Arellano University

Junior High School Department

2600 Legarda St. Sampaloc, Manila

ENTREPRENEURSHIP
2nd QUARTER
LECTURE NOTES

EXECUTIVE SUMMARY
Objectives:
• Enumerates the parts of the executive summary
• Recognize the importance of capital sourcing
• Describes the 4M’s of operations in relation to the business opportunity

Lecture Notes:

• Business plan - a written document describing the nature of the business, the sales
and marketing strategy, and the financial background, and containing a projected profit
and loss statement.
• Business concept - contains the essence of the enterprise in a concise but powerful
manner and must be translated into a business model.
• Business model - a formula on how the enterprise exactly plans to make out of the
business.

FOUR (4) AREAS OF MONEYMAKING WHICH THE BUSINESS MODEL MUST ADDRESS

1. How will the business raise revenues? What critical factors will cause the revenues to
materialize?

2. What will be the costs of the enterprise products and other costs of doing business? How
will these costs be managed to ensure comfortable profits? What critical factors will drive the
costs? How can these factors be controlled?

3. What will be the major investments of the enterprise? Why will these investments give the
enterprise a competitive edge?

4. How will the enterprise finance the investment? How will the enterprise fund its growth?
CONCEPTS: 4 M’S OF OPERATION MANAGEMENT

✓ METHOD - an established, habitual logical, or prescribed practice or systematic

process of achieving certain ends with accuracy and efficiency, usually in an ordered
sequence or fixed steps.
✓ MANPOWER - total supply of personnel available or needed for a specific job or task.
✓ MACHINE - semi or fully automated device that magnifies human physical and mental
capabilities in performing one or more operations.
✓ MATERIALS - all items such as raw materials, standard and specialized parts, and
sub-assembles required to assemble or manufacture a complete product.

EXECUTIVE SUMMARY
The executive summary contains everything relevant and important to the business
audience. This is the first thing that the audience read, before deciding to proceed in
screening the details of the business plan. It contains the major argumentations of the
business proponent on why the business will work and succeed. A good executive
summary should highlight the following:
1. The business proponents and their partners;
2. The enterprise organization and its capabilities;
3. The technology providers and their expertise and experience; and
4. The suppliers and all major service providers.

The enterprise strategy builds and develops the game plan for attaining
competitiveness while the enterprise delivery system is the entire process of converting
inputs to outputs, and these outputs to outcomes.
It should then render all the major institutional, market, operations and organizational
strategies into financial strategies and forecasts.

Investment requirements should be presented along with the summaries of the

projected income statements, balance sheets, cash flows and funds flow and their
analyses and conclusions. Yields and returns, along with risks and contingency measures
should be included in this section.

INTRODUCTION
An overview of a company's main objectives and purpose is provided in the business plan
introduction. It's critical to give this section careful consideration and attention because it's
the first thing that readers and investors see when learning about your business idea. A
strong, captivating start to a business plan helps readers understand your company's
purpose, your objectives, and how you intend to meet them.
THE COMPANY
A company summary gives the reader of your business plan a general background
understanding of your organization, including an explanation of what you do, the members
of the management team, and the target market your firm caters to. The second section of
a business plan, following the executive summary, is the company description.

PRODUCTS AND SERVICES

Your business plan's products and services section contain more than just a list of the
services your company will offer. This portion of your business plan should contain
information about how you'll set prices for your goods and services, handle orders, and
other matters that investors need to know before they can fund your venture.

THE MARKET
In this section of your business plan, you have the chance to really stand out and
showcase your exceptional concept. Your service or product is undoubtedly the greatest.
You'll have the opportunity to share the knowledge you've learned about the market, the
target market you intend to sell to, your competitors, and how you intend to differentiate
yourself in writing up your market study.

• Enterprise strategy - builds and develops the game plan for attaining
competitiveness

• Enterprise delivery system - the entire process of converting input (resources)

into output and these output into outcomes.
Financial Consideration
It describes a business’s historical financial state (if applicable) and future financial
projections. Businesses include supporting documents such as budgets and financial
statements, as well as funding requests in this section of the plan.

D. The Business Proponents

The next section of the business plan contains information about the business plan
proponents or stakeholders. Stakeholders come in four types namely:
a. Resource mobilizers and financial backers - if the business plan readers are the
resource providers, then they will want to know who else are on board to share the burden of
raising money to see the whole thing through.
b. Technology providers and applicators - if the business plan readers are
technology providers, they will want to know if there will be sufficient funds to pay for the
technology.
c. Governance and top management - if the business plan readers are the
governance and top management team, then they will want to know what strategies and
performance indicators are being proposed.
d. Operating and support team - if the business plan readers are the implementing,
operating and support teams, they will want to know what programs, activities, tasks and
resources would be in place.

E. Capital Sourcing
Sourcing the necessary capital for start up business is a full-time job on its own. It is no
easy task to do especially when the entrepreneur has tight financial constraints. Nevertheless,
the following are some of the ways to raise capital for the business.
 • Personal Savings For most people, they come up with an idea and the desire to
venture into business ahead making them try hard and earn enough money to allocate
funds for the dream business. This is sort of like this mental self-talk.
• Borrow From Family and Friends This is the easiest way so far, to source funds,
especially for an entrepreneur whose family is financially secure. Not only that he can
pay when he is able to, usually there is no interest.
• Apply for a Business Loan from A Bank The most popular and common source of
business capital in the Philippines is bank loaning. This is also one of the most difficult
sources of funds to get. To be able to borrow from them, the entrepreneur has to make
sure that he has a good business plan. It has to be impressive and believable.

5 Cs of CREDIT:
1. Character – Character is reflected in the banking consumer's level of responsibility and
willingness to meet their obligations.
2. Capacity – Capacity is determined by a number of factors:
✓ Sources of income - are you salaried, commission based, self-employed or a
seasonal worker?
✓ Stability of income - how long have you been at your job and is your employer a
new business or are they well established?
✓ Total Debt Service Ratio (TDSR) - TDSR is calculated by adding together your
mortgage or rental payments, property taxes and all other debt payments (credit
cards, loans, lines of credit, etc).
3. Capital – Lenders like to see the borrower investing their own capital into a project, as it
shows a seriousness about the investment.
4. Collateral – Sometimes when you apply for a loan, you have the option to offer collateral
as a way to strengthen the application.
5. Conditions – The conditions of your loan are also considered before it is granted. This
includes the interest rate, the repayment term, the amount and the purpose of the money.

Other Sources of Capital

The three sources of fund presented above may be the most common, especially here
in the Philippines. But times have changed, and there are other options available. These are
the following:
✓ Home Equity Loan
✓ Credit Card
✓ Venture Capital / Angel Investors
✓ Small Business Loans from Government Agencies – visit DTI, and other similar
business-oriented agencies
 BALANCE SHEET
• balance sheets along with income statement are statements that are not only used to
evaluate the health and financial position of a business but are the primary statements
that lenders and investors will look at.
• a portrait of the financial standing of a business at a point in time. Shows what your
business owns and what it owes.
• will show you a summary of a company’s assets, liabilities and owner’s equity at a
specific point in time

WHY PREPARE A BALANCE SHEET?

• the balance sheet is one of the three (3) primary financial statements that a business
uses to evaluate its financial health
• can be a very valuable tool in evaluating financial performance and making financial
business decisions

BALANCE SHEET TERMS

Assets - are items owned by the business
A. Current assets or short-term assets - are assets that are expected to be turned into
cash within one year.
✓ Cash - is considered the most liquid of all assets.
✓ Short-term assets - include items like
1. Accounts Receivable (A/R) - money owed by customers who purchased
goods or services on credit that was provided by the company
2. Prepaid expenses - (e.g.) rent or insurance

B. Non-current assets or long-term assets - are assets not expected to take more than one
year to be consumed or converted into cash.
1. Long-term assets - include items like real estate or machinery.

C. Current liabilities - is a loan due to creditors within the next 12 months from the
beginning date on the balance sheet.
1. Accounts Payable (A/P) - are short-term loans typically owed by the
business from purchases made on credit from suppliers or vendors
2. Taxes payable- taxes that have accrued but have not yet been paid. One
example would be payroll taxes. The wages have been paid to the employee but
payroll taxes have not been paid yet as they were not due at the time the
balance sheet was created
 ✓ Long-term liabilities - a debt that is due more than one year out from the date being
reviewed on the balance sheet
✓ Retained earnings - earnings that are reinvested in the business after the deduction of
any dividends

CURRENT PORTION OF LONG-TERM

• Debt - amount of principal that will be due within one year of the date of the balance
sheet.
• Owner’s equity - sometimes referred to as stockholder equity. Net worth or paid-in
capital and is the amount owners have invested in the business minus any withdrawals
(not including salaries) taken since the business began.
WHAT IS INCLUDED IN A BALANCE SHEET?

ASSETS LIABILITIES OWNER’S EQUITY

Current Assets ✓ Accounts Payable shows the amount of money
✓ Cash ✓ Taxes Payable invested in the business
✓ Accounts Receivable ✓ Salaries / Wages along with retained earnings.
✓ Inventory Payable
✓ Supplies ✓ Interest Payable
Long-term Assets
✓ Land
✓ Buildings and
Improvements
✓ Furniture and Fixtures
✓ General Equipment
✓ Goodwill
✓ Intangible Assets

FINANCIAL FORECASTING
FORECASTING
• the use of historic data to determine the direction of future trends
• the process of making statements about events whose actual outcomes have not
yet been observed
• a planning tool that helps met in its attempt to cope the uncertainty of the future
• starts with certain assumptions based on the MET’s experiences, knowledge and
judgement
• predicting what will happen in the future by gathering and analyzing past and
current data
 Successful forecasting = Science + Art

✓ Science - implies that the body of the forecasting knowledge lies on the solid ground of
quantitative forecasting methods (solid data and figures) and their correct utilization for
various business situation
✓ Art - represents a combination of a decision maker’s experience, logic, and intuition to
supplement the forecasting quantitative analysis

TWO (2) TYPES OF FINANCIAL FORECAST METHODS

1. Qualitative method - involves gathering information that cannot be measured such
as consumer’s opinion about new packaging for a product, etc.
2. Quantitative method - uses data to predict future results (e.g. using past sales
volume for the upcoming year).

BUSINESS GOALS: VISION, MISSION, OBJECTIVES, KEY RESULT AREAS

BUSINESS GOALS- show the future and long-term prospects of the enterprise.
✓ VISION STATEMENT- A business vision is your goal for what your business will be in
the future. It will align with your business goals and aspirations. It focuses on tomorrow
and what an organization wants to ultimately become.
✓ MISSION STATEMENT- A Mission Statement is a definition of the company's
business, who it serves, what it does, its objectives, and its approach to reaching those
objectives. It focuses on today and what an organization does to achieve it.
✓ OBJECTIVES- must be more specific than the vision and mission statements should
be SMART.
➢ Specific- Your goal should be clear and specific. What will you achieve? What
will you do? (simple, sensible, significant).
➢ Measurable- It's important to have measurable goals, so that you can track your
progress and stay motivated. What data will you use to decide whether you've
met the goal? (meaningful, motivating).
➢ Achievable-Your goal also needs to be realistic and attainable to be successful.
Are you sure you can do this? Do you have the right skills and resources?
(agreed, attainable).
➢ Relevant- This step is about ensuring that your goal matters to you, and that it
also aligns with other relevant goals. Does the goal align with those of your team
or organization? How will the result matter? (reasonable, realistic and resourced,
results-based).
 ➢ Time bound- Every goal needs a target date, so that you have a deadline to
focus on and something to work toward. What is the deadline for accomplishing
the goal? (time-based, time limited, time/cost limited, timely, time-sensitive).
✓ KEY RESULT AREAS- A Key Result is a measurable outcome required to achieve the
Objective. They help you measure progress toward the Objective. Key Results
encourage you to be ambitious yet realistic.

7P’S OF MARKETING

MARKETING- the process of continuously and profitably satisfying customer’s needs, wants
and expectations superior to competition.
1. PRODUCT- Is your current product or service, appropriate and suitable for the market and
the customers of today?
2. PRICE- The strategy behind the pricing of your product needs to be based on what your
customers are prepared to pay, costs such as retail mark-up and manufacturing, as well as
other considerations. Sometimes you need to lower your prices. At other times, it may be
appropriate to raise your prices.
✓ Penetration Pricing- offering lower prices on goods and services on its launching date
✓ Charm Pricing- reducing the price by a minimal amount which makes the customer
perceive the price for less.
✓ Freemium Pricing- the game is provided for free, but a price is levied if you want more
lives to play.
✓ Premium Pricing- business that sells unique goods set their products higher than their
competitors.
✓ Economy Pricing- business including generic food suppliers and discount retailers to
attract the most price-conscious consumers.
 ✓ Psychology Pricing- to make the customers buy the products, triggered by emotions
rather than logic
3. PROMOTION- Successful marketing strategies include all the promotional activities across
the marketing mix, including advertising, direct marketing, and in-store promotional activities.
✓ Advertising- to effectively inform an persuade the target market
✓ Public Relations- to offer a positive image of the company and the brand, as well as
promote an advocacy.
✓ Sales Promotion- to convince customers to buy immediately.
4. PLACE- Where and how your product is displayed and sold should be directly informed by
your customers. Where else could you offer your products or services?
5. PACKAGING-The main goal of creating any product, after all, is to attract customers and
encourage them to buy your product. First impressions are very important, and your
packaging is often a consumer’s first introduction to the product.
6. POSITIONING- Brand positioning creates clarity around who you serve. It also explains to
your target audience why you are the best company for them and what sets your products or
services apart.
7. PEOPLE- Your ability to select, recruit, hire and retain the proper people, with the skills and
abilities to do the job you need to have done, is more important than everything else put
together.