PROTOTYPE

● Representation of a product or idea – a simple model made by one’s self, a 3D printout, or a

highly refined version produced by a prototyping firm.
● Likely to be built, assessed, and tested before a product comes to market.
● Prototyping lets one correct design faults and get feedback from potential customers on product
usability and performance.
● Prototyping lets one correct design faults and get feedback from potential customers on product
usability and performance

STEPS TO CREATE A PROTOTYPE

1. Select the type of prototype
a. Clearly define the purpose:
● Assess product form and appearance for market testing and design satisfaction.
● Physically test parts to ensure correct functionality.
● Check fit to ensure components align correctly.
● Use prototyping for low-volume production.
b. Budget considerations
● Evaluate costs based on product size and complexity.
● Request quotes and timescale details from prototype manufacturers.
c. Create basic models
● Assemble simple models with wood, cardboard, foam, or 3D printing.
● Use models and sketches to evaluate appearance and ergonomics.
d. Consider CAD for design needs
● CAD software creates 3D models viewed on a computer screen.
● Solid modelers (e.gSolidWorks, Siemens Explore NX) for engineering evaluation.
● Surface modelers (e.g., Rhino) for surface and external appearance.
e. Seek help for detailed prototypes
● For presentations, market research, or attracting investors.
● Develop a prototype resembling the finished product to minimize costs.
● Professional assistance from a product designer or prototyping specialist may be necessary.
● Protect your idea when seeking external help.
f. Pre-production prototypes
● Develop at a late development stage.
● Manufacture using representative production methods.
● Fully functional and closely resembles the final product.
● Typically used for investor presentations or market research.
2. Plan your prototype
a. Check safety and performance standards; consult a product designer for advice.
 ● Ensure intellectual property protection with patents or NDAs.
● Consider exhibition/publication implications.
b. Determine the quantity of prototypes needed.
● Producing multiple samples simultaneously may be cost-effective.
c. Consider assessment and testing methods.
● Some products may become redundant after rigorous testing.
● Independent testing or certification against standards may be needed.
3. Fund your prototype
a. Fund basic prototypes from existing funds or borrowings.
● Bank loans can cover early-stage prototype development; demonstrate strong commercial
viability in your business plan.
● Clearly communicate investment amounts to family and friends; use professionally drawn-up
agreements.
b. Explore grants, awards, and funding opportunities.
● Funding can support idea testing, new product development, or collaborative projects.
c. Seek equity investment or commercial partnerships for sophisticated prototypes.
● Strong evidence of commercial potential required, including a good early-stage prototype or
CAD graphics.
● Consider bringing in outside specialists as partners for a share of profits; ensure financial
feasibility.
4. Get your prototype made
a. Engage a suitable designer for product design.
● Designers assess feasibility, aesthetics, and offer alternatives.
b. Find a prototype manufacturer capable of handling your requirements.
● Ensure they can produce the required complexity.
● Verify available processes and equipment suitability.
c. Consider universities for potentially lower-cost prototyping.
d. Supply the prototype manufacturer with an outline, CAD data, and detailed drawings.
● Recognize the cost implications of converting drawings into 3DCAD.

TEST YOUR PROTOTYPES:

HOW TO GATHER FEEDBACK AND MAXIMIZE LEARNING
Six Best Practice Tips for Gathering Feedback on Your Prototypes
1. Ways to Solicit Feedback
a. Tailor feedback solicitation to your prototype type.
● Conduct user interviews to explore thinking processes.
● Use "I Like, I Wish, What If" method for honest feedback.
2. Test Your Prototypes on the Right People
a. Choose testers strategically for relevant feedback.
● Teammates for early-stage feedback.
● Extreme users to uncover problems affecting regular users.
 ● Stakeholders to align criteria and prevent feasibility issues.
3. Ask the Right Questions
a. Clarify testing goals before gathering feedback.
● Focus on usability-related positive and negative feedback after interviews.
4. Be Neutral When Presenting Your Ideas
a. Present both positive and negative aspects without selling.
● Avoid defending against negative feedback.
● Be ready to modify or abandon ideas as needed.
5. Adapt While Testing
a. Maintain flexibility during prototype testing.
● Deviate from scripts and improvise as needed.
6. Let the User Contribute Ideas
a. Encourage user ideas to enhance prototypes.
● Ask users for improvement suggestions.

THREE METHODS FOR MAXIMIZING LEARNING FROM TESTING

1. Feedback Capture Grid
● Use during or after testing for systematic feedback capture.
● Divide a sheet into four quadrants, noting user questions and new questions raised.
2. I Like, I Wish, What If
● Invite open feedback by prompting three types of statements.
● Frame feedback constructively for open discussion or absorption.
3. Sharing Inspiring Stories
● Share powerful stories within the team to inspire solutions.
● Capture resonating ideas and feelings for future solution development.
4.Build, Gather Feedback, Iterate
● Integrate new information into the next prototype iterations.
● Develop a habit of actively incorporating learning into the process for continuous solution
improvement.

FORECASTING REVENUE

Forecasting
● Process of predicting the future based on past and present data.
● Establishes benchmarks for financial certainty in business decisions.
● Monthly/weekly forecasts crucial for startups, rapid growth, or financial difficulties.
● Regular forecasts enable close financial monitoring and problem prevention.

IMPORTANCE OF FORECASTING REVENUE

● Establishes goals and sales targets.
● Enhances understanding of business numbers.
● Focuses on the future by learning from the past.
 ● Improves business planning and decision-making.

Financial Forecasts
1. Start-up Costs:
● Start-up capital: facilities, equipment, registration, licensing.
● Working capital: raw materials, packaging, staff training, etc.
● Start-up capital and Working capital: Evaluate if owner's equity is sufficient to start without a
loan.
2. Operating Costs:
● Fixed costs (expenses paid even if no production).
● Variable costs (depend on the amount of production).
3. Sales Forecast:
● Essential month-by-month tool for managing business.
4. Cost of Goods Sold (COGS):
● Relates to sales forecast; includes direct production costs.
● Components: wholesale cost, packaging, freight, commissions, direct labor.
5. Cash Flow Forecast:
● Estimates money flow in/out over a specified period (usually 12 months).

COMPUTING FOR PROFITS

● Profit Formula: Profit = Revenue - Total Costs
Calculations:
● Profit – Revenue = Total Costs (when total costs and profit figures are known).
● Total Costs + Profit = Revenue (if total costs are unknown).
● Total Costs = Fixed Costs + Variable Costs
Other Formulas:
● Assets = Liabilities + Equity
● Net Income = Revenue - Expenses
● Total Cost = Profit - Revenue

BUSINESS RECORDS

Business Records
● Documents/data related to business operations.
● Includes financial statements, receipts, invoices, contracts, and tax filings.
● Aids tracking transactions, filing taxes, compiling accounts, and future reference.
● Hardcopy or digital; records include meeting minutes, memoranda, contracts, and accounting
source documents.

KEEPING BUSINESS RECORDS

1 Monitors financial health by tracking revenues, expenses, and profits.
2. Ensures compliance with legal and regulatory requirements.
3. Provides information for informed decisions about the business.
IMPORTANCE OF KEEPING BUSINESS RECORDS
1. Monitors business progress, identifies selling items, and suggests changes.
2. Prepares financial statements: income statement and balance sheet.
3. Identifies income sources.
4. Tracks deductible expenses.
5. Keeps a record for property basis
6. prepares tax returns
7. Supports items reported on tax returns.

Financial Forms/Records
● Financial forms/records follow set standards; differences are minimal.
● Samples from similar projects aid in design requirements.
a. Accounts Receivables - Valuable for credit decisions, accurate billing, and customer relations.
b. Inventory Records - Control for inventory management.
c. Accounts Payable - Show firm's liabilities.
d. Sales Records - Analyze advertising and promotions effectiveness.
e. Production Records - Basis for product costing, detect lost profits/costs.
f. Payroll Records - Detail total employee payments, basis for legal computations.
g. Cash Records - Show all firm receipts and disbursements.

SPECIFIC TYPES OF ACCOUNTING RECORDS

1. Journals - Sales, Purchase, Cash Receipts, Cash Payments, and General journals.
2. Ledgers - Accounts Receivable, Accounts Payable, and Plant ledgers.

Bookkeeping
● Recording business transactions systematically and chronologically.
● Follows procedures and principles.
Bookkeeper
● Person in charge of recording, maintaining, and updating business records.
● Uses Book of Accounts for transactions.
Book of Accounts
● Composed of journal and ledger.
Journal
● Book of original entry.
Ledger
● Book of final entry.
General Journal
● Basic journal with columns for date, account titles, explanations, folio or references, debit, and
credit entries.
General Ledger
● Group of all accounts in the chart of accounts.
 ● Reflected in the trial balance summarizing financial activities from the general journal and
subsidiary ledgers.
Subsidiary Ledger
● Group of accounts associated with the general ledger.
● Maintains individual accounts for customers and vendors without using cash as a medium of
exchange.
Accounts Receivable Ledger
● Sub-ledger recording credit sales made by a business.
● Useful for segregating invoiced amounts to customers.
Account Payable Ledger
● Contains details for invoices from suppliers.
● Used as a subsidiary ledger, keeping detailed payable transactions.
Debit
● Left-hand side entry, "Value Received."
● Records received cash or non-cash items, increasing debit balance.
Credit
● Right-hand side entry, "Value Parted With."
● Records given cash or non-cash items, increasing credit balance.

Rules of Debit and Credit

● Debit (DR) and Credit (CR) rules crucial for accurate recording and decision-making.
● Bookkeepers must master normal balances of account titles.

STEPS FOR DETERMINING BALANCES

a. Add all debit sides for total debit.
b. Add all credit sides for total credit.
c. Subtract total debit from total credit.
d. Determine balance for each account

1. T-Account
● Fastest method for journal entries.
● Divided into debit and credit sides, resembling the letter "T."
● Shows value received (debit) and value parted with (credit
2. Asset
● Resources with economic value.
● Owned or controlled for future benefit.
3. Liabilities
● Owed sum of money by a person or company.

4. Owner’s Equity
● Shareholders' equity or owner's equity.
 ● Residual ownership after subtracting liabilities.

5. Revenue
● Money brought into the company through business activities.
● Includes service income, fees, sales, and sales discount.

6. Expense:
● Costs of operations to generate revenue.
● Includes payments to suppliers, employee wages, leases, and depreciation.

7. Trial Balance
● List of all ledger accounts with final balances.
● Arranged by assets, liabilities, capital, revenue, and expenses.

Adjusting Entry
● Entry to update recorded financial data.
● Captures financial events over a period within the accounting cycle.
● Essential for keeping financial records updated.

5 BASIC SOURCES OF ADJUSTING ENTRIES

1. Depreciation
● Method of allocating asset cost to an expense over its useful life.
● Types of assets include Store, Office, Building, and Transportation Equipment.
● Land is exempt from depreciation.
● Formula:
Annual Depreciation = (Acquisition Cost - Salvage Value) / Useful Life.

2. Deferred Expenses (Prepaid Expenses)

● Initially recorded as assets but become expenses over time.
● Amortized weekly, semi-monthly, or monthly.

3. Deferred Income (Unearned Income)

● Initially recorded as liabilities but become income over time.

4. Accrued Expenses (Accrued Liabilities)

● Expenses incurred but not yet recorded and paid.

5. Accrued Income (Accrued Assets)

● Income earned but not yet recorded and received from the customer.