ENTREPRENEURSHIP COMPILATION

2ND SEMESTER | QUARTER 1

LESSON 1 | CAREER OPPORTUNITIES IN Entrepreneurship De ned

ENTREPRENEURSHIP
The activity of setting up a business or
“Entrepreneur” originates from the French word businesses, taking on nancial risk in the hope
“entreprendre” which means “to undertake”. of pro t is called entrepreneurship. (Oxford
▪ It connotes a business paradigm which Dictionaries). It is an act of being an
signi es the start of a new business entrepreneur which is de ned as a person who
undertaking.  organizes and operates a business or
“Entrepreneurship” comes from the word businesses, taking on greater than normal
entrepreneur. nancial risk to do so. It can also be de ned as
▪ It refers to a particular eld of practice or "one who undertakes innovations, nance and
process, as compared to an entrepreneur business acumen in a n e ort to transform
which is a person practicing innovations into economic goods". This makes
entrepreneurship. form part of creating a new business opportunity
that they willingly undertake conception,
Small Business & Ordinary Business organization, and management of a productive
activity with all the possibility of taking risk and
Small business refers to a business or seeks pro t as a compensation. 
enterprise that correctly adopts and practices
the principles of entrepreneurship. It is owned As an entrepreneur you must be a creative
by one person with a limited workforce of not innovator who accepts risk in losing pro t by
more than 20 persons. investing your capital. He should know how to
▪ It includes the small and medium enterprise generate business and job opportunities, easy to
(SMEs) that have been strongly promoted by think of a solution and know how to value its
both government and non-government customers.
organizations (NGOs) in their desire to
improve the lives of the Filipino people Qualities to Successfully Run an Enterprise
through entrepreneurship.
1. Disciplined
Ordinary small business pertains to a business These individuals are focused on making their
enterprise managed and operated by an owner businesses work and eliminate any hindrances
who is not an advocate of and does not practice or distractions to their goals. They have
the concepts and principles of entrepreneurship. overarching strategies and outline the tactics to
▪ In the Philippines, small businesses, accomplish them. Successful entrepreneurs are
whether ordinary or not, are ourishing and disciplined enough to take steps every day
sprouting like mushrooms. They can be found toward the achievement of their objectives.
almost anywhere and everywhere – along city
streets, municipal roads, and in public 2. Con dence
markets, hospitals, schools, and amusement The entrepreneur does not ask questions about
parks. whether they can succeed or whether they are
worthy of success. They are con dent with the
knowledge that they will make their businesses
succeed. They exude that con dence in
everything they do.

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 3. Open Minded highlighting the bene ts of any situation and

Entrepreneurs realize that every event and coaching others to their success.
situation is a business opportunity. Ideas are
constantly being generated about work ows 9. Strong work ethic
and e ciency, people skills and potential new The successful entrepreneur will often be the
businesses. They have the ability to look at rst person to arrive at the o ce and the last
everything around them and focus ti toward their one to leave. They will come in on their days o
goals. to make sure that an outcome meets their
expectations. Their mind is constantly on their
4. Self-Starter work, whether they are in or out of the
Entrepreneurs know that if something needs to workplace.
be done, they should start it themselves. They
set the parameters and make sure that projects 10. Passion
follow that path. They are proactive, not waiting Passion is the most important trait of the
for someone to give them permission. successful entrepreneur. They genuinely love
their work. They are willing to put in those extra
5. Competitive hours to make the business succeed because
Many companies are formed because an there is a joy their business gives which goes
entrepreneur knows that they can do a job beyond the money. The successful entrepreneur
better than another. They need to win at the will always be reading and researching ways to
sports they play and need to win at the make the business better. Successful
businesses that they create. entrepreneurs want to see what the view is like
An entrepreneur will highlight their own at the top of the business mountain. Once they
company's track record of success. see it, they want to go further. They know how to
talk to their employees, and their businesses
6. Creativity soar as a result.
One facet of creativity is being able
to make connections between seemingly LESSON 2 | THE ENTREPRENEUR
unrelated events or situations. Entrepreneurs
often come up with solutions which are the From the French word “entrepredre” which
synthesis of other items. They will repurpose means “to undertake”
products to market them to new industries.
• It connotes a business paradigm which
7. Determination signi es the start of a new business
Entrepreneurs are not thwarted by their defeats. undertaking.
They look at defeat as an opportunity for
success. They are determined to make all of • A person who organizes, operates and
their endeavors succeed, os will try and try again assumes the risk of business ventures
until it does. Successful entrepreneurs do not
• A person who strongly advocates and
believe that something cannot be done.
correctly practices the concepts and
principles of entrepreneurship in operating
8. Strong people skills
and managing the self – owned business
The entrepreneur has strong communication
enterprise.
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
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 What is Entrepreneurship? LESSON 3 | FEATURES OF
ENTREPRENEURSHIP
The art of observing correct practices in
managing and operating a self-owned wealth- Salient Features of Entrepreneurship
creating business enterprise by providing goods
and services that are valuable to the customers.

Entrepreneurial Character Traits

• Positive Networker

• Information- Seeker

• Persuasive Committed

• Risk-Taker Self-Con dent

• Goal-Setter Persistent ENTREPRENEURSHIP IS AN ART OF CORRECT

PRACTICES
• E cient & Quality Oriented
Entrepreneurship is an art and not science. It is
• Systematic In Planning And Monitoring not governed by xed and absolute rules,
whereas science is. Thus, there is constant
• Opportunity-Seeker change which denotes movement and
innovation. Entrepreneurship, therefore, is not
static or stagnant. It continuously grows,
Personal Entrepreneurial Clusters develops, improves, and expands; the change
does not stop. The development of
ACHIEVEMENT CLUSTER entrepreneurship through the years is a proof
that it is an art that continuously evolves and
- accomplished successfully by means of
responds to the changing needs of the people.
exertion, skill, practice or perseverance
Now ask your self the following questions
PLANNING CLUSTER
1. Is Creativity Present In The Operation Of
- the process of thinking and organizing the
Ordinary Small Business Along The Street
activities required to achieve a desired goal
And Highways And In Your Neighborhood?
POWER CLUSTER Why Do You Say So?

- the ability to in uence the behavior 2. Will You Consider The Daily Business
of people Practices Of The Small Business Owner
Within The Concept Of Entrepreneurship?
Why?
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 ENTREPRENEURSHIP IS A WEALTH CREATING The entrepreneur de nes value from the

VENTURE perspective of the buyers and not only from his/
her own because what is valuable to the
Entrepreneurship, however, is operating within entrepreneur may not be of any value to the
the concepts of wealth creation rather than pro t consumers. Value, therefore, is subjective. Not
generation. The concept of the pro t is more every person considers the same things as
applicable in the area of accounting as away of valuable
measuring the operating performance of a
business. Now ask your self the following questions

According to Random House Webster dictionary, 1. Is Your Product Or Srvice Valuable? Why Do
wealth is de ned as the abundance of money, You Say So?!
property, or possession.nary, This conceptual 2. From Whose Perspective Is Your Product
de nition of wealth, in its strict sense, those not Or Service Valuable?
even refer to business pro t. This book strongly 3.How Will You Make Your Product Or Service
underscores the word “abundance” in the Valuable To Your Target Market
conceptual de nition of wealth. The concept of
abundance and not of accounting pro t, is the ENTREPRENEURSHIP ENTAILS OPENING AND
very essence of wealth in entrepreneurial MANAGING THE SELF OWNED ENTERPRISE
endeavor.
the entrepreneur opens his/her owned business
Now ask your self the following questions under the principles of entrepreneurship. It must
be self-owned in order to qualify as an
1. Is Your Small Business A Wealth-Creating entrepreneurial endeavor. A business is
Venture Or An Income Generating Enterprise? considered self-owned when the person
Why Do You Say So? managing is daily activities is also its owner. This
is a straightforward requirement of
2. Does Your Business Helf Improve Your Life?
entrepreneurship. Businesses that are being
How?
managed by others for the bene ts of the
ENTREPRENEURSHIP PROVIDES VALUABLE owners do not fall within the sphere of
GOODS AND SERVICES entrepreneurship. Such businesses are
operating under the concepts of
Entrepreneurship creates economics wealth by intrapreneurship.
providing goods and services to the consumers.
These goods and services must have a value in Now ask yourself the following questions:
order to create wealth. Otherwise, they become 1. Do you know someone who owns a small
wasted. One essential principle in business?
entrepreneurship then is, “not to sell waste to 2. Does he/she personally manage his/her
consumers but only valuable goods and own business? How?
services”. Anything of no value to anybody is
de nitely a waste. 3. Do you think he/she is an entrepreneur or
an ordinary small businessperson? Why do
Valuable goods and services highly satisfy the you say so?
target buyers in terms of quality and price. The
entrepreneur convinces the consumers that they
gain more bene ts that what they pay for the
goods and services.
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 Entrepreneurship Is a Risk-Taking Venture To the Local Community

The basic concept of risk in entrepreneurship - Provides employment in the community

can be expressed in this statement, “ Risk is - Creates new demand in the market
inherent in an entrepreneurial venture.” - Makes substantial contribution to the raising
and collection of taxes
In other words, once an entrepreneurial ventures - Facilitates the movement of the factors of
is born because of new ideas or opportunities, production
risk comes simultaneously with the venture. Risk - Creates new business opportunities
cannot be detached from any entrepreneurial - Promotes peace and loving community
venture and the only way to remove it is to close - Increases constructive competition
the venture. However, closing the business
means giving up becoming a successful
To the Philippine Economy
entrepreneur. Hence, closing the business is not
the ultimate answer in handling its inherent risk. - Encourages competitiveness and challenge
The risk in entrepreneurship is called a business them to keep improving their product and
risk. So every time the word risk is used in this services.
book, it refers to a business risk. - Help nd entrepreneurial niche in the world
market.
The approach in handling business risk
- Help hasten the economic recovery of the
di erentiates an entrepreneur from an ordinary
Philippines during nancial breakdown.
businessperson. Usually, an ordinary
- Facilitate smooth ow of money in the local
businessperson does not understand the nature
market
of business risk which in one way or another
- Assist the national government to have
may lead to the failure of his/her business. He/
favorable economic ratings in the world market.
she shuns or avoids it which indicates that he/
she only favors operating under favorable
condition. Skills and Core Competencies in
Entrepreneurship
NOW ASK YOUR SELF THE FOLLOWING
QUESTION

1. Are You A Risk Taker Or Not? Why Do You

Say So

2. How Do You Face Or Avoid Risk?

3. What Business Risk Do You Forsee In Your

Future Interpreneurial Venture?
COGNITIVE SKILLS
Importance of Entrepreneurship
• Ability to understand written materials
To the Filipino People:
• Ability to learn and apply new information
- Provides guidelines in their wealth – creating • Ability to solve problems systematically
ventures - Help improve their nancial and social • Ability to create new ideas.
life.
- Helps broaden their creativity • Ability to innovate new products and
- Helps make their lives happy, fruitful and and procedures or methods,
successful.
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 TECHNICAL SKILLS LESSON 4 | THEORIES ON

ENTREPRENEURSHIP
Pro ciency and ability in the following areas:
NATURE AND CONCEPT
• Information Technology
• Feasibility study and business plan A theory is a generalization that explains a set of
preparation facts or phenomena. It is not an absolute truth. It
• Technical writing skills can be supported by another observation or
• Marketing proven to be otherwise.
• Management and Finance
• In the process of evaluating the soundness and
INTERPERSONAL SKILLS logic of various entrepreneurship theories,
remember that the scholars who developed or
• Skills in verbal communication contributed them mostly anchored their
• Skills in non – verbal communication concepts on the economic events which were
• Skills in listening happening at that time. Learn by heart the
• Skills in leading theories that you deem appropriate and
• Skills in negotiating applicable in your prospective business and will
support your desire to become a successful
entrepreneur. Evaluate them and choose the
theory or theories that you will believe and
accept. In other words, there is no right or wrong
answer.

INNOVATION THEORY

The innovation theory on entrepreneurship was

contributed by Joseph Schumpeter, an Austrian
economist and political scientist. He wrote about
Exploring Career Opportunities it in his book, The Theory of Economic
• Business Accountant Development.
• Business Consultant Entrepreneur
• Start New Business Concept Buy a The innovation theory regards economic
Franchise development as the product of structural change
Buy an Existing Business Copy an or innovation. Schumpeter argued that the
Existing Concept Become a One chances for economic development to take
Person Firm place would be slim unless revolutionary
• Teacher changes in the circular ow of economy would
• Sales happen. An economy without any revolutionary
• Research and Development Business change is deemed to be static and cannot
Writer and Reporter expect any economic development . Simply put,
there will be no development in any economic
equilibrium or status quo.

Schumpeter strongly believed that innovation is

the force that will propel the revolutionary
change. It will cause the creative destruction of
the static mode of the economy, stir the
entrepreneurial activity, and encourage

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competition. Unless innovation takes place,
economic equilibrium or status quo will remain.
It becomes the primary role of entrepreneur to
introduce innovation in any of the following
forms:
1. New product
2. New production method 3. New market
4. New supplier
5. New industry structure
Will you consider the innovation theory as one
of your guiding posts in your journey as an
entrepreneur?
KEYNESIAN THEORY
The Keynesian theory on entrepreneurship was
developed by John Maynard Keynes, a British
economist. The key concepts of the theory were
included in his book, The General Theory of
Employment, Interest and Money, which was
published during the Great Depression in 1936.
The theory put so much emphasis on the role of
the government in entrepreneurial and
economic development, most especially when
the economy was experiencing depression. It
suggests that entrepreneurial activities may not
be favourable in the future unless the short-term
problem of economic disequilibrium is nally
resolved through the active participation of the
government.
The private sector may perform well in their
entrepreneurial ventures only when the people
have enough money. However, during a period
of economic depression, money becomes
scarce and the number of unemployed workers
is high. It is during this time that the government
must make a strong intervention in the
entrepreneurial role played by the private sector
by pouring some money to the economy and
creating more jobs and projects for communities.
History reveals that the entrepreneurial
endeavour was hardly felt during the Great
Depression in the United States since
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entrepreneurs were reluctant to invest for fear of
having poor returns on investment. It was the
government that played a critical role then.
Are you going to consider the tenets of the
Keynesian theory of entrepreneurship?
ALFRED MARSHALL THEORY
The entrepreneurship theory of Alfred Marshall,
an English economist, was introduced in his
book, Principles of Economics. As he strongly
asserted that there are four factors in the
production (land, labor, capital, and organization)
of goods and services in the economy, he
considered organization as the coordinating
element. Without the active participation of
organization, the other factors production will
remain inactive in their role for economic
development.
Marshall regarded the entrepreneurs as the
prime movers in the organization. They are
expected to create new commodities or
improved the existing ones. He believed that the
entrepreneurs could perform and meet
expectations only if they had a thorough
understanding of the industry where they
operated. Without the active participation of
entrepreneurs in the economy, development will
surely be slow and limited.
Marshall further suggested that an entrepreneur
must be able to foresee possible changes in the
future supply and demand pattern. He/ She must
also possess the necessary skills to be an
entrepreneur. Marshall observed that though the
skills and abilities required of an entrepreneur
are so numerous, only a few exhibited a high
degree of pro ciency.
Will your entrepreneurial drive be in uenced by
the entrepreneurship theory of Alfred Marshal?

 RISK AND UNCERTAINTY-BEARING THEORY development would be slow and growth might
not be expected. The entrepreneur is expected
Frank Hyneman Knight, an American economist, to keep abreast with modern technology and
conceptualized the risk and uncertainty-bearing nd ways to apply the same in the
theory of entrepreneurship in his book, Risk, entrepreneurial endeavor. Proper application of
Uncertainty and Pro t. modern technology will promote e ciency in the
production of goods and services.
By adopting some concepts of the early
economists, Knight viewed an entrepreneur as 3. Leibenstein’s gap- lling theory.
an agent of the production process where he/
she connects the producers and the consumers. In this theory on entrepreneurship, Henry
Knight, however, added risk-taking as an Leibenstein proposed that the primary role of
important dimension that will di erentiate an entrepreneurship in any economic activity is to
entrepreneur from a worker. ll the existing gap. Entrepreneurship is
responsible for recognizing trends in the market.
Knight considered uncertainty an important The entrepreneur is expected to possess
factor in the production of goods and services. abilities that will connect the di erent markets .
He believed that the entrepreneur must He/She must extend assistance to
anticipate possible random events to happen entrepreneurial ventures experiencing failures
while shouldering the risk at the same time. The and de ciencies.
entrepreneur would be eventually rewarded with
high pro ts. 4. Kirzner’s learning-alertness theory.

Do you consider the risk-uncertainty bearing Israel Kirzner was the main proponent of this
theory of entrepreneurship applicable to you as theory. He pointed out spontaneous learning
future entrepreneur? and alertness as the two major attributes of
entrepreneurship in any given economy. The
OTHER THEORIES ON ENTREPRENEURSHIP entrepreneur must be alert in recognizing
entrepreneurial opportunities and the ignorance
There are other theories on entrepreneurship. of consumers as well. He/She must immediately
This does not mean, however, that they are nd appropriate remedy to correct the error or
inferior to the previously listed theories. wrong perception.
1. Weber’s sociological theory. Which of these theories do you consider tting
to your dream of becoming a successful
In sociological theory, Max Weber stressed that entrepreneur?
social cultures are the primary driving elements
of entrepreneurship. The entrepreneur is FUNCTION OF ENTREPRENEURS
expected to perform the role of a good
constituent by executing his/her entrepreneurial An entrepreneur frequently has to wear many
activities in line with good customs and hats. He has to perceive opportunity, plan,
traditions, religious beliefs, and morals. organize resources, and oversee production,
marketing, and liaison with o cials. Most
2. Kaldor’s technological theory. importantly he has to innovate and bear risk.
The technological theory was developed by
Nicholas Kaldor who considered modern
technology as an essential factor in production .
In the absence of modern technology
application in entrepreneurship, economic
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 The main functions of an entrepreneur are b. Estimation of Details of Business and

grouped in three categories: Implementation of the Same
1. Risk bearing functions,
2. Administrative and decision-making After arriving at a conclusion about the nature of
functions, and; business, the entrepreneur works out the details
3. Distributive functions (responsibility of the of business, i.e., what, how and when to produce
organizer). and from where the resources are to be
arranged. With all these estimations, they make
1. Risk Bearing Function an all-out e ort to give a practical shape to his
plans, organizes various factors of production
It is the most important and speci c function of and sets them to function in proper harmony.
an entrepreneur. Every business involves some
amount of risk. The production of goods and c. Supervision and Control of Business
services is always related to future demands. Activities
The future demand is uncertain and
unpredictable because it is in uenced by the The entrepreneur has to supervise and control
changes in fashion or taste and liking of the the day-to-day business activities to accomplish
consumers. The price structure, value of money, the business objectives. For this they properly
climatic conditions and government policies are coordinate between various factors of
some other important factors that a ect the production. As the risk (success or failure) of
demand of a commodity. All these factors are business operations directly a ect the economy,
variable and as such an exact estimation of they keep a vision and control on the business
future demand is a di cult exercise to work out. a airs and avoids unnecessary expenditures.
Since this unpredictable task is undertaken by They are required to take a numerous decision
the entrepreneur; he has to bear the risk. If his and has to get these decisions properly
estimations prove to be wrong, then in the entire implemented.
business sphere, no other factor of production
d. Innovation
shares the loss incurred by the entrepreneur. It is
the main reason why the entrepreneur becomes Innovation is one of the most important functions
entitled for the surplus that is remaining with him of an entrepreneur. An entrepreneur uses
from the sale proceeds of the product, after information, knowledge, and intuition to come
distributing the shares to other factors. This up with new products, new methods of reducing
surplus is termed as pro t of the business. costs of a product, improvement in design or
function of a product, discovering new markets
2. Administrative and Decision-Making
or new ways of organization of industry. Through
Functions
innovation, an entrepreneur converts a material
a. Conceiving the Idea of Business into a resource or combines existing resources
into new and more productive con gurations. It
The entrepreneur conceives the idea of a is the creativity of an entrepreneur that results in
business which suits their nature, skill and invention (creation of new knowledge) and
resources. They make a thorough (intensive and innovation (application of knowledge to create
extensive) study of the condition of market and the new products, services, or processes)
business prospects.
After making a thorough study of economic
viability, they decides the business that they has
to start.
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 3. Distributive Functions LESSON 4.2 | RECOGNIZING A POTENTIAL
MARKET
The entrepreneur organizes di erent factors of
production and sets them to work. It, therefore,
SETTING UP A SMALL BUSINESS
becomes his responsibility to make proper
allocation of funds for each factor of production, A person (entrepreneur) who set up a business
i.e., each factor of production must be properly must recognize its nancial risk. One must make
remunerated. The remuneration here refers to their business work by eliminating any
an important hindrances or distractions to their goals. They
decision as to what should be the share of each must overarch strategies and outline the tactics
factor of production in the sale proceeds of the to accomplish them. Successful entrepreneurs
entire product. The remuneration should be just are disciplined enough to take steps every day
and equitable and the payment to each factor toward the achievement of their objectives. If
should be commensurate, so that each factor is you possess the quality of an entrepreneur to
fully satis ed. If the factors of production remain perform a business venture you may now start
dissatis ed, they will not be able to deliver their having your small business.
best to the entrepreneur. So, it is the
entrepreneur, who has to ultimately su er. FACTORS TO CONSIDER WHEN SETTING UP A
Hence, it is very essential for the entrepreneur to BUSINESS.
perform distributive functions
with extreme care and caution. Ask yourself:

KEY POINTS 1. How Can I Arrange My Capital

2. How Can I Select The Line Of Right
Business For Me?
1. Entrepreneurship is an activity of setting up 3. What Is The Right Location Of My
a business and taking Business?
nancial risk to earn pro t. 4. How To Select Your Business Workforce?
2. An entrepreneur is a person who organizes
and operates a business. HOW CAN I ARRANGE MY CAPITAL
3. Successful entrepreneurs are disciplined
enough to take steps every day toward the The entrepreneur has to analyze and nd out
achievement of their objectives. the amount and the duration of nance required
4. The entrepreneur has strong as well as the duration for such nance is
communication skills to sell the product and needed in the business. The entrepreneur
motivate employees. requires money to buy machinery, building, raw
5. Entrepreneurship provides employment, material, pay wages to labor, etc. Money spent
contributes development to the economy of on buying machinery, building, equipment, etc. is
the country and creates wealth to individuals. known as xed capital. On the other hand,
6. Entrepreneur conceives the idea of a money spent on buying raw materials and
business which suits their nature, skills, and paying wages and salaries, rent, telephone and
resources. electricity bills, etc. is known as working capital.
7. Innovation is one of the most important
functions of an entrepreneur The entrepreneur has to arrange for both xed
8. Commercial bankers, Franchise operators, as well as working capital for his business The
Research and Development executives and nance can be raised by self-contribution or by
Business consultants are among the career borrowing from banks and other nancial
pathway in studying entrepreneurship institutions. Money can also be borrowed from
friends and relatives.


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 HOW CAN I SELECT THE LINE OF RIGHT IMPORTANCE OF POTENTIAL MARKET

BUSINESS FOR ME?
A potential market is the part of the market you
The process of launching a business begins can capture in the future. It includes the
when the entrepreneur start thinking about a demographic groups of customers that will
line of business, which can be undertaken by purchase your product or services in the future
him. He may consider business opportunities as who might become your regular customers
per the market demand. He may go for an from the expansion of your business. A target
existing product or a new product. But before customer that make up its share in the available
taking any step he has to ascertain the market is to be set by every business owner. The
pro tability of the business and the amount of best ways to grow your business is to identify
capital investment. Having estimated the your potential market that you can begin to
pro tability and risk involved, the entrepreneur target.
has to decide which line of business could be
desirable to pursue The potential market allows you to:
1. Identifying new customers to ensure the
WHAT IS THE RIGHT LOCATION OF MY future of your business.
BUSINESS? 2. Think proactively about ways for your
business to grow and change.
Special care should be taken while selecting the 3. Show the potential of your business to
location of the business. An entrepreneur can investors or collaborators.
start business in his own premises or in a rented 4. Increase your pro t.
premises. It can be located at a marketplace or 5. Create a strategic plan when there will be
in a commercial complex or in an industrial changes in the economy or market.
estate. While deciding the location, the
entrepreneur should consider various factors VALUE PROPOSITION
like sources of supply of raw material,
nearness to the market, availability of labor, In identifying your potential markets, you are not
transportation, banking and communication just increasing your share for today but ensuring
facilities, etc. Factories should be preferably the increase of your pro t in the future. If you are
located near the source of raw material and at a an ambitious entrepreneur with a promising
place that is well connected with rail and road product, you probably can’t wait to show it to
transport facility. A retail business should be potential customers. But before you go into
started near residential area or in a marketplace. “sales mode,” you might want to sit down at your
desk, take a look at your value proposition and
HOW TO SELECT YOUR BUSINESS do some research.
WORKFORCE?
A value proposition
An entrepreneur cannot run the business alone. • refers to the value a company promises
He has to employ people to help him. Skilled to deliver to customers should they
and Semi-skilled workers have to be recruited choose to buy their product.
particularly for manufacturing work. Before • part of a company's overall marketing
starting the business, the entrepreneur must nd strategy.
out whether he will be able to get the right type • provides a declaration of intent or a
of employees for the activities involved. 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.
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 • can be presented as a business or products and services provided to consumers

marketing statement that a company uses should be something each employee should be
to summarize why a consumer should buy able to pinpoint easily.
a product or use a service. This
statement, if worded compellingly, 2. Connect bene ts to the value
convinces a potential consumer that one Once leaders have a complete grasp on the
particular product or service the company bene ts o ered, they should then link these
o ers will add more value or better solve bene ts to the value the company creates for
a problem for them than other similar customers.
o erings will. - How do the bene ts help the customer?
- Does the product address a problem or need?
UNDERSTANDING A VALUE PROPOSITION - Does the buying process signi cantly reduce
the purchase time?
A value proposition stands as a promise by a - How can customers expect to bene t from
company to a customer or market segment. The what the company o ers?
proposition is an easy-to-understand reason why
a customer should buy a product or service from
that business. 3. Target your audience
Every businesses product is not for every
A value proposition should clearly explain how a consumer. Leaders need to sharpen the focus
product lls a need, communicate the speci cs and decide who is the target segment for the
of its added bene t, and state the reason why it product or service. This information can include
is better than similar products on the market. location, demographics, income, occupation,
The ideal value proposition is to-the-point and hobbies, and many other factors. Knowing who
appeals to a customer’s strongest decision- the audience is will help leaders decide which
making drivers. bene ts should be mentioned and which might
be best to leave out. It also creates a way to
REQUIREMENTS OF A VALUE PROPOSITION better link bene ts to value.

A value proposition should always be displayed

prominently on a company's website and in 4. Di erentiate the Product and Service
other consumer touch points. It The headline This might be one of the most critical
should be a single memorable sentence, phrase, components of all. At this point, leaders need to
or even a tagline. It frequently incorporates work with their teams to see how they are
catchy slogans that become part of successful di erent from competitors. This step revolves
advertising campaigns. Often a sub headline will around the question of why consumers should
be provided underneath the main headline, 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
HOW TO DEVELOP VALUE PROPOSITION either does it better or more e ciently.
Consumers need to know why they should look
1. Understand the bene ts customers receive over another brand for someone else’s.
To start creating a value proposition, leaders
need to understand how they create value. 5. Put everything into a clear and easy to read
Therefore, the bene ts the company provides to sentence
the consumers should be listed. Everything from Through research and analysis, leaders should
the product’s use, customer service, delivery emerge with an idea of what to include in their
processes, and any other component should be value proposition. The purpose of this statement
on the list. The bene ts the company and its is not to become a long and arduous read, but it
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 should quickly inform customers of who the Sample(s)

company is. Customers should be able to read
over the value proposition in ve seconds to get For non-technical marketers
a feel for the bene ts and value the business who struggle to nd return on investment in
o ers. If the statement cannot be whittled down social media
to a sentence, then leaders should go back to our product is a web-based analytics software
the drawing board to cut out features that may that translates engagement metrics into
not be needed. actionable revenue metrics.

6. Place it everywhere 2. Venture Hacks' High-Concept Pitch

Once the leader and the team agree on a value
proposition, then leaders need to work with In Made to Stick, Dan and Chip Heath point to
marketing to get this statement as many places how high-concept pitches such as 'Jaws on a
as possible. It should be included in a website, spaceship' (Alien) and 'Die Hard on a
logos, email newsletter signatures, on a bus' (Speed) convince movie executives to invest
company brochure, and everywhere possible. vast sums of money in a project on the basis of
almost no information. In Pitching Hacks Nivi and
7. Test its e ectiveness Navel from
Leaders need to assess how the value
Venture Hacks share examples of this technique
proposition is adding in increasing revenue and
applied to startups.
bringing in new customers. Also, leaders should
be aware of how the value proposition is Template
changing the perception of the company.
- Have conversions increased? [Proven industry example] for/of [new domain].
- Are more people visiting the website?
- Are more email newsletters being opened Sample(s)
- How are competitors responding?
Flickr for video.
LESSON 5 | VALUE PROPOSITION TEMPLATE Friendster for dogs.
& PRODUCT The Firefox of media players

1.Geo Moore's Value Positioning Statement 3. Steve Blank's XYZ

Probably the most popularized - in his seminal Steve Blank writes that a Value Proposition is a
book Crossing the Chasm - Geo Moore ten-dollar phrase describing a company’s
suggests a speci c template for outlining your product or service. It’s the “what are you building
value positioning. In addition to the rst part and selling?" He suggests the following format
below, Moore also for creating a value proposition statement that
introduces a second statement focused on other people understand.
competitive positioning. Template
“We help X do Y doing Z”.
Template
Sample(s)
For ____________ (target customer)
who ____________ (statement of the need or We help non-technical marketers discover return
opportunity) on investment in social media by turning
our (product/service name) is ____________ engagement metrics into revenue metrics.
(product category) that (statement of bene t)
____________ .
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 4. Vlaskovits & Cooper's CPS Template

1. Highlight the enormity of the problem you are
In their Cheat Guide to Customer Development tackling.
Cooper and Vlaskovits use what they call a 2. Tell the audience up front what your company
Customer-Problem-Solution presentation. sells.
Template 3. Distill the di erentiation down to one, easy-to-
Customer: ____________ (who your customer comprehend sentence.
is). 4. Establish credibility by sharing the pedigree of
the entrepreneurs, customers, or the investors.
Problem: ____________(what problem you're
solving for the customer). Solution: Sample(s)
____________ (what is your solution for the
problem). One person dies of melanoma every 62
minutes.
Sample(s) We o er a dermatoscope app for iPhone that
enables people to easily diagnose their skin,
Customer: I believe my best customers are small leveraging patented pattern recognition
and medium-sized business (SMB) markets. technology trusted by the World Health
Problem: Who cannot easily measure campaign Organization.
ROI because existing solutions are too
expensive, complicated to deploy, display a 7. Eric Sink's Value Positioning
dizzying array of non-actionable charts.
Solution: Low cost, easy to deploy analytics Eric Sink writes that marketing is somewhat like
system designed for non-technical marketers an iceberg - the part sticking out of the water is
who need actionable metrics. highly visible. For this Eric suggests the following
format for positioning. Template
5. Dave McClure's Elevator Ride
Superlative ("why choose this product").
In his How to Pitch a VC presentation Dave Label ("what is this product").
McClure presents a 3-step check list for creating Quali ers ("who should choose this product").
positioning statements.
Sample(s)
Template
The easiest operating system for netbook PC's.
• Short, simple, memorable; what, how, why. • 3 The most secure payment gateway for mobile e-
keywords or phrases commerce
• KISS (no expert jargon)
WHAT TO SELL | How to Select the Right
Sample(s) product for your Business
• "Mint.com is the free, easy way to manage What products or services could you sell that will
your money online. make you money? The selection of the right
product or service is critical. In fact, the choice of
6.David Cowan's Pitchcraft a product or service for your business can make
or break. your business.
Although a more elaborative one David Cowan
shares some useful guidelines in Practicing the Choose a product that requires signi cant
Art of Pitchcraft. I've put together a summary. production capital when you have none and
couldn’t nd any, and your business is



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 compromised from the start. O er a service that It must have a real value that customers can
a hundred other entrepreneurs o er in your recognize, want and need. Include in your
locality and you may nd it hard to get noticed product information and sales materials how
above your competitors. Or select a product with your products can bene t the customers, e.g.
an extremely specialized market yet you do not help reduce time, e ort and expenses
know how to reach the potential customers, and
your business can go kaput. 3. How capable are you to produce the
product?
WHAT TO SELL: HOW TO SELECT THE RIGHT Just as an athlete needs to know his physical
PRODUCT FOR YOUR BUSINESS condition before he enters a race, you must also
know if you have the time, resources and
Your products are your business! If you want to capability to produce your product. Many
turn your business into an income-generating entrepreneurs make the mistake of going
machine, the rst step is to choose the right forward with a business idea only to nd that
product or services to sell. With the right they cannot a ord the manpower required, or do
products, you even stand a better chance at not have the resources to outsource the product
keeping your customers. development. As a result, many experience
slippage in release dates making the mistake of
The idea is to keep your customers forever by launching half- nished web sites. You must also
continually o ering them a valuable product or evaluate at the onset how you can scale up the
service, thereby diminishing your costs of production if there is a strong demand for the
reaching and appealing to them. Wise product product
selection is therefore critical to your business
success. 4. What is the size of your potential reachable
market?
How do you choose the right product to sell? You need to at least get an idea of the size of
Here are a few questions to help you narrow your market. Know who are likely to use or
your focus and hopefully select the product that bene t from your products. If you are selling an
will work for you: information product on how to sell at Lazada or
1. What are your primary considerations for Shoppee, de ne who will be your potential
choosing a particular product? customers you think will be interested in your
Make a list of your selection criteria, and what product. Many small and home business
you think are important to you in identifying what entrepreneurs view market research as an
business to engage in. There are a myriad unnecessary and expensive cost but
reasons for selecting a product, and these understanding who and how big your market
reasons can include: nancial bene t to your can pay o in the long run.
business, relatively low investment
requirements, positive return on investment, t 5. Would you need to comply with government
with present strategy, feasible to develop and rules and regulations?
produce, easy to source and procure, relatively New laws or government rules and regulations
low risk, and time to see intended results can impact your product. Some products can be
sold immediately without the need for
2. Can you meet the needs of the customer government approval. Others, however, require
and solve a speci c problem? permits, licenses and approval from the
Your product must address a need or an government.
opportunity. You need to know how your
products or services can assist customers.


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 6. If a similar product exists, can your product LESSON 6 | BUSINESS PLAN
be superior in its functionality, presentation or
marketing? A business plan is a document that describes
This entails knowing and understanding your your business in terms of what it does, the
Unique Selling Proposition. Your unique selling products and services it o ers, your business
proposition is the one thing that makes that your strategy and business goals, and your action
product di erent than any other. It’s the one plan outlining how you plan to achieve your
reason they think consumers will buy the goals and earn money.
product even though it may seem no di erent
from many others just like it. It may be that the The main purposes of a business plan are to:
product has a lower price or more convenient • Show the future nancial performance of
packaging, or it may taste or smell better, or last the company and its
longer. economic situation for the owners and
investors.
7. What barriers must be overcome for a • Help identify risk that may a ect the
potential new product entry? growth of the company
Barriers to entry include high research and and its economic situation for the owners
development expenditure, high presence of and investors.
start-up or sunk costs, and international trade • Help make predictions about market
restrictions such as tari s and quotas. Patents trends, competitor
are likewise important barriers for many small behavior, customer requirements an
and home-based businesses, where your de ne and prioritize key
competitor may hold legal protection for an business objectives.
integral component of your product and hence • Serve as a key resource for developing
may prevent you from manufacturing budgets
your product. Other barriers to entry include
predatory pricing of competitors that will force Writing a business plan shouldn’t be
you to operate at a loss, high advertising and complicated. In this step-by- step guide you will
marketing costs to compete with established quickly and easily write a business plan that will
brands in the industry, and the cost advantages get the results you want. You don’t have to have
enjoyed by your competitor that allows them to a business or accounting degree to put together
set lower prices. a great business plan. This guide will show you
how to get your plan done step-by step without
8. What are the potential sales, growth, pro ts, any of the complexity or frustration.
and time for payback?
Before starting your business, run your numbers SIX COMPONENTS OF A BUSINESS PLAN
rst. Get a clear idea of your cost structure, how
much sales you need to have to breakeven and 1. Executive Summary
post a pro t, and what your return on investment 2. Opportunity
will be.
3. Execution
To succeed as an entrepreneur, you must 4. Company overview and team
develop the ability to select and o er the right 5. Financial plan
products or services to your
customers in a competitive market. More than 6. Marketing Plan
any other factor, your ability to make this choice
will determine your sUCCESS OR FAILURE.
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 1. Executive Summary. The executive summary Problem

of your business plan introduces your company, In one or two sentences, summarize the problem
explains what you do, and lays out what you’re you are solving in the market. Every business is
looking for from your readers. Structurally, it is solving a problem for its customers and lling a
the rst chapter of your business plan. And while need in the market
it’s the rst thing that people will read, I generally
advise that you write it last. Solution
This is your product or service. How are you
Why? Because once you know the details of addressing the problem you have identi ed in
your business inside and out, you will be better the market?
prepared to write your executive summary. After
all, this section is a summary of everything else Target market
you’re going to write about. Ideally, the Who is your target market, or your ideal
executive summary can act as a stand-alone customer? How many of them are there? It’s
document that covers the highlights of your important here to be speci c. If you’re a shoe
detailed plan. In fact, it’s very common for company, you aren’t targeting “everyone” just
investors to ask for only the executive summary because everyone has feet. You’re most likely
when they are evaluating your business. If they targeting a speci c market segment such as
like what they see in the executive summary, “style-conscious men” or “runners.” This will
they’ll often follow up with a request for a make it much easier for you to target your
complete plan, a pitch presentation, and more marketing and sales e orts and attract
in-depth nancials the kinds of customers that are most likely to
buy from you.
Because your executive summary is such a
critical component of your business plan, you’ll Competition
want to make sure that it’s as clear and concise How is your target market solving their problem
as possible. Cover the key highlights of your today? Are there alternatives or substitutes in
business, but don’t into too much detail. Ideally, the market? Every business has some form of
your executive summary will be one to two competition and it’s critical to provide an
pages at most, designed to be a quick read that overview in your executive summary.
sparks interest and makes your investors feel
eager to hear more. Company overview and team
Provide a brief overview of your team and a
The critical components of a winning executive short explanation of why you and your team are
summary: the right people to take your idea to market.
Investors put an enormous amount of weight on
One sentence business overview At the top of
the team—even more than on the idea—because
the page, right under your business name,
even a great idea needs great execution in order
include a one-sentence overview of your
to become a reality
business that sums up the essence of what you
are doing. This can be a tagline, but is often
Financial summary
more e ective if the sentence describes what
Highlight the key aspects of your nancial plan,
your company actually does. This is also known
ideally with a chart that shows your planned
as your value proposition.
sales, expenses, and pro tability. If your
business model (i.e., how you make money)
needs additional explanation, this is where you
would do it.
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 Funding requirements of your plan lives—it includes information about
If you are writing a business plan to get a bank the problem that you’re solving, your solution,
loan or because you’re asking angel investors or who you plan to sell to, and how your product
venture capitalists for funding, you must include or service ts into the existing competitive
the details of what you need in the executive landscape.
summary. Don’t bother to include terms of a
potential investment, as that will always be You’ll also use this section of your business plan
negotiated later. Instead, just include a short to demonstrate what sets your solution apart
statement indicating how much money you need from others, and how you plan to expand your
to raise o erings in the future.

Milestones and traction People who read your business plan will already
The last key element of an executive summary know a little bit about your business because
that investors will want to see is the progress they read your executive summary. But this
that you’ve made so far and future milestones chapter is still hugely important because it’s
that you intend to hit. If you can show that your where you expand on your initial overview,
potential customers are already interested in—or providing more details and answering additional
perhaps already buying—your product or questions that you won’t cover in the executive
service, this is great to highlight. You can skip summary.
the executive summary (or greatly reduce it in
The problem and solution
scope) if you are writing an internal business
plan that’s purely a strategic guide for your Start the opportunity chapter by describing the
company. In that case, you can dispense with problem that you are solving for your customers.
details about the management team, funding What is the primary pain point for them? How are
requirements, and traction, and instead treat the they solving their problems today? Maybe the
executive summary as an overview of the existing solutions to your customer’s problem
strategic direction of the company, to ensure are very expensive or cumbersome. For a
that all team members are on the same page. business with a physical location, perhaps there
aren’t any existing solutions within reasonable
driving distance. De ning the problem, you are
LESSON 6.1 | BUSINESS PLAN (OPPORTUNITY)
solving for your customers is far and away the
COMPONENTS OF EXECUTIVE SUMMARY most critical element of your business plan and
crucial for your business success. If you can’t
• One statement business overview pinpoint a problem that your potential customers
• Problem have, then you might not have a viable business
• Solution concept.
• Target market
• Competition To ensure that you are solving a real problem for
• Company overview and team your potential customers, a great step in the
• Financial summary business planning process is to get away from
• Funding requirements your computer and actually go out and talk to
• Milestones and tractions potential customers. Validate that they have the
problem you assume they have, and then take
2. Opportunity. There are four main chapters in the next step and pitch your potential solution to
a business plan— opportunity, execution, their problem. Is it a good t for them?
company overview, and nancial plan. The
Once you have described your target market’s
opportunity chapter of your business plan is
problem, the next section of your business plan
where the real meat
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 should describe your solution. Your solution is breakdown to look at market sizes from a top-
the product or service that you plan on o ering down approach as well as a bottom-up
to your customers. What is it and how is it approach.
o ered? How exactly does it solve the problem
that your customers have? For some products Here are some quick de nitions:
and services, you might want to describe use • TAM: Your Total Available or Addressable
cases or tell a story about a real user who will Market (everyone you wish to reach with your
bene t from (and be willing to pay for) your product)
solution • SAM: Your Segmented Addressable Market
or Served Available Market (the portion of
Target market TAM you will target)
• SOM: Your Share Of the Market (the subset
Now that you have detailed your problem and of your SAM that you will realistically reach—
solution in your business plan, it’s time to turn particularly in the rst few years of your
your focus toward your target market: Who are business)
you selling to? Depending on the type of
business you are starting and the type of plan Once you have identi ed your key market
you are writing, you may not need to go into too segments, you should discuss the trends for
much detail here. No matter what, you need to these markets. Are they growing or shrinking?
know who your customer is and have a rough Talk about the market’s evolving needs, tastes,
estimate of how many of them there are. If there or other upcoming changes to the market.
aren’t enough customers for your product or
service, that could be a warning sign. Your ideal customer

When you have your target market segments

Market analysis and market research
If you are going to do a market analysis, start
with some research. First, identify your market
segments and determine how big each segment
is. A market segment is a group of people (or
other businesses) that you could potentially sell
to. Don’t fall into the trap, though, of de ning the
market as “everyone.” The classic example is a
shoe company. While it would be tempting for a
shoe company to say that their target market is
everyone who has feet, realistically they need to
target a speci c segment of the market in order
to be successful. Perhaps they need to target
athletes or businesspeople who need formal
shoes for work, or perhaps they are targeting
children and their families.
TAM, SAM, and SOM
A good business plan will identify the target
market segments and then provide some data to
indicate how fast each segment is growing.
When identifying target markets, a classic
method is to use the TAM, SAM, and SOM
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de ned, it’s time to de ne your ideal customer
for each segment. One way to talk about your
ideal customer in your plan is to use your “buyer
persona” or “user persona.” A buyer persona is a
ctitious representation of your market—they get
a name, gender, income level, likes, dislikes, and
so on. While this may seem like additional work
on top of the market segmentation that you have
already done, having a solid buyer persona will
be an extremely useful tool to help you identify
the marketing and sales tactics you’ll need to
use to attract these ideal customers.
Key customers
The nal section of your target market chapter
should discuss key customers. This section is
really only required for enterprise (large)
companies that have very few customers. Most
small businesses and typical startups can skip
this and move on. But if you selling to other
businesses (B2B), you may have a few key
customers that are critical to the success of your
business, or a handful of important customers

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 that are trend leaders in your space. If so, use successful. While it’s tempting to spend a lot of
this nal portion of your target market chapter to time exploring future opportunities for new
provide details about those customers and how products and services, you shouldn’t expand too
they are important to your business’s success much on these ideas in your business plan. It’s
certainly useful to include a paragraph or two
Competition about potential future plans, to show investors
where you are headed in the long term, but you
Immediately following your target market don’t want your plan to be dominated by long-
section, you should describe your competition. range plans that may or may not come to
Who else is providing solutions to try and solve fruition. The focus should be on bringing your
your customers’ pain points? What are your rst products and services to market.
competitive advantages over the competition?
Most business plans use a “competitor matrix” to COMPONENTS OF OPPORTUNITY
easily compare their features against their • The problem and solution
competition. The most important thing to
• Target market
illustrate in this section of your business plan is
how your solution is di erent or better than • Target analysis and marketing research
other o erings that a potential customer might • TAM, SAM, and SOM
consider. Investors will want to know what
advantages you have over the competition and • Your ideal customers
how you plan on di erentiating yourself. One of • Key customers
the biggest mistakes entrepreneurs make in • Competition
their business plans is stating that they don’t
have any competition. • Future products and services

The simple fact is that all businesses have LESSON 6.2 | BUSINESS PLAN (EXECUTION)
competition. Competitors may not always come
in the form of “direct competition,” which is when 3. Execution
you have a competitor o ering a similar solution Now that you’ve completed the opportunity
to your o ering. Often times, you may be dealing chapter, you’re going to move on to the
with “indirect competition,” which is when execution chapter, which includes everything
consumers solve their problem with an entirely about how you’re actually going to make your
di erent kind of solution. business work. You’ll cover your marketing and
sales plans, operations, how you’ll measure
For example, when Henry Ford was rst success, and the key
marketing his cars, there was very little direct milestones that you expect to achieve.
competition from other car manufacturers—there
weren’t any other cars. Instead, Ford was Marketing and ales plan
competing against other modes of transportation
—horses, bikes, trains, and walking. On the The marketing and sales plan section of your
surface, none of these things look like real direct business plan details how you plan to reach
competition, but they were how people were to your target market segments (also called target
solving their transportation problems at that marketing), how you plan on selling to those
time. target markets, what your pricing plan is, and
what types of activities and partnerships you
Future products and services need to make your business a success. Before
you even think about writing your marketing
All entrepreneurs have a vision of where they plan, you must have your target market well-
want to take the business in the future if they are de ned and have your buyer persona(s) eshed
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 out. Without truly understanding who you are For example, the positioning statement for
marketing to, a marketing plan will have little LivePlan, our business planning product, is: “For
value. the businessperson who is starting a new
company, launching new products or seeking
Your positioning statements funding or partners, LivePlan is software that
produces professional business plans quickly
The rst part of your marketing and sales plan is and easily. Unlike [name omitted], LivePlan
your positioning statement. Positioning is how creates a real business plan, with real insights—
you will try and present your company to your not just cookie-cutter, ll-the-blank templates.
customers. Are you the low-price solution, or are
you the premium, luxury brand in your market? Pricing
Do you o er something that your competitors
don’t o er? Once you know what your overall positioning
strategy is, you can move on to pricing. Your
Before you start working on your positioning positioning strategy will often be a major driver
statement, you should take a little time to of how you price your o erings. Price sends a
evaluate the current market and answer the very strong message to consumers and can be
following questions: an important tool to communicate your
positioning to consumers. If you are o ering a
• What features or bene ts do you o er that premium product, a premium price will quickly
your competitors don’t? • What are your communicate that message to consumers.
customers’ primary needs and wants? Deciding on your price can feel more like an art
• How are your competitors positioning than a science, but there are some basic rules
themselves? that you should follow:
• How do you plan on di erentiating from the
competition? In other words, why should a • Covering your costs. There are certainly
customer choose you instead of someone exceptions to this, but for the most part, you
else? • Where do you see your company in should be charging your customers more than it
the landscape of other solutions? costs you to deliver your product or service.
• Primary and secondary pro t center pricing.
Once you’ve answered these questions, you can Your initial price may not be your primary pro t
then work on your positioning strategy and center. For example, you may sell your product
de ne it in your business plan. Don’t worry about at, or even below, your cost, but require a much
making your positioning statement very long or more pro table maintenance or support contract
in-depth. You just need to explain where your to go along with the purchase.
company sits within the competitive landscape • Matching the market rate. Your prices need to
and what your core value proposition is that match up with consumer demand and
di erentiates your company from the expectations. Price too high and you may have
alternatives that a customer might consider. no customers. Price too low and people may
undervalue your o ering.
You can use this simple formula to develop a
positioning statement: Pricing
For [target market description] who [target Once you know what your overall positioning
market need], [this product] [how it meets the strategy is, you can move on to pricing. Your
need]. Unlike [key competition], it [most positioning strategy will often be a major driver
important distinguishing feature]. of how you price your o erings. Price sends a
very strong message to consumers and can be
an important tool to communicate your
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 positioning to consumers. If you are o ering a
premium product, a premium price will quickly
communicate that message to consumers.
Deciding on your price can feel more like an art
than a science, but there are some basic rules
that you should follow:
If you are selling a product, the packaging of that
product is critical. If you have images of your
packaging, including those in your business plan
is always a good idea. Be sure the packaging
section of your plan answers the following
questions:

You can approach your pricing strategy in • Does your packaging match your positioning
di erent ways. Here are a few ways that you can strategy?
think about your pricing and come up with the • How does your packaging communicate your
right strategy for your business: key value proposition?
• How does your packaging compare to your
• Cost-plus pricing. You can establish your competition
pricing based on several factors. You can look at
your costs and then mark up your o ering from
there. This is usually called “cost-plus pricing” Advertising
and can be e ective for manufacturers where Your business plan should include an overview
covering initial costs is critical. of the kinds of advertising you plan to spend
• Market-based pricing. Another method is to money on. Will you be advertising online? Or
look at the current landscape of competitors and perhaps in traditional, o ine media? A key
then price based on what the market is component to your advertising plan is your plan
expecting. You could price at the high-end or for measuring the success of your advertising
low-end of the market to establish your
positioning. Public relations
• Value pricing. Yet another method is to look at
a “value pricing” model where you determine Getting the media to cover you—PR—can be a
the price based on how much value you are great way to reach your customers. Getting a
providing to your customer. For example, if you prominent review of your product or service can
are marketing lawn care to busy professionals, give you the exposure you need to grow your
you may be saving your customers 1 hour/week. business. If public relations if part of your
If that hour of their time is valued at P50/hour, promotional strategy, detail your plans here.
your service could charge P30/hour.
Content marketing
Promotion
A popular strategy for promotion is engaging in
With pricing and positioning taken care of, it’s what is called content marketing. Content
time to look at your promotion strategy. A marketing is what Business plans is all about. It’s
promotion plan details how you plan on when you publish useful information, tips, and
communicating with your prospects and advice— usually made available for free—so that
customers. Remember, it’s important that you’ll your target market can get to know your
want to measure how much your promotions company through the expertise that you deliver.
cost and how many sales they deliver. Content marketing is about teaching and
Promotional programs that aren’t pro table are educating your prospects on topics that they are
hard to maintain in the long term.: interested in, not just on the features and
bene ts that you o er.
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 Social media Technology

These days, having a social media presence is If you are a technology company, it’s critical for
essentially a requirement for the vast majority of your business plan to describe your technology
businesses. You don’t need to be on every social and what your “secret sauce” is. You don’t have
media channel, but you do need to be on the to give away trade secrets in your business plan,
ones that your customers are on. More and but you do need to describe how your
more, prospects are using social media to learn technology is di erent and better than other
about companies and to nd out how responsive solutions out there. At a high level, you will want
they are. to describe how your technology works. You
don’t need to go into excruciating detail here,
Strategic alliances though—if an investor is interested in more
detail they will ask for it, and you can provide
As part of your marketing plan, you may rely on that information in your appendix.
working closely with another company in a form
of partnership. This partnership may help Remember, your goal is to keep your business
provide access to a target market segment for plan as short as possible, so too much detail
your company while allowing your partner to here could easily make your plan much too long.
o er a new product or service to their
customers. If you have partnerships already Distribution
established, it’s important to detail those
partnerships in your business plan. For product companies, a distribution plan is an
important part of the complete business plan.
Operations For the most part, service companies can skip
this piece and move on. Distribution is how you
The operations section is how your business will get your product into the hands of your
works. It’s the logistics, technology, and other customers. Every industry has di erent
nuts and bolts. Depending on the type of distribution channels and the best way to create
business you are starting, you may or may not your distribution plan is to interview others in
need the following sections. Only include what your industry to gure out what their distribution
you need and remove everything else. model is.

Sourcing and ful llment DISTRIBUTION MODELS

If your company is buying the products it is Direct distribution. Selling directly to consumers
selling from other vendors, it’s important to is by far the most simple and most pro table
include details on where your products are option. You could consider passing the savings
coming from, how they get delivered to you, and of selling directly on to your customers or you
ultimately how you deliver the products to the could simply increase your pro t margins. You
customer—that’s sourcing and ful llment. If you will still need to cover the logistics of how you
are sourcing products from manufacturers will get your products to your customers from
overseas, investors are going to want to know your warehouse, but a direct distribution model
about your progress working with these is usually fairly simple.
suppliers. If your business is going to be
delivering products to your customers, Retail distribution. Most large retailers don’t like
you should describe your plans for shipping your the hassle of dealing with thousands of
products. individual suppliers. Instead, they prefer to buy
through large distribution companies that
aggregate products from lots of suppliers and
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 then make that inventory available to retailers to
purchase. Of course, these distributors take a
percentage of the sales that pass through their
warehouses.
Manufacturers’ representatives
These are typically salespeople who work for a
“ripping” agency. They often have relationships
with retailers and distributors and work to sell
your products into the appropriate channel. They
typically work on commission and it’s not
uncommon for a rep to be necessary for getting
a new company access to a distributor or
retailer.
OEM
This stands for “original equipment
manufacturer.” If your product is sold to another
company that then incorporates your product
into their nished product, then you are using an
OEM channel. A good example of this is car
parts suppliers. While large auto manufacturers
do build large components of their cars, they
also purchase common parts from third-party
vendors and incorporate those parts into the
nished vehicle. Most companies use a mixture
of distribution channels as part of their plans, so
don’t feel that you need to be limited to a single
channel. For example, it is very common to both
sell direct and via distributors—you can
purchase an iPhone directly from Apple, or go
into a Target store and get one there.
Milestones and metrics
A business plan is only a document on paper
without a real path to get the work done,
complete with a schedule, de ned roles, and key
responsibilities. While the milestones and
metrics section of your business plan may not be
long, it’s critical that you take the time to look
forward and schedule the next critical steps for
your business. Investors will want to see that you
understand what needs to happen to make your
plans a reality and that you are working on a
realistic schedule.
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Start with a quick review of your milestones.
Milestones are planned major goals. For
example, if you are producing a medical device,
you will have milestones associated with clinical
testing and government approval processes. If
you are producing a consumer product, you may
have milestones associated with prototypes,
nding manufacturers, and rst- order receipt.
Traction
While milestones look forward, you will also want
to take a look back at major accomplishments
that you have already had. Investors like to call
this “traction.” What this means is that your
company has shown some evidence of early
success. Traction could be some initial sales, a
successful pilot program, or a signi cant
partnership. Sharing this proof that your
company is more than just an idea—that it has
actual evidence that it is going to be a success—
can be critically important to landing the money
you need to grow your business.
Metrics
In addition to milestones and traction, your
business plan should detail the key metrics that
you will be watching as your business gets o
the ground. Metrics are the numbers that you
watch on a regular basis to judge the health of
your business. They are the drivers of growth for
your business model and your nancial plan. For
example, a restaurant may pay special attention
to the number of table turns they have on an
average night and the ratio of drink sales to food
sales. An online software company might look at
churn rates (the percentage of customers that
cancel) and new signups. Every business will
have key metrics that it watches to monitor
growth and spot trouble early, and your business
plan should detail the key metrics that you will
be tracking in your business.
Key assumptions and risks
Finally, your business plan should detail the key
assumptions you have made that are important
for your business’s success. Another way to

 think about key assumptions is to think about Team

risk. What risks are you taking with your
business? For example, if you don’t have a The old adage is that investors don’t invest in
proven demand for a new product, you are ideas, they invest in people. Some investors
making an assumption that people will want even go as far as to say that they would rather
what you are building. If you are relying on invest in a mediocre idea with a great team
online advertising as a major promotional behind it than a blockbuster idea with a
channel, you are making assumptions about the mediocre team. What this really means is that
costs of that advertising and the percentage of running a successful business all comes down to
ad viewers that will actually make a purchase. getting the work down. Can you actually
accomplish what you have planned? Do ou have
Knowing what your assumptions are as you start the right team in place to turn a good idea into a
a business can make the di erence between great business that will have customers banging
business success and business failure. When down your doors?
you recognize your assumptions, you can set out
to prove that your assumptions The company overview and team chapter of
are correct. The more that you can minimize your business plan is where you make your best
your assumptions, the more case that you have the right team in place to
likely it is that your business will succeed. 28 execute on your idea. It should show
that you have thought about the important roles
Components of Execution: and responsibilities your business needs in
1. Marketing and sales plan order to grow and be successful.
2. Your positioning statements
3. Pricing Include brief bios that highlight relevant
4. Promotion experiences of each key team member. It’s
5. Packaging important here to make the case for why the
6. Advertising team is the right team to turn an idea into a
7. Public relations reality. Do they have the right industry
8. Content marketing experience and background? Have members of
9. Social media the team had entrepreneurial successes before?
10. Strategic alliances A common mistake novice entrepreneur make in
11. Operations describing the management team is giving
12. Sourcing and ful llment everyone on the team a C-level title (CEO, CMO,
13. Technology COO, and so on). While this might be good for
14. Distribution egos, it’s often not realistic. As a company
15. Milestones and metrics grows, you may require di erent types of
16. Key assumptions and risks experience and knowledge. It’s often better to
allow for future growth of titles rather than to
LESSON 7 | BUSINESS PLAN (TEAM start everyone at the top with no room for future
growth or change.

4. Company overview and team Your management team doesn’t necessarily

In this chapter, you’ll review the structure of need to be complete in order to have a
your company and who the key team members complete business plan. If you know that you
are. These details are especially important to have management team gaps, that’s O.K. In fact,
investors as they’ll want to know who’s behind investors see the fact that you know you are
the company and if they can convert a good missing certain key people as a sign of maturity
idea into a great business and knowledge about what your business needs
to succeed. If you do have gaps in your team,

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 simply identify them and indicate that you are
looking for the right people to ll certain
roles.
Finally, you may choose to include a proposed
organizational chart in your business plan. This
isn’t critical and can certainly live in your
business plan’s appendix. At some point, as you
explore funding options, you may be asked for
an “org chart,” so it’s good to have one. Beyond
raising money, an org chart is also a useful
planning tool to help you think about your
company and how it will grow over time. What
key roles will you be looking to ll in the future
and how will you structure your teams to get the
most out of them? An org chart can help you
think through these questions.
Company overview
The company overview will most likely be the
shortest section of your business plan. For a
plan that you intend to just share internally with
your business partners and team members, skip
this section and move on. For a plan that you will
share with people outside of your company, this
section should include:
• Mission statement
• Intellectual property
• A review of your company’s legal structure and
ownership • The business location
• A brief history of the company if it’s an existing
company
Mission statement
Don’t fall into the trap of spending a day or more
on your mission statement. An hour or two
should be plenty of time. Avoid putting together
a long, generic statement about how your
company is serving its customers, employees,
and so on. Your company mission should be
short—one or two sentences at most—and it
should encompass, at a very high level, what
you are trying to do. Frankly, your mission
statement and your overall value proposition
might even be the same thing. Here at Palo Alto
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Software (makers of Bplans), our mission
statement is this: “We help people succeed in
business.” It’s simple and encompasses
everything we do from the types of products that
we build to the kind of marketing that we do.
Intellectual property
This mostly applies to technology and scienti c
ventures your patents and other intellectual
property. But, if you h to your business and helps
your business defend itself information here. If
you have patents or are in the pate highlight
those patents. Equally important to discuss is
core technology from someone else, you need
to disclose / include details of the nancial
relationship.
Business structure and ownership
Your company overview should also include a
summary of your company’s current business
structure. Are you an LLC? A C-corp? An S-corp?
A sole proprietor? In a partnership?
Be sure to de ne provide a review of how the
business is owned as well. Does each business
partner own unequal portion of the business?
How is ownership divided? Potential lenders and
investors will want to know the structure of the
business before they will consider a loan or
investment.
Company history
If you are writing a business plan for an existing
company, it’s appropriate to include a brief
history of the company and highlight major
historical achievements. Again, keep this section
short—no more than a few paragraphs at most.
This section is especially useful to give context
to the rest of your plan and can also be very
useful for internal plans. The company history
section can provide new employees with a
background on the company so that they have a
better context for the work that they are doing
and where the company has come from over the
years.
 Location Sales forecast

Finally, the company overview section of your Your sales forecast is just that—your projections
business plan should describe your current of how much you are going to sell over the next
location and any facilities that the company few years. A sales forecast is typically broken
owns. For businesses that serve consumers from down into several rows, with a row for each core
a storefront, this information is critical. Also, for product or service that you are o ering. Don’t
businesses that require large facilities for make the mistake of breaking down your sales
manufacturing, warehousing, and so on, this forecast into excruciating detail. Just focus on
information is an important part of your plan the high-level at this point. For example, if you
are forecasting sales for a restaurant, you might
COMPONENTS OF COMPANY OVERVIEW break down your forecast into these groups:
AND TEAM lunch, dinner, and drinks. If you are a product
1. Team company, you could break down your forecast
2. Key Assumptions and Risks by target market segments or into major product
3. Company overview categories
4. Mission statement
5. Intellectual Property Your sales forecast will also include a
6. Business overview corresponding row for each sales row to cover
7. Common industry Cost of Goods Sold, also known as COGS (also
8. Location called direct costs). These rows show the
expenses related to making your product or
LESSON 8 | BUSINESS PLAN (FINANCIAL delivering your service. COGS should only
PLAN) include those costs directly related to making
your products, not regular business expenses
such as rent, insurance, salaries, etc. For
5. Financial plan restaurants, it would be the cost of ingredients.
For a product company, it would the cost of raw
Last, but certainly not least, is your nancial plan
materials. For a consulting business, it might be
chapter. This is often what entrepreneurs nd
the cost of paper and other presentation
most daunting, but it doesn’t have to be as
materials
intimidating as it seems. Business nancials for
most startups are less complicated than you Personnel plan
think, and a business degree is certainly not
required to build a solid nancial forecast. That Your personnel plan details how much you plan
said, if you need additional help, there are plenty on paying your employees. For a small company,
of tools and resources out there to help you you might list every position on the personnel
build a solid nancial plan. plan and how much will be paid each month for
each position. For a larger company, the
A typical nancial plan will have monthly sales personnel plan is typically broken down into
and revenue forecast for the rst 12 months, and functional groups such as “marketing” and
then annual projections for the remaining three “sales.” The personnel plan will also include
to ve years. Three-year projections are typically what is typically called “employee burden,”
adequate, but some investors will request a ve- which is the cost of an employee beyond salary.
year forecast. Following are details of the This includes payroll taxes, insurance, and other
nancial statements that you should include in necessary costs that you will incur every month
your business plan, and a brief overview of what for having an employee on your payroll
should be in each section
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 Income statement or pro t and loss statement before interest, taxes, depreciation, and
amortization. This is a simple calculation
Also known as the income statement, the pro t where you just subtract your total operating
and loss (or P&L) is where your numbers all expenses and COGS from your sales
come together and show if you’re making a
7. Interest, taxes, depreciation, and
pro t or taking a loss. The P&L pulls data from
amortization.
your sales forecast and your personnel plan and
also includes a list of all your other ongoing If you have any of these expense streams,
expenses associated with running your business. you will list them below your operating
You can download a free example of an income income
statement here. The P&L also contains the all- 8. Total expenses. Add your operating
important “bottom line” where your expenses expenses to interest, taxes, depreciation, and
are subtracted from your earnings to show if amortization to get your total expenses.
your business is making a pro t each month or 9. Net pro t. This is the all-important bottom
potentially incurring some losses while you line that shows if you’ve made a pro t, or
grow. taken a loss, during a given month or year.
A typical P&L will be a spreadsheet that includes
the following: Cash ow statement

1. Sales (or income or revenue). The cash ow statement often gets confused
This number will come from your sales with the pro t and loss statement, but they are
forecast worksheet very di erent and serve very di erent purposes.
and includes all revenue generated by the While the P&L calculates your pro ts and losses,
business. the cash ow statement keeps track of how
2. Cost of goods sold (COGS). much cash (money in the bank) that you have at
This number also comes from your sales any given point.
forecast and is the total cost of selling your
The key to understanding the di erence
product. For service businesses, this can also
between the two statements is understanding
be called the cost of sales or direct costs
the di erence between cash and pro ts. The
3. Gross margin. Subtract your COGS from simplest way to think about it is when you make
your sales to get this number. Most pro t and a sale. If you need to send a bill to your
loss statements also show this number as a customer and then your customer takes 30 or
percentage of total sales (gross margin / sales 60 days to pay the bill, you don’t have the cash
= gross margin percent) from the sale right away. But, you will have
4. Operating expenses. booked the sale in your P&L and shown a pro t
from that sale the day you made the sale.
List all of your expenses associated with
running your business, excluding the COGS A typical cash ow statement starts with the
that you already detailed. You should also amount of cash you have on hand, adds new
exclude taxes, depreciation, and amortization. cash received through cash sales and paid
However, you do include salaries, research invoices, and then subtracts cash that you have
and development (R&D) expenses, marketing paid out as you pay bills, pay o loans, pay
expenses, and other expenses here. taxes, etc. This will then leave you with your total
5. Total operating expenses. cash ow (cash in minus cash out) and your
This is the sum of your operating expenses. ending cash starting cash + cash in – cash out
6. Operating income. = ending cash).
This is also known as EBITDA, or earnings
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 Your cash ow statement will show you when
you might be low on cash, and when it might be
the best time to buy new equipment. Above all,
your cash ow statement will help you gure out
how much money you might need to raise or
borrow to grow your company. Since an
operating business can’t run out of cash without
having to close its doors, use your cash ow
statement to gure out your low cash points and
consider options to bring in additional cash.
that you plan to maintain ownership of
inde nitely, and you’re not seeking angel
investment or VC funding, you can skip the exit
strategy section. After all, your investors will
want to get a return on their investment, and the
only way they will get this is if the company is
sold to someone else. Again, you don’t need to
go into excruciating detail here, but you should
identify some companies that might be
interested in buying you if you are successful/

Balance sheet 6. Appendix

The last nancial statement that most An appendix to your business plan isn’t a
businesses will need to create as part of their required chapter by any means, but it is a useful
business plan is the balance sheet. The balance place to stick any charts, tables, de nitions, legal
sheet provides an overview of the nancial notes, or other critical information that either felt
health of your business. It lists the assets in your too long or too out-of- place to include
company, the liabilities, and your (the owner’s) elsewhere in your business plan. If you have a
equity. If you subtract the company’s liabilities patent or a patentpending, or illustrations of your
from assets, you can determine the net worth of product, this is where you’d want to include the
the company. Instead of providing additional details.
detail on the balance sheet here, I’ll refer you to
this article on building and reading balance LESSON 9 | RECOGNIZING THE IMPORTANCE
sheets. You can also download this balance OF MARKETING MIX IN THE DEVELOPMENT
sheet example to help you get started. OF MARKETING STRATEGY

Use of funds Marketing may refer to the process of value

If you are raising money from investors, you
should include a brief section of your business
plan that details exactly how you plan on using
your investors’ cash. This section doesn’t need
to go into
excruciating detail about how every last dollar
will be spent, but instead, show the major areas
where the investors’ funds will be spent. These
could include marketing, R&D, sales, or perhaps
purchasing inventory
Exit strategy
The last thing that you might need to include in
your nancial plan chapter is a section on your
exit strategy. An exit strategy is your plan for
eventually selling your business, either to
another company or to the public in an IPO. If
you have investors, they will want to know your
thoughts on this. If you’re running a business
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exchange that is facilitated by the 4P’s. The term
marketing mix is a foundation model for
businesses, historically centered around the
product, price, place and promotion.
The marketing mix has been de ned as the “set
of marketing tools that the rm uses to pursue its
marketing objectives in the target market”. Thus,
the marketing mix refers to four broad levels of
marketing decision
A marketing expert named E. Jerome McCarthy
created the Marketing 4Ps in the 1960’s. This
classi cation has been used throughout the
world. It is the foundation of the idea of
marketing mix.
A Product is a tangible or intangible item that is
built or produced to satisfy the needs of a
certain group of people. It is in the form of a
service or goods. To ensure the right product,

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an entrepreneur must know the demand of inferior good in the consumers eyes as they may
their consumer in the market. They must also compare your product to your competitor.
know how to create the right product mix by Making it a ordable with good quality may
expanding and diversifying the depth of your encourage customer to purchase and share it
product line. with others to buy. On the contrary, a too high
price of the product will make the cost outweigh
A product has a certain life cycle that includes the bene ts in customers eyes, and they will
the growth phase, the maturity phase and the therefore value their money instead of having
sales decline phases. During the product your product purchased. Be sure to know and
development phase, the entrepreneur must do examine your competitors pricing so that you
an extensive research of the product that they may adjust and bene ted to price competition.
are creating. Another product must be When setting the product price, marketers
developed to maintain the progress and its life should consider the perceived value that the
cycle to gain more pro t even there will be product o ers
changes in the economy.

A Product is a tangible or intangible item that is THREE MAJOR PRICING STRATEGIES

built or produced to In developing the right
product for your business, you must answer the • Market penetration pricing – It is a pricing
following questions: strategy where the price of a product is initially
sent low to rapidly reach a wide fraction of the
• What does the client want from the service or market and initiate word of mouth.
product? • Market skimming pricing – It is a pricing
• How will the customer use it? strategy in which a marketer sets a relatively
• Where will the client use it? high initial price for a product or service at rst,
• What features must the product have to meet then lowers the price over time.
the client’s needs? • Are there any necessary • Neutral pricing -Generally a default strategy
features that you missed out? to minimize the role of pricing in the marketing
• Are you creating features that are not needed mix, not utilizing price to gain or restrict market
by the client? • What’s the name of the product? share.
• Does it have a catchy name?
• What are the sizes or colors available? Here are some of the important questions that
• How is the product di erent from the products you should ask yourself when you are setting
of your competitors? • What does the product the product price:
look like? • How much did it cost you to produce the
product?
• What is the customers’ perceived product
The Price of the product is the amount that the
value?
customer pays for them to satisfy. It is the
• Do you think that the slight price decrease
important component of a marketing plan to
could signi cantly increase your market share?
determine if the business will gain pro t and
• Can the current price of the product keep up
survive. It gives an impact on the entire
with the price of the product’s competitors?
marketing strategy a ecting the sales and
demand of the product. If a company is not yet
A Place is the position and distribution channel
popular and does not yet make a name in the
of the product to make it accessible to the
market your target customer will unlikely pay a
potential buyers. An entrepreneur must examine
high price for the product being sold.
and study the location of its buyer to easily
The value of the product depends on its price. A deliver the product that the customer needs. An
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 suppliers to reduce the cost of transportation for Sales Organization – is a part of the total
the raw materials to be used in making the business organization of a rm. This unit of the
product or services. rm is concerned with distribution of goods or
services. It may be produced by the organization
Distribution strategies: itself or may be purchased from manufacturers
for resale
• Intensive distribution – It mainly means a
distribution on a large-scale and displaying the Public relation – It is the practice of deliberately
product in as many ways and places as possible managing the release and spread of
so that the customer sells in high volume due information between an individual or an
to large scale distribution. organization and the public to generate
• Exclusive distribution – It is an agreement awareness and positive responses to products
between supplier and retailer that grants the and services of the business.
exclusive rights within a speci c geographic area
to carry the supplier’s product. Advertising – It is the activity or profession of
• Selective distribution – It is a retail strategy producing advertisement for commercial
that involves making a product or group of products or services. It is a marketing tactic
products available only in certain markets. involving paying for space to promote a product,
• Franchising – An agreement where one party service, or a cause. The goal of advertising is to
(the franchiser) grants another party (the reach out people most likely to be willing to pay
Franchisee) the right to use its trademark or for a company’s product or services and entice
trade-name as well as certain business system them to buy.
and processes, to produce and market a good
or service according to certain speci cations. Sales promotion – It is the process of
• persuading a potential buyer to buy the product
Here are some of the questions that you designed to be used as a short-term tactic to
should answer in developing your distribution boost sales.
strategy:
In a contemporary time, there seems to a
• Where do your clients look for your service or product or services using the social customers
product? and suppliers. An extremely rm's online social
• What kind of stores do potential clients go to? media presence
Do they shop in a mall, in a regular brick and
mortar store, in the supermarket, or online? In creating an e ective product promotion
• How do you access the di erent distribution strategy, you need to answer the following
channels? questions:
• How is your distribution strategy di erent from
• How can you send marketing messages to
your competitors? • Do you need a strong sales
your potential buyers? • When is the best time to
force?
promote your product?
• Do you need to attend trade fairs?
• Will you reach your potential audience and
• Do you need to sell in an online store ?
buyers through television ads?
Promotion is a very important component of • Is it best to use the social media in promoting
marketing as it can boost brand recognition and the product?
sales. It comprises the various elements like • What is the promotion strategy of your
sales organization, public relations, advertising, competitors?
and sales promotion. Your combination of promotional strategies and
how you go about promotion will depend on
your budget
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 The 7P’s model is a marketing model that
modi es the 4P’s model. It is generally used in
the service industries.
Here are the additional elements that transition
the 4P’s to the
7P’s marketing mix model.
1. People
2. Process
3. Physical environment
People makes the business run. Looking for the
right person in the business is one of the
important elements in marketing mix model.
They are the employees who do the work,
produce the product, and the ones who deliver
the product or services. A selection of skilled
personnel is needed to make the business run
smoothly and successful. It is important to hire
and train the right people to deliver superior
service to the clients. When business nds
people, who believe in the product or services
that the particular business creates, it’s highly
likely that employees will perform the best they
can. They are the internal competitive
advantages a business can have over other
competitors which can inherently a ect a
business’s position in the market.
Process refers to the ow of activities or
mechanism that take place when there is an
interaction between customers and the
businesses. It is a systems and processes of the
organization that a ects the execution of the
service. A combination of some consecutive
things or objects that may enable an
entrepreneur to achieve a certain goal in a
structured way. They develop some of the
processes regarding marketing decisions like
marketing segmentation, customer needs,
identi cation, promotional campaign designing,
and some other essential process.
Example of the process would be when a
customer decides to subscribe to a
telecommunication company to install telephone
and internet equipment. The customer will apply
by submitting its requirements and pay the
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necessary fees. After processing its application,
the company then install the telephone and
modem for them to access the internet service. It
is now a relationship for a given time that the
customer will be paying monthly, and the
company will give its service according to their
contract plan
TYPES OF PROCESS:
1. Technological processes. The process of
creating tangible products is called
technological process. The objectives to ensure
that the customers feel the product to be theirs.
The manufacturer should ensure that he creates
the product that is wanted by the customers and
should also make the products that he as a
businessman would want to sell in the market.
The balance between both would ensure that
the technological process would run smoothly.
2. Electronic processes. Use of receipts or
barcodes or forms or other methods of
information about a product of a company that
manufactures them is called an electronic
process. This also includes the course which is
used to scan with the help of an application
using a mobile phone
3. Direct activities. Direct activities, as the name
suggests, is about the reactions of the
customers regarding the process. How did they
feel about the process that they just underwent
through is known thereby making any changes if
necessary, in order to make the process more
smoother. Direct activities are occurred and
recorded in present time
4. Indirect activities. When the interaction does
not take place in person and it happens before
or after the product has been bought is termed
as an indirect activity. Processes in something
as a tool to create something enormous or
monumental. For example, the combination of
telemarketing and internet marketing is used to
promote a certain service or a product to the
targeted set of customers.

 1. Work ow. Movement of information or tasks
for material from one participant to the other is
termed as work ow. This includes but is not
limited to people and tools procedures that are
involved in every step of the marketing mix
process.
The work ow may be sequential that is the
consequent step is begin only when the prior
step is completed or parallel that is multiple
steps may occur at the same time. Single
work ows may be combined in multiple ways to
have an overall process.
2. Business process reengineering. Business
process reengineering commonly abbreviated
as BPR is a means to enhance or improve the
e ectiveness of the organization along with its
productivity. It consists of starting right from the
beginning or from scratch and creating a major
business process along with the application of IT
or information technology in order to achieve
signi cant improvement of performances.
.3. Business process management.
Business process management is commonly
abbreviated as BPM. It is de ned as a discipline
which has a mix of di erent business activities
and their ows and which strives to support the
vision and mission of business within and also
beyond many boundaries which one was people
customers internal the employee’s external
stakeholders as well as external partners.
In the service industries, there should be
physical evidence that the service was
delivered. It pertains on how a business and its
products are perceived in the marketplace. It is
the physical evidence of a business’ presence
and establishment. They are generally market
leaders that establishes a physical evidence that
the customer will go when buying things that
they need.
Example of a physical evidence is when you
think of a place where all the things you need
are already in that place like SM City Olongapo
Central in Olongapo City is a much-awaited
super mall that put excitement to the people for
their spin on shopping, dining and
entertainment. The mall is a unique mix of local,
national, and global brands that suit every mall-
goer’s need. This physical evidence is where
you immediately know exactly what their
presence in the marketplace. So when you think
of a branding concept, if asked of a place to go,
you think of a “Mall”, you would probably say of
SM because “They got it all, for You”. This
manipulated their customers perception when
asked for a di erent brand it is already inside in
that place.

4. Total quality management.

Commonly abbreviated as TQM, Total Quality

management is sought in order to improve the
quality of the product. Six sigma method was
used by Motorola in order to nd out about total
quality management.

It consists of methods to improve the processes

in the business and thereby reduce the
problems in the output increase the output and
thereby maximize the pro ts.

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