation are great
factors in the production of goods.
d. Building and Other Utilities – the building must be
within the restriction code of the municipality or city. the
utilities like canteen and other employees’ facilities must
be put in place in compliance with the labor code.
e. Plant Site Accessibility – the plant site must be
accessible to public or service transport for its employees
and valued customers.
Strength, Weaknesses, Opportunities and Threats (SWOT)
SWOT ANALYSIS. Opportunities carries with it some risk
involved and this should be look into carefully. The
strengths and weaknesses are internal factors to the
entrepreneur while the opportunities and threats are
external factors.
The product must be evaluated along the following areas:
1. Product Strength in the Market must have the
following:
a. Available Technology in Product Processing –
technology is an important component in producing the
product as the economies of scale determines the price
index.
b. The source of Raw Materials must be Abundant and at
Lower Price – the constant supply of raw materials is an
important factor in the production of the product.
c. Skilled Workers must be Available – technology must
have component of skilled workers that shall operate the
machineries and other equipment.
d. Capital Investment in Machinery and Operating
Expenditures – a starting venture may have little
investment in terms of machinery and equipment but
starting with small capital should generate profitable
operation.
e. Expertise and Technical Skills of the Management Team
– a good product is the making of a well-conceived idea
of the management team.
2. Characteristics of Weak Products and Weak
Management:
a. Poor quality and High Price – the entrepreneur should
not launch a poor product in the market as it will surely
fail to advance in the sales and profit.
b. Product Design and Appeal – Product design should
appeal to customers’ demand. Poor design of the product
is the making of people with no technical expertise in
handling customer wants in terms of features.
c. Product Cost – production cost is the price
determinants. Entrepreneur cannot make maximum
profitability on products whose production cost cannot
survive market competition.
d. Supply and Demand – intermittent supply to the
market will make customers shift to other products. The
supply chain management must be put in place to make
the products available to valued customers.
e. Weak Product Management – weak management is
created when people at the top of the organization fail to
sustain a vigorous effort for expansion and growth when
management sets on his initial laurels and ventured on
vices and other extra activities that will lose his total
investment.
4. Sustainable Product Opportunities in the Market:
a. Product Demand – product demand is the greatest
opportunity of the entrepreneur. Demand is the essence
of profit and this must be sustained by the entrepreneur
before wide competition appeared in the marketplace.
b. Presence of Poor Quality in the Market – the presence
of poor quality product in the market place is an
opportunity for the entrepreneur.
c. Government Policies and Support – the government
support to local entrepreneur is an opportunity for
greater expansion. The government should support the
local entrepreneur in terms of taxes and government
incentives.
d. Liberal Credit Terms and Interest Rates – liberal credit
terms by banks and other government institution will
generate expansion for the local entrepreneur. Banks and
financing institutions serve as conduit of business in their
expansion program.
4. Treats to Product Profitability and Market Expansions:
a. Entrance Competition – the entrance of many
competitors in the market place will definitely give
problem to the entrepreneur. Competition will reduce
profitability as the price has to be competitive with those
in the market place.
b. The supply of raw materials – will be limited as other
competitors will be getting the same supplier. Increased
production cost means changes in product price.
C. The Emergence of Leftwing Labor Unions – Many
companies close shops with the advent of labor unions
leftist philosophy as they want more wages and benefits
that the company could not give.
SETTING UP A SMALL BUSINESS
You have learned that in entrepreneurship a person
(entrepreneur) who set up a business must recognize its
financial risk. One must make their business work by
eliminating any hindrances or distractions to their goals.
They must overarch strategies and outline the tactics to
accomplish them. Successful entrepreneurs are
disciplined enough to take steps every day toward the
achievement of their objectives. If you possess the quality
of an entrepreneur to perform a business venture you
may now start having your small business. But before you
start your business let us study various factors required
to be considered while setting up any small business.
WHO CAN START A BUSINESS?
Anyone can start a small business unit. He may be
an existing entrepreneur or a new one, having a business
background or not educated or uneducated from rural
area or urban area.
HOW CAN I ARRANGE MY CAPITAL?
The entrepreneur has to analyze and find out the
amount and the duration of finance required as well as
the duration for such finance is needed in the business.
The entrepreneur requires money to buy machinery,
building, raw material, pay wages to labor, etc. Money
spent on buying machinery, building, equipment, etc. is
known as fixed capital. On the other hand, money spent
on buying raw materials and paying wages and salaries,
rent, telephone and electricity bills, etc. is known as
working capital. The entrepreneur has to arrange for both
fixed as well as working capital for his business. The
finance can be raised by self-contribution or by borrowing
from banks and other financial institutions. Money can
also be borrowed from friends and relatives.
HOW CAN I SELECT THE LINE OF RIGHT BUSINESS FOR
ME?
The process of launching a business begins when
the entrepreneur start thinking about a line of business,
which can be undertaken by him. He may consider
business opportunities as per the market demand. He
may go for an existing product or a new product. But
before taking any step he has to ascertain the profitability
of the business and the amount of capital investment.
Having estimated the profitability and risk involved, the
entrepreneur has to decide which line of business could
be desirable to pursue.
WHAT IS THE RIGHT LOCATION OF MY BUSINESS?
Special care should be taken while selecting the
location of the business. An entrepreneur can start
business in his own premises or in a rented premise. It
can be located at a marketplace or in a commercial
complex or in an industrial estate. While deciding the
location, the entrepreneur should consider various
factors like sources of supply of raw material, nearness to
the market, availability of labor, transportation, banking
and communication facilities, etc. Factories should be
preferably located near the source of raw material and at
a place that is well connected with rail and road transport
facility. A retail business should be started near
residential area or in a marketplace.
HOW TO SELECT YOUR BUSINESS WORKFORCE?
An entrepreneur cannot run the business alone. He
has to employ people to help him. Skilled and Semi-
skilled workers have to be recruited particularly for
manufacturing work. Before starting the business, the
entrepreneur must find out whether he will be able to get
the right type of employees for the activities involved.
IMPORTANCE OF POTENTIAL MARKET
Now that you’re familiar on how to set up your
small business. It is now time for you to identify and
recognize your potential market by studying its definition
and importance. A potential market is the part of the
market you can capture in the future. It includes the
demographic groups of customers that will purchase your
product or services in the future who might become your
regular customers from the expansion of your business. A
target customer that make up its share in the available
market is to be set by every business owner.
The best ways to grow your business is to identify your
potential market that you can begin to target. The
potential market allows you to:
1. Identifying new customers to ensure the future of your
business.
2. Think proactively about ways for your business to grow
and change.
3. Show the potential of your business to investors or
collaborators.
4. Increase your profit.
5. Create a strategic plan when there will be changes in
the economy or market.
In identifying your potential markets, you are not
just increasing your share for today but ensuring the
increase of your profit in the future. If you are an
ambitious entrepreneur with a promising product, you
probably can’t wait to show it to potential customers. But
before you go into “sales mode,” you might want to sit
down at your desk, take a look at your value proposition
and do some research.
VALUE PROPOSITION
A value proposition refers to the value a company
promises to deliver to customers should they choose to
buy their product. A value proposition is part of a
company overall marketing strategy. The value
proposition provides a declaration of intent or a
statement that introduces a company's brand to
consumers by telling them what the company stands for,
how it operates, and why it deserves their business. A
value proposition can be presented as a business or
marketing statement that a company uses to summarize
why a consumer should buy a product or use a service.
This statement, if worded compellingly, convinces a
potential consumer that one particular product or service
the company offers will add more value or better solve a
problem for them than other similar offerings will.
UNDERSTANDING A VALUE PROPOSITION
A value proposition stands as a promise by a
company to a customer or market segment. The
proposition is an easy-to-understand reason why a
customer should buy a product or service from that
business. A value proposition should clearly explain how a
product fills a need, communicate the specifics of its
added benefit, and state the reason why it is better than
similar products on the market. The ideal value
proposition is to-the- point and appeals to a customer
strongest decision-making drivers.
REQUIREMENTS OF A VALUE PROPOSITION
A companys value proposition communicates the
number one reason why a product or service is best
suited for a customer segment. Therefore, it should
always be displayed prominently on a company's
website and in other consumer touch points. It also must
be intuitive, so that a customer can read or hear the value
proposition and understand the delivered value without
needing further explanation. Value propositions that
stand out tend to make use of a particular structure. A
successful value proposition typically has a strong, clear
headline that communicates the delivered benefit to the
consumer. The headline should be a single memorable
sentence, phrase, or even a tagline. It frequently
incorporates catchy slogans that become part of
successful advertising campaigns. Often a sub headline
will be provided underneath the main headline,
expanding on the explanation of delivered value and
giving a specific example of why the product or service is
superior to others the consumer has in mind. The
subheading can be a short paragraph and is typically
between two and three sentences long. The subheading
is a way to highlight the key features or benefits of the
products and often benefits from the inclusion of bullet
points or another means of highlighting standout details.
This kind of structure allows consumers to scan the value
proposition quickly and pick up on product features.
Added visuals increase the ease of communication
between business and consumer. In order to craft a
strong value proposition, companies will often conduct
market research to determine which messages resonate
the best with their customers.
HOW TO DEVELOP A VALUE PROPOSITION?
A good value proposition should allow companies
to increase their conversion rates which in turn lift
revenue. However, the value proposition creation process
is not something that can be hastily done. It should
loosely follow a series of actions that flesh out what the
company can offer to customers.
1. Understand the benefits customers receive
-To start creating a value proposition, leaders need to
understand how they create value. Therefore, the
benefits the company provides to the consumers should
be listed. Everything from the product’s use, customer
service, delivery processes, and any other component
should be on the list. The benefits the company and its
products and services provided to consumers should be
something each employee should be able to pinpoint
easily.
2. Connect benefits to the value
-Once leaders have a complete grasp on the benefits
offered, they should then link these benefits to the value
the company creates for customers.
*How do the benefits help the customer?
*Does the product address a problem or need?
*Does the buying process significantly reduce the
purchase time?
*How can customers expect to benefit from what the
company offers?
3. Target your audience
-Every businesses product is not for every consumer.
Leaders need to sharpen the focus and decide who the
target segment for the product or service is. This
information can include location, demographics, income,
occupation, hobbies, and many other factors. Knowing
who the audience is will help leaders decide which
benefits should be mentioned and which might be best to
leave out. It also creates a way to better link benefits to
value.
4. Differentiate the Product and Service
-This might be one of the most critical components of all.
At this point, leaders need to work with their teams to
see how they are different from competitors. This step
revolves around the question of why consumers should
pick this company over someone else’s. It is a good idea
to look at direct competitors and note what they do
similarly, and how the company either does it better or
more efficiently. Consumers need to know why they
should look over another brand for someone else’s.
5. Put everything into a clear and easy to read sentence
-Through research and analysis, leaders should emerge
with an idea of what to include in their value proposition.
The purpose of this statement is not to become a long
and arduous read, but it should quickly
inform customers of who the company is. Customers
should be able to read over the value proposition in five
seconds to get a feel for the benefits and value the
business offers. If the statement cannot be whittled down
to a sentence, then leaders should go back to the drawing
board to cut out features that may not be needed.
6. Place it everywhere
-Once the leader and the team agree on a value
proposition, then leaders need to work with marketing to
get this statement as many places as possible. It should
be included in a website, logos, email newsletter
signatures, on a company brochure, and everywhere
possible.
7. Test its effectiveness
-Leaders need to assess how the value proposition is
adding in increasing revenue and bringing in new
customers. Also, leaders should be aware of how the
value proposition is changing the perception of the
company.
*Have conversions increased?
*Are more people visiting the website?
*Are more email newsletters being opened?
*How are competitors responding?
7 PROVEN TEMPLATES FOR WRITING A VALUE
PROPOSITION THAT WORK
You already know that getting your value proposition
right is critical to your business model. You can have the
best features, the most perfectly executed presentation,
the most stunning price, but no one will ever know of it
if they don’t get past your high-level value proposition.
Here are among the proven templates that are designed
to help you create a clear, compelling value proposition in
minutes.
1. Geoff Moore’s Value Positioning Statement
-Probably the most popularized - in his seminal book
Crossing the Chasm - Geoff Moore suggests a specific
template for outlining your value positioning. In addition
to the first part below, Moore also introduces a second
statement focused on competitive positioning.
2. Venture Hacks’ High-Concept Pitch
-In Made to Stick, Dan and Chip Heath point to how high-
concept pitches such as Jaws on a spaceship (Alien) and
Die Hard on a bus; (Speed) convince movie executives to
invest vast sums of money in a project on the basis of
almost no information. In Pitching Hacks Nivi and Navel
from Venture Hacks share examples of this technique
applied to startups.
3. Steve Blank’s XYZ
-Steve Blank writes that a Value Proposition is a ten-dollar
phrase describing a company’s product or service. It’s the
“what are you building and selling quot; He suggests the
following format for creating a value proposition
statement that other people understand.
4. Vlaskovits & Cooper’s CPS
-In their Cheat Guide to Customer Development Cooper
and Vlaskovits use what they call a Customer-
Problem-Solution presentation.
5. Dave McClure's Elevator Ride
-In his How to Pitch a VC presentation Dave McClure
presents a 3-step check list for creating positioning
statements.
6. David Cowan’s Pitchcraft
-Although a more elaborative one David Cowan shares
some useful guidelines in Practicing the Art of Pitchcraft.
I’ve put together a summary.
7. Eric Sink’s Value Positioning
-Eric Sink writes that marketing is somewhat like an
iceberg - the part sticking out of the water is highly
visible. For this Eric suggests the following format for
positioning.
WHAT TO SELL: HOW TO SELECT THE RIGHT PRODUCT
FOR YOUR BUSINESS
Key question often asked by start-up entrepreneurs
is what to sell in the business. What products or services
could you sell that will make you money? The selection of
the right product or service is critical. In fact, the choice
of a product or service for your business can make or
break your business. Choose a product that requires
significant production capital when you have none and
couldn’t find any, and your business is compromised from
the start. Offer a service that a hundred other
entrepreneurs offer in your locality and you may find it
hard to get noticed above your competitors. Or select a
product with an extremely specialized market yet you do
not know how to reach the potential customers, and your
business can go kaput. Your products or services define
your business. Your products are your business! If you
want to turn your business into an income-generating
machine, the first step is to choose the right product or
services to sell. With the right products, you even stand a
better chance at keeping your customers. The idea is to
keep your customers forever by continually offering them
a valuable product or service, thereby diminishing your
costs of reaching and appealing to them. Wise product
selection is therefore critical to your business success.
How do you choose the right product to sell? Here are a
few questions to help you narrow your focus and
hopefully select the product that will work for you:
1. What are your primary considerations for choosing a
particular product?
-Make a list of your selection criteria, and what you think
are important to you in identifying what business to
engage in. There are a myriad reasons for selecting a
product, and these reasons can include: financial benefit
to your business, relatively low investment requirements,
positive return on investment, fit with present strategy,
feasible to develop and produce, easy to source and
procure, relatively low risk, and time to see intended
results.
2. Can you meet the needs of the customer and solve a
specific problem?
-Your product must address a need or an opportunity.
You need to know how your products or services can
assist customers. It must have a real value that customers
can recognize, want and need. Include in your product
information and sales materials how your products can
benefit the customers, e.g. help reduce time, effort and
expense.
3. How capable are you to produce the product?
-Just as an athlete needs to know his physical condition
before he enters a race, you must also know if you have
the time, resources and capability to produce your
product. Many entrepreneurs make the mistake of going
forward with a business idea only to find that they cannot
afford the manpower required, or do not have the
resources to outsource the product development. As a
result, many experience slippage in release dates making
the mistake of launching half-finished web sites. You
must also evaluate at the onset how you can scale up the
production if there is a strong demand for the product.
4. What is the size of your potential reachable market?
-You need to at least get an idea of the size of your
market. Know who are likely to use or benefit from your
products. If you are selling an information product on
how to sell at Lazada or Shoppe, define who will be your
potential customers you think will be interested in your
product. Many small and home business entrepreneurs
view market research as an unnecessary and expensive
cost but understanding who and how big your market can
pay off in the long run.
5. Would you need to comply with government rules and
regulations?
-New laws or government rules and regulations can
impact your product. Some products can be sold
immediately without the need for government approval.
Others, however, require permits, licenses and approval
from the government.
6. If a similar product exists, can your product be superior
in its functionality, presentation or marketing?
-This entails knowing and understanding your Unique
Selling Proposition. Your unique selling proposition is the
one thing that makes that your product different than any
other. It’s the one reason they think consumers will buy
the product even though it may seem no different from
many others just like it. It may be that the product has a
lower price or more convenient packaging, or it may taste
or smell better, or last longer.
7. What barriers must be overcome for a potential new
product entry?
-Barriers to entry include high research and development
expenditure, high presence of start-up or sunk costs, and
international trade restrictions such as tariffs and quotas.
Patents are likewise important barriers for many small
and home-based businesses, where your competitor may
hold legal protection for an integral component of your
product and hence may prevent you from manufacturing
your product. Other barriers to entry include predatory
pricing of competitors that will force you to operate at a
loss, high advertising and marketing costs to compete
with established brands in the industry, and the cost
advantages enjoyed by your competitor that allows them
to set lower prices.
8. What are the potential sales, growth, profits, and time
for payback?
-Before starting your business, run your numbers first.
Get a clear idea of your cost structure, how much sales
you need to have to breakeven and post a profit, and
what your return on investment will be.