ENTREPRENEURSHIP

SENIOR HIGH SCHOOL DEPARTMENT

TEACHER: MRS. RHEA MAE G. SUPAN

LESSON 1: THE 4M’s OF PRODUCTION AND BUSINESS MODEL

The most serious issues in the whole production system are the inputs and the transformation process. Their quality
determines the quality of the output. The factors involved in the input and the production process are usually referred
to as the Four M’s of production, namely Manpower, Method, Machine, and Material.

1. MANPOWER
• Talks about human labor force involved in the manufacture of products.
• It is measured as the most serious and main factor of production.
• The entrepreneur must determine, attain, and match the most competent and skilled employees with the
jobs at the most appropriate time period.
• Educational qualifications and experience, status of employment, numbers of workers required, skills and
expertise required for the job are some of the manpower criteria that must be highly considered by the
entrepreneur.

2. MATERIAL
• Talks about raw materials necessary in the production of a product.
• Materials mainly form part of the finished product. Just in case the resources are below standard, the
finished product will be of unsatisfactory as well.
• The entrepreneur may consider cost, quality, availability, credibility of suppliers and waste that the raw
material may produce.

3. MACHINE
• Discusses about manufacturing equipment used in the production of goods or delivery of service.
• In the process of selecting the type of equipment to purchase, the entrepreneur may consider types of
products to be produced, production system to be adopted, cost of the equipment, capacity of the
equipment, availability of spare parts in the local market, efficiency of the equipment and the skills required
in running the equipment.

4. METHOD
• Production method discusses the process or way of transforming raw materials to finished products.
• The resources undergo some stages before it is finalized and becomes set for delivery to the target buyers.
• The selection of the method of production is dependent on product to produce, mode of production,
manufacturing equipment to use and required skills to do the work.

What is Product Description?

It is the promotion that explains what a product is and why it’s worth buying. The purpose of a product description is
to provide customers with details around the features and benefits of the product, so they’re obliged to buy.

Know who your target market is, focus on the product benefits, tell the full story, use natural language and tone, use
power words that sell, and use good images. These are guidelines for you to have a good product description; since
some customers are very particular with it since they consider the welfare of their family, if it is safe to use.

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 ENTREPRENEURSHIP
SENIOR HIGH SCHOOL DEPARTMENT
TEACHER: MRS. RHEA MAE G. SUPAN

What is Prototyping?

It is a duplication of a product as it will be produced, which may contain such details as color, graphics, packaging,
and directions. One of the important early steps in the inventing process is making a prototype.

Benefits are the reasons why customers will decide to buy the products such as affordability, efficiency, or ease of
use. The features of the product or service merely provide a descriptive fact about the product or service. It is better
to test your product prototype to meet customers’ needs and expectations; and for your product to be known and
saleable. Pretesting of the product or service is like a sample of the product or service given to the consumer free of
cost in order that he/she may try the product before committing to a purchase.

Supplier is an entity that offers goods and services to another business. This entity is among of supply chain of a
business, which may offer the main part of the value contained within its products. Certain suppliers may even
involve in drop shipping, where they ship goods directly to the customers of the buyer. Suppliers are your business
partners; without them your business will not live.

Value chain is a method or activities by which a company adds value to an item, with production, marketing, and the
provision of after-sales service. The main goal and benefit of a value chain, and therefore value chain analysis, is to
make or support a competitive benefit.

Supply chain is a structure of organizations, people, activities, data, and resources involved in moving a product or
service from supplier to customer.

What is Business Model?

It describes the reasons of how an organization creates, delivers, and captures value in economic, social, cultural, or
other contexts. The development of business model construction and variation is also called business model
innovation and forms a part of business plan.

What is Business Plan?

It is an important tool for you to have an idea about the future of your business. Your business plan will be your guide
in the moment you will be implementing and operating your business proposal. The following are the components
found in a Business Plan.
❖ Introduction- this part discusses what is the business plan all about.
❖ Executive Summary- is part of the business plan which is the first to be presented but the last to be made.
❖ Management Section- shows how you will manage your business and the people you need to help you in your
operations.
❖ Marketing Section- shows the design of your product/service; pricing, where you will sell and how you will
introduce your product/service to your market.
❖ Financial Section- shows the money needed for the business, how much you will take in and how much you will
pay out.
❖ Production Section- shows the area, equipment and materials needed for the business.
❖ Competitive Analysis- is the strategy where you identify major competitors and research their products, sales
and marketing strategies.
❖ Market- The persons who will buy the product or services.
❖ Organizational chart- is the diagram showing graphically the relation of one official to another, or others of a
company.

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 ENTREPRENEURSHIP
SENIOR HIGH SCHOOL DEPARTMENT
TEACHER: MRS. RHEA MAE G. SUPAN

LESSON 2: FORECASTING REVENUES AND COSTS

FORECASTING REVENUE

Forecasting is a tool used in planning that aims to support management or a business owner in its desire to adjust
and cope with uncertainties of the future.

Revenue is a result when sales exceed the cost to produce goods or render the services. Revenue is recognized
when earned, whether paid in cash or charged to the account of the customer. Other terms related to revenue
includes Sales and Service Income.
➢ Sales is used especially when the nature of business is merchandising or retail.
➢ Service Income is used to record revenues earned by rendering services.

Factors in forecasting revenues of the business

1. The economic condition of the country. When the economy grows, its growth is experienced by the
consumers. Consumers are more likely to buy products and services. The entrepreneur must be able to identify
the overall health of the economy to make informed estimates. A healthy economy makes good business.
2. The competing businesses or competitors. Observe how your competitors are doing business. Since you
share the same market with them, information about the number of products sold daily or the number of items
they are carrying will give your idea as to how much your competitors are selling.
3. Changes happening in the community. Changes’ happening in the environment such as customer
demographic, lifestyle and buying behavior gives the entrepreneur a better perspective about the market. The
entrepreneur should always be keen in adapting to these changes to sustain the business.
4. The internal aspect of the business. Another factor that affects forecasting revenues in the business itself.
Plant capacity often plays a very important role in forecasting.

COMPUTATION FORMULAS:
Mark Up Price = Cost x desired markup percentage
Selling Price = Cost + Mark Up
Projected Monthly Revenue = Projected daily revenue x 30 days
Projected Yearly Revenue = Projected daily revenue x 365 days

TABLE 3: Increase
Projected Monthly Revenue (Increase) = Revenue (month) x % increase
Projected Revenue for February = Revenue (January) + Amount of increase

TABLE 3: Decrease
Projected Monthly Revenue (Decrease) = Revenue (month) x % increase
Projected Revenue for September = Revenue (August) - Amount of decrease

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 ENTREPRENEURSHIP
SENIOR HIGH SCHOOL DEPARTMENT
TEACHER: MRS. RHEA MAE G. SUPAN

Forecasting the Costs to be Incurred

Cost of Goods Sold / Cost of Sales refer to the amount of merchandise or goods sold by the business for a given
period. This is computed by adding the beginning inventory to the Net Amount of Purchases to arrive with Cost of
goods available for sale from which the Merchandise Inventory end is subtracted.

Merchandise Inventory, beginning refers to goods and merchandise at the beginning of operation of business or
accounting period.

Purchases refer to the merchandise or goods purchased. Example: Cost to buy each pair of Jeans or t-shirt from a
supplier.

Merchandise Inventory, end refers to goods and merchandise left at the end of operation or accounting period.

Freight-in refers to amount paid to transport goods or merchandise purchased from the supplier to the buyer. In this
case, it is the buyer who shoulders these costs.

PROFIT AND GROSS PROFIT

Profit is the amount you gain after selling your product. In computing your profit, you just simply follow this formula:

Sales - Cost of Goods Sold = Gross Profit

The gross profit represents the difference between net sales and cost of sales.

VARIABLE COSTS. These costs are those things that change based on the amount of product being made and are
incurred as a direct result of producing the product. Variable costs include:

1. Materials used
2. Direct labor
3. Packaging
4. Freight
5. Plant supervisor salaries
6. Utilities for a plant or a warehouse
7. Depreciation expense on production equipment
8. Machinery

FIXED COSTS. Fixed costs generally are more static in nature. They include:

1. Office expenses such as supplies, utilities, a telephone for the office, etc.
2. Salaries and wages of office staff, salespeople, officers and owners
3. Payroll taxes and employee benefits
4. Advertising, promotional and other sales expenses
5. Insurance
6. Auto expenses for salespeople
7. Professional fees
8. Rent

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 ENTREPRENEURSHIP
SENIOR HIGH SCHOOL DEPARTMENT
TEACHER: MRS. RHEA MAE G. SUPAN

LESSON 3: BUSINESS IMPLEMENTATION

Guidelines for successful business plan implementation:

1. Objectives. The entrepreneur should have a clear idea on what is his purpose of putting up his enterprise.
2. Tasks. This means that the entrepreneur must know what the tasks are he must perform in order that his
objectives will be realized.
3. Time allocation. This means that the entrepreneur should have a timetable or a schedule to follow every
task, so that it will be accomplish on time and realize his objective.
4. Progress. This means that the entrepreneur should monitor the development of the tasks and the
accomplishment of the objective.

Basic Requirements to start a business in the Philippines:

1. Securities and Exchange Commission (SEC) Registration-for partnership or Corporation

2. Department of Trade and Industry (DTI) Registration- for your business tradename
3. Mayor’s Business Permit- for getting the license to operate in the city or municipality and payment of your
local business taxes.
4. Bureau of Internal Revenue (BIR) Registration - for getting TIN, official receipts, and invoices, registering
your books of accounts and paying your national Internal revenue taxes
5. SSS, PhilHealth, and Pag-Ibig Fund registration- for registering yourself or company as an employer and
for remitting your employees’ contribution together with your employer’s share.

Other steps to follow before operating a Business are as follows:

1. Set up an accounting system or hire an accountant. Knowing how the business is doing financially is
important for planning and survival.
2. Advertise the business. No one will buy the products or services if customers do not know that the company
exists. You can make use of the social media.
3. Secure insurance for the business. Liability insurance protects the business in the event of litigation.
Consider life and disability insurance, health insurance and fire insurance when you are leasing an office or
storefront.

Keeping Business Records

Good record keeping can help protect the business, measure the performance, and maximize profit. Records are the
source documents, both physical and electronic, that specify transaction dates and amounts, legal agreements and
private customer and business details.

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 ENTREPRENEURSHIP
SENIOR HIGH SCHOOL DEPARTMENT
TEACHER: MRS. RHEA MAE G. SUPAN

Developing system to log, store and dispose of records can benefit the business.
A systematic recording allows you to;

A. Plan and work more efficiently

B. Meet legal and tax requirements
C. Measure profit and performance
D. Protect your rights, and
E. Manage potential risks

What is Business Plan?

A business plan is an effective tool in making your dream business come true. It reiterates different plans or
strategies in Operation and Administration, Marketing, Production and Logistics, Finance, etc.

1. Operational plan put into details on what business model you are going to employ and how are you going
to start the business. Among others, it’s also reiterated the layers pf management, type of skills and
employee attitude your business need and the steps on how to get the government license.
2. The marketing plan contains valuable strategies as to what product you are going to produce or sell, what
industry you want to enter, group of target customers, or your target market and the business model or
strategies you are going to employ.
3. The production plan revealed the production processes and the quality control system of the goods
produced for sale. While the logistics provides a channel of distribution of the goods from production lines
down to the wholesalers/retailers or directly to consumers.
4. The financial plan talks about monetary requirements before you open the business. While financial
forecast informs the business owners of the expected outcome of the business in monetary terms

What is Bookkeeping?

Bookkeeping is the process of recording business transactions in a systematic and chronological manner. It is
systematic because it follows procedures and principles. On the other hand, it is chronological because the
transactions are recorded in order of the date of occurrence.

Bookkeeping is the starting point of the accounting process. A sound bookkeeping system is the foundation for
gathering the information necessary to answer questions related to profitability, solvency and liquidity of the business.

What is a Bookkeeper?

Each business has a bookkeeper who is in charge to record, maintain and update business records from all sorts of
financial transactions using account title that can be found in the charts of accounts already set up by the Accountant.

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