HFPA

FITNESS ACADEMY

ENTREPRENEURSHIP

HIGHER CERTIFICATE IN EXERCISE SCIENCE

 Entrepreneurship

02 CHAPTER 1
CONTENT
ENTREPRENEURSHIP
Introduction .................................................................................................................................................. 3
South African entrepreneurs .......................................................................................................... 3
Definition ......................................................................................................................................................... 3
Modern day entrepreneurs ............................................................................................................. 3
Entrepreneurship vs. Management .......................................................................................... 3
Factors that drive entrepreneurial activity ........................................................................ 3
Factors prohibiting entrepreneurial activity ..................................................................... 4
The entrepreneurial process .......................................................................................................... 4
Management skills required by entrepreneurs .............................................................. 9
Conclusion ...................................................................................................................................................... 12

13 CHAPTER 2
BUSINESS PLAN
What is a Business plan ..................................................................................................................... 14
Purpose of a business plan ............................................................................................................ 14
Basic format and layout of a business plan .................................................................... 14
Swot analysis .............................................................................................................................................. 18

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 Entrepreneurship

CHAPTER 1:
ENTREPRENEURSHIP

This chapter gives an overview of entrepreneurship in relation to the fitness industry.

OBJECTIVES:

The learner will be able to:

Understand what an entrepreneur is
Factors that drive entrepreneurial activity
The entrepreneurial process
Management skills required by entrepreneurs

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 Entrepreneurship CHAPTER 1: ENTREPRENEURSHIP

INTRODUCTION enables entrepreneurs to surround themselves with

status symbols (cars and houses). Entrepreneurs
1.1 SOUTH AFRICAN ENTREPRENEURS condone temporary losses, with the ultimate goal of
What made Mark Shuttleworth a millionaire at the age of long-term profitability.
30 while his university classmates sought conventional
employment? What business practices did Herman Even so it is important when starting a business to make
Mashaba use to build the ‘black like me’ empire? What sure that income exceeds expenditure. It usually takes
made Ina Paarman a household name? What are the a few years for a business to become self-sustainable,
principals of management that underlie the success of so planning ahead and realistic forecasting is essential
the (SE – small enterprise) captains of South African to prevent a business becoming insolvent. Insolvency
industry? means the business is unable to pay expenses when
due; this can happen even when the value of assets
In this module we will examine the process and exceeds liabilities and debts incurred by the company.
dynamics of entrepreneurship and apply the theory Overspending on things like salaries, infrastructure and
to local (South African) circumstances in a way that equipment are some of the causes of insolvency.
highlights the challenges and opportunities that exist for
entrepreneurs in the fitness industry also known as the 1.5.2 Challenge
SRF (Sport, Recreation and Fitness) environment. Entrepreneurs enjoy the cut and thrust of parenting an
actualisation; it provides them with an opportunity for
1.2 DEFINITION self actualisation. Entrepreneurs absorb failures as a
Entrepreneurship is the process of conceptualising, learning experience from which important lessons are
organising, launching and nurturing a business drawn which serve as a platform for future success.
opportunity, through innovation, into a potentially high
growth venture in a complex unstable environment. NOTES
1.3 MODERN DAY ENTREPRENEURS
Entrepreneurs are both founders and revivers; they spot
opportunities and marshal their resources to offer
something new and improved. They are viewed as
‘movers and shakers’, acting as agents for change
and value creation. To be successful, modern-day
entrepreneurs have to:
• Effect customer convenience in all walks of life
• Benefit all stakeholders (investors, suppliers,
community)
• Minimise risk via contingency planning
• Ensure dynamic growth through innovative
combinations of human, material, physical and
financial resources

1.4 ENTREPRENEURSHIP VS. MANAGEMENT

There is a difference between an entrepreneur and a
manager; entrepreneurs focus on value creation and
growth - they examine ideas, develop opportunities
and handle the nuts and bolts of start-ups; managers
perform functions like planning, organising, leading and
controlling – their management duties are more akin to
administration than the duties of entrepreneurs.

1.5 FACTORS THAT DRIVE ENTREPRENEURIAL

ACTIVITY
Entrepreneurs build businesses for various reasons.
Among their leading motives are profit, challenge and a
sense of independence.

1.5.1 Profit
Profit serves as a manifestation of success and fuels
the entrepreneur’s standard of living. High profitability

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1.5.3 Independence 1.7.1 Identifying, Measuring and Refining an

The passion to run one’s own company and control one’s
own destiny is a perennial drive among entrepreneurs.
Running his/her own business imparts a feeling of
achievement for an entrepreneur.
1.6 FACTORS PROHIBITING ENTREPRENEURIAL
ACTIVITY
Both social and economic circumstances impact on the
number and quality of entrepreneurs in our country.
Factorslike education, culture and family back-ground
have been found to spur or retard entrepreneurial
activity.
Van Aard & van Aard (2003:3) lament the shortage of
South African entrepreneurs: “In general, South Africans
are not socialised or educated to become entrepreneurs,
but to enter the labor market as employees. In becoming
employees, they become consumers instead of creators
of new jobs…The trend of people being socialised
and educated to become employees appears to be
especially true in respect of Africans….”.
Opportunity from Multiple Ideas
An opportunity is a chance to create a new and/
or improved offering (product or service). Wickham
(1998:28) defines an opportunity as “the gap left in the
market by those who currently serve it. It represents the
potential to serve customers better than they are being
served at present”.
Something to think about: A problem is nothing more
than a challenge (opportunity) looking for a solution.
To qualify as an opportunity, an idea should fulfil the
following requirements:
• The market must be large enough, growing rapidly
and easy to enter
• Profit margins must be large and brake-even points
low so that only a few units need to be sold to realise
a profit; alternatively the projected volume of sales
must be sufficient to ensure profitability through
economies of scale
• It should generate large cash flows

Other factors that inhibit new venture creation in South NOTES

Africa include:
• The absence of start-up capital that foils useful
ideas and impedes progress
• Costly funding (high interest rates), particularly for
entrepreneurs without a track record
• High risk where environmental threats outweigh
opportunities
• Legal restrictions that prohibit certain operations
(and the high costs involved with meeting certain
conditions)
• The lack of entrepreneurial training
• Inexperience
• Poor community image, especially in a community
where business ownership is suspect
• Insufficient local skills that must be imported or
trained at a great cost
• The lack of business networks
• The myriad of activities required to start-up a
business

1.7 THE ENTREPRENEURIAL PROCESS

The entrepreneurial process involves founding (or
reinventing) a business venture and growing it into a
thriving and agile enterprise. The specific steps in the
process are:
• Identifying, measuring and refining an opportunity
from multiple ideas
• Formulating a business plan
• Marshalling resources
• Organising and mobilising an entrepreneurial team
• Overseeing new venture development and growth

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Opportunity-driven entrepreneurs are continually

looking for ways in which to improve their current NOTES
operations, outwit the competition or market something
new. They know that opportunities flow from the
following sources:
• The rate of socioeconomic change - that outdates
existing products, fashions and needs
• Demographic change - young people account for
43.2% of the population, representing future buyers
who should be captured early (in a few years they
will need everything from houses, nappies and cars
to insurance)
• Growing urbanisation and the accompanying
cultural change – e.g. the trend toward two-income
families bodes well for service provision and the
marketing of convenience items
• Increased intercultural contact - that leads to
tourism and entertainment opportunities
• Improved technology - that allows entrepreneurs to
offer better products and services at lower prices

The world is full of potential threats (unforeseen

competition, hostile regulations, fast changing
technology, substitute products and declining demand)
that can unravel even the best laid plans.

Opportunities and threats must be balanced against

the internal strengths and weaknesses of the venture
in a process called a SWOT analyses (discussed later).
Recognition of internal capabilities (strengths and
weaknesses) helps the entrepreneur to align his/her
strategies with external realities (opportunities and
threats).

Note: These opportunities must be sufficiently valued by

consumers so that they are prepared to pay a profitable
price and abandon existing suppliers.

1.7.2 Marshalling Resources

Dollinger (1995) defines a resource as “anything of
quality that is useful”. Resources for a business, therefore
include:
• Finance (equity and cash)
• Physical assets (buildings, equipment, vehicles, etc
• Skills
• Information
Resources can also be intangible assets like:
• Protected patents
• Unique technology
• A valuable brand
• A sound corporate reputation
Today skilled, motivated employees are the
entrepreneur’s most valuable resource, especially in the
SRF (Sport, Recreation and Fitness) environment, as
they are the building blocks for creating new value. It is
the responsibility of the entrepreneur to obtain, protect
and nurture quality resources.
1.7.3 Obtaining Resources
Having spotted the opportunity, the entrepreneur has to
convince funders, prospective employees and suppliers
to invest in the venture. This requires ingenuity and
patience as rejection is common. Young entrepreneurs
without a track record are bound to encounter skepticism
from funders, skilled employees and other resource
suppliers.
1.7.4 Protecting Resources
Entrepreneurs strive to develop a sustainable competitive
advantage (SCA) by acquiring and protecting valuable
resources. SCA is created when a firm has strategic
resources that are:
• Valuable
• Rare
• Not easily imitated
• Not easily substituted

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Resources that fulfil all of these requirements can 1.7.6 Organising and Mobilising an Entrepreneurial
prolong the competitive edge of a venture. Once the Team
entrepreneur has acquired the needed resources, he/ The most successful entrepreneurs tend to be
she must protect them by deploying them sustainably transformational (charismatic) leaders that set
and profitably - support is likely to continue if the ambitious goals and harness the creative energy of
venture delivers competitive returns to all stakeholders their subordinates.
(shareholders, suppliers and employees). Transformational leaders get their employees to:
• Perform beyond their normal expectations
Roles and responsibilities must be clearly defined. For • Transcend their own immediate self-interests
instance a Manager must know his responsibilities, • Concentrate on intrinsic, higher level goals
which decisions he is required to make and execute • Have confidence in their abilities to achieve the
independently and those which require the authorisation extraordinary
of the facility’s owner or executive committee.
Entrepreneurs know that they need the help of qualified,
Staff should undergo training that helps enhance motivated people to make their venture a success –
their competency but should also have access to they therefore reward their employees well with profit
workshops which enhance skills such as leadership, sharing and stock options; this makes practical sense
conflict management, problem solving etc. They should since it links organisational fortune to personal and
also be taught about issues relating to things such as team effort and encourages them, as “co-owners” of the
sexual harassment and background checks should be business, to maintain individual performance.
conducted on all prospective employees to establish,
among other things, any previous interaction with Other than motivating employees, entrepreneurs
children. are also responsible for organising employees into a
There are many different types of facilities that fall coherent and evolving structure.
within the fitness and conditioning spectrum. Gyms,
dance, yoga, spinning and Pilates studios, recreation
sports clubs, sports fields and stadiums, indoor sports NOTES
arenas, high performance centres etc. The business plan
must take into account whether the organisation will be
strictly service oriented (e.g. a gym where people work
out and only participate in gym activities) or if it will also
include a retail outlet (e.g. selling gym branded gym
bags, towels, etc). The target market must be identified
and included in the business plan. This is important when
considering pricing for the services provided and the
location of the company.
It is important that all staff members are aware of
the applicable health and safety codes and that signs
and notices are conspicuously displayed throughout
the facility providing information on what to do in any
emergency. A first aid kit should be easily accessible
and all staff should have completed a recognised First
Aid qualification. Rules of the facility should be clear to
staff and clients and these rules must be enforced.

The facility must also be user friendly for disabled

people. This means inclusion of ramps where there
might be stairs, enough space to move a wheelchair,
vital posters in colours that are easily visible to people
with poor eyesight.

1.7.5 Nurturing Resources

As the venture grows the quality of its resources must
be nurtured to sustain value creation - this is particularly
critical for human resources. Skilled and motivated
people are the lifeblood of any successful organisation;
the entrepreneur has a crucial role to play in harnessing
the creative energy of his/her team and in nurturing an
innovative environment.

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Organisational structures differ according to ‘horizontal’
and ‘vertical’ aspects; horizontal organisational
structures (flat) have very few or no levels of middle
management, while vertical organisational structures
have a well-defined chain of command or hierarchy.
The figure below is a framework to analyse a competitors
strategies and objectives in order to identify how best
to compete (to gain a ‘competitive edge’), services that
might differ, pricing policies or ways to co-operate on
certain projects.

Today many companies prefer flat structures that Figure 7.1 Competitor analysis framework (Blake, 2011).
accommodate rapid decision making and responsiveness
as opposed to vertical organisational structures that
tend to produce multi-layered bureaucracies that stifle Competition Response Profile
communication and decision making.

Companies also seem to prefer outsourcing work instead

of creating in-house positions to fulfil work requirements. COMPETITOR COMPETITOR
Responses
CAPABILITIES DRIVERS
With fewer in-house positions, organisational structure Assumptions &
becomes more flat and companies can enjoy the Capabilities
Strategy Objectives
advantages discussed above.

Doing away with organisational layers and

subcontracting work forms part of organisational down- NOTES
sizing.

As work conditions change and evolve, so should

the structure of the organisation - no matter how
unpalatable the change may seem.

What people say - “The most successful ventures become

learning organisations: that is, flexible organisations
that continually adapt to changing opportunities.
Most importantly, they learn from their successes and
mistakes”.

1.7.6 Overseeing New Venture Development and

Growth
Starting a new venture is only the first step in an
entrepreneurial career; it requires a different set of skills
to manage and maintain it.

What people say - “While entrepreneurs may excel at

starting ventures, many lack the flair to grow them and
many professional managers lack the entrepreneurial
flair to form new ventures”

American research, conducted by Rubenson & Gupta

(1990:177-78), concludes that business founders evolve
through a new business venture in the following ways:
• Creation to exploitation
• Initial excitement to sober reflection
• Close initial involvement to subsequent delegation

A (successful) venture is thought to live through certain

generic steps or phases. Over time, the dynamics and
balance between the three elements of entrepreneurship
(opportunity, resources and team) change; while
opportunity may outweigh recourses at the outset,
resources gradually reverse the momentum as money,
skills and physical assets increase and opportunity is
whittled away by competition.

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The role of the entrepreneur changes through the venture’s life-cycle (start-up, rapid growth, maturity and decline).
It is evident from Table 1.1 that entrepreneurial management is essential for growth and the management of change
early in the venture’s life-cycle. Later, a desirable hybrid of entrepreneurial and managerial skills is needed to
maintain growth and manage resources. The entrepreneur must adapt strategies, appoint skilled staff, continually
expose them to new challenges and techniques and generally motivate them to deliver even-higher standards of
work.

Figure 7.2 The Balance between Opportunity Resources throughout the Ventures Lifespan

Resources • Leadership
• Capital Market
Communication

Opportunity

• Ambiguity
• Creativity Team
• Uncertainty

• Founder
• Staff members

Table 7.1: The Role of the Entrepreneur throughout the Life Cycle of the Venture

Dimensions Start-up Rapid growth Maturity Decline

Skills needed Entrepreneurial Managerial (technical, Entrepreneurial Participative

conceptual and human)

Opportunity Not well defined and a lot Well defined and ambiguity Market is saturated and
of uncertainty & ambiguity exists about size, growth & opportunity is divided
exists prospects only

Considerations External environment Increased competition that Return shared by more & A lot of competition
(technological, social and reduced market share more competitors resulting resulting in very low market
economic) in very low market share share

Characteristics Opportunity>limited Resources less limited Resources increase as Resources>

resources sales grow opportunities

Focus Is to development of Is on changing goods Is to find & develop new To get new opportunity to
distinctive goods and and services to tastes of opportunities and to assure survival
services customers improve profitability by
cutting costs

Activities Develop a business plan Focus on production Develop a prospectus Focus on core competency

Aim To acquire funds, resources To fight of competition & To sell shares to public to To revive innovative
and people steer company to goals grow company entrepreneurship and
restore entrepreneurial
skills

Actions Build stock and quality Look for new opportunities, Improve cash flow Focus on technology
gather resources and to
deploy it optimally

Team Focus on cohesion, team Grows in confidence Become stronger Infighting, reduced morale
building and spirit & manipulation

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Leadership A decisive leader, with
team building skills, that
is both firm and flexible,
that sets ambitious goals,
create a vision and that
expect high productivity is
needed
A leader that builds the A leader that creatively The leader must develop a
company image, align and innovatively continue new vision (and turnaround
activities and balance to keep competitive strategy) through
demand towards advantage, supplier and participation by reviewing
stakeholders and the vendor attention the mission, goals and
community is needed is needed opportunities, competition
and moral

Structure Informal and flexible Hybrid Everybody has to help Lean

People Multitask Specialise, and focus on Must pull their weight Must be eager to work
further development

Communication Informal and quick Focused on the new vision

and what the future holds

1.8 MANAGEMENT SKILLS REQUIRED BY aspects of marketing, including market research,

ENTREPRENEURS
While few individuals are experts in every field,
entrepreneurs need to be sufficiently familiar with all
functions of the business to make informed judgments.
Entrepreneurs need both general and people
management skills.
1.8.1 General Management Skills
In the SRF (Sport, Recreation and Fitness) environment,
the entrepreneur needs strategic management,
planning, marketing, financial, time management and
other skills vital for efficient administration.
1.8.2 Strategic Management Skills
Strategic management comprises the planning,
execution and monitoring of a competitive game
plan. It deals with the management of the enterprise’s
long-term future. In order to position the venture
competitively within its environment, the entrepreneur
must set ambitious long-term goals for the enterprise
and design and implement an aggressive action plan
based on proper SWOT analyses.
1.8.3 Planning Skills
Strategic plans must be accompanied by detailed,
shorter-term tactics. These spell out interim goals and
programmes of action, serve as a budgetary tool and
outline the expectations of the management team with
regard to products, sales, costs and profits; basically,
they represent a roadmap for a certain period. Plans
also provide feedback when compared with actual
results (the control function). Planning skills demand
the ability to predict and anticipate profitable, practical
customer-focused products and services.
1.8.4 Marketing skills
By innovatively combining product, price, distribution
and promotion principles, marketing helps to recapture
lost markets and gain new ones. An understanding of
the needs and lifestyle of the target market is vital for an
entrepreneur to accurately define value creation for his/
her customers (from the customer’s point of view) and
to determine the gaps in competitors’ value offerings.
The entrepreneur must have a working knowledge
of the significance and interdependence of specific
marketing planning, product planning and pricing, sales
management, direct selling, service management and
supply chain management.
1.8.5 Financial skills
Entrepreneurs must be able to evaluate an opportunity’s
profitability, monitor expenditure and cash flow, source
funds competitively and generally secure the ventures
future. Credit and cash flow management, some book
keeping and basic financial management are additional
areas that need the entrepreneurs’ attention.
1.8.6 Project management skills
A project is an undertaking or scheme that integrates
related activities. It has a finite duration - there is a
beginning and an end, with deadlines in-between.
Developing a new product, planning an advertising
campaign and probing new markets are a few examples
of projects. Entrepreneurs must organise projects; find
the requisite resources, set goals and review progress
of the project.
1.8.7 Time Management
Time is a scarce commodity that must be managed
productively. This requires discipline, prioritising
important tasks, delegating to others and ensuring that
everyone completes their work on time.
1.8.1.7 People Management Skills
The entrepreneur must have the ability to work with
diverse personalities. They require team building skills
to bind their workers together. Interpersonal skills are
essential in dealing with external stakeholders like
government, unions, communities, investors, lenders,
etc. Diplomacy is the entrepreneurs’ ‘stock-in-trade’.
1.8.8 Leadership Skills
Leadership is the process of nudging others to achieve
goals voluntarily and passionately using various
motivational devices (money, praise, status, challenge
etc.). Leaders inspire enthusiastic performance and
a feeling of common purpose. Leadership skills are
essential to managing interpersonal relations and to
stoking organisational excitement through thick and
thin.

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Ultimately, the effectiveness of leadership rests on three
interdependent pillars: the leader, the job in question
and the surrounding environment. These factors must
work together – although inter-factor trade-offs do
occur, e.g. a strong leader can compensate for complex
tasks and a hostile environment by simplifying things
and preparing multiple plans.
Natural leadership qualities are insufficient unless
supplemented by some training and experience. Those
lacking natural talent can improve their skills through
training and practice. Leadership is a skill that can be
learned. Ambitious entrepreneurs keep abreast of the
latest techniques and ideas through reading or by
attending courses.
What people say- “While there is an undeniable core
of such inborn characteristics as energy and raw
intelligence, it is becoming increasingly apparent that
possession of these characteristics does not necessarily
make an entrepreneur. There is also a good deal of
evidence that entrepreneurs are born and made better,
and that certain behaviors can be acquired, developed,
practiced and refined - through a combination of
experience and study”
enhanced. Conversely, negativity in any one of the
factors can compromise effort. For example where
workers have the ability to work but not the desire, the
remaining factors matter little.
Motivating people requires meeting their most pressing
needs. A need can be defined as a state of felt
deprivation requiring some action; an uncomfortable
feeling that will persist until action is taken to alleviate
it. There are many classifications of human needs. A
popular classification is that of Abraham Maslow, who
ranks needs hieratically from basic physiological to more
complex self-actualisation needs. Maslow’s hierarchy of
needs include:
• Physiological needs: basic survival needs for food,
water and sleep
• Security needs: for self-preservation and the
protection of others
• Social needs: the desire to affiliate or belong
• Esteem needs: for a positive self-image and
recognition by one’s peers
• Self-actualisation: a need to stretch one’s capabilities
NOTES

1.8.9 Motivation Skills

Motivation is the urge that inspires and directs behavior.
Linked with leadership, motivational skills enable
managers and entrepreneurs to stimulate subordinates
at work.

What people say- Motivation is “the willingness to

exert high levels of effort to reach organisational
goals, conditioned by the effort’s ability to satisfy some
individual need”

Individuals and groups are motivated or driven when

they work without supervision, using their own initiative
because they enjoy the work. Motivational skills
enable managers to shape behaviour or employee
action. It appears through the leader’s ability to guide
commitment. Motivation breeds commitment, though
the direction and intensity of that commitment is
uncertain.

Motivation is measured indirectly through improved

or dwindling performance; i.e. falling productivity
accompanied by staff turnover, stay-aways, sabotage
and strikes signal low morale.

So how does the entrepreneur motivate colleagues

to strive harder? The motivational theory offers three
explanatory variables, encapsulated by the following
formula:
Performance = ability x motivation x environment

If the independent variables (ability, motivation and

environment) are favourable, then performance is

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The needs theory of motivation suggests that human
action is incited by the desire to satisfy needs. An
unfulfilled need creates a discomfort that drives the
search for action (ways to reduce the tension). The
need recedes once it has been satisfied and a new one
arises in its place. Entrepreneurs and mangers with the
means to do so, can influence behaviour by satisfying or
promising to fulfil the needs of their employees.
To motivate others, entrepreneurs must be able to
motivate themselves; leading by example and behaving
consistently. Incentives must be varied to suit the changing
environment. Applying the same old motivators all the
time will not yield the required outcome. Maintaining
motivation is an ongoing challenge that demands
ingenuity.
1.8.12 Negotiation Skills
Negotiation brings together two or more parties to
discuss appropriate terms for an exchange of goods or
services. Negotiations can be distributive (or sero-sum),
meaning that a gain by one is an equivalent loss to the
other. Entrepreneurs look beyond short-term victories to
lasting, mutually beneficial gains and to building long-
term relationships with suppliers, distributors, unions
and other stakeholders. Integrative bargaining occurs
when negotiators cooperate with each other so that
each gains something from the exchange.
NOTES

1.8.10 Delegation Skills

Delegating means allocating some of one’s duties to
others. Delegation permits the broadest participation
in the organisation’s activities. By delegating work, the
entrepreneur taps the skills of qualified individuals while
focusing on more challenging assignments.
Insecure leaders are loath to delegate and end up
frustrating employees that have little work. Unable to
cope with their own workload, insecure leaders then
berate under-used staff for mistakes they had no part
in causing.

Delegating implies ‘letting go’ and trusting employees

to manage the work, while remaining in ultimate control.
This entails building and encouraging teamwork;
consulting widely and building employee confidence
through participation.

1.8.11 Communication Skills

Communication is the exchange of information
between people for the purpose of sharing meaning.
Communication can be verbal or non-verbal. Non-verbal
communication employs elements and behaviours that
are not coded in words; it includes:
• Kinetic behaviour that includes body movement such
as gestures, facial expressions, eye movements, and
posture
• Paralanguage includes the vocal aspects of
communication that relate to how something is said
rather than what is said (pitch, volume, tone)
• Object language is communication through
material things such as clothing, cosmetics,
furniture and architecture that conveys a meaning
Communication skills determine a leader’s ability
to convey vision, build teams, issue instructions,
control processes and generally interact with
internal and external stakeholders. Research
indicates that managers spend most of their time
communicating and that they mostly prefer oral
over written communication - however they choose
to communicate, entrepreneurs need to express
ideas clearly and efficiently.

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During negotiations, negotiators define their core

interests, those of the various parties involved and their NOTES
own bottom-line (points they are prepared to concede).
They bargain hard but know when to yield. This is
described as a win-win situation.

1.9 CONCLUSION
The entrepreneurial process begins when the
entrepreneur perceives an opportunity, marshals the
requisite resources and builds a team to realise the
vision. How the entrepreneur integrates these elements
in relation to competitors in a dynamic environment
determines how successful the venture becomes.

Successful ventures add value by meeting consumer

needs competitively. Adding value means offering a
product in which the customer finds or perceives value
and ensuring that the price of the product exceeds the
cost of production. Therefore, adding value produces
profits that sustain growth.

Entrepreneurial managers need both people and

general management skills. In addition, their success
depends upon knowledge of their industry and individual
motivation.

CHAPTER 1 ONLINE ASSIGNMENTS

All online assignments are available on the HFPA

Online Learning Platform.

To access this site go to: www.hfpa.co.za

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 Entrepreneurship

CHAPTER 2:
BUSINESS PLAN

This chapter provides a comprehensive explanation of how to compile a business plan.

OBJECTIVES:

The learner will be able to:

Understand the purpose of a business plan
Understand the basic format of a business plan
Develop a business plan
Develop a SWOT analysis

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2.1 FORMULATING A BUSINESS PLAN

A business plan is a written document that explains what NOTES
the organisation’s objectives are and how it is going to
achieve these objectives. It helps focus all its activities
and resources in an organised manner, to ensure it
reaches its goals.

A business plan provides answers to the following four

core questions:
• What product or service does the business provide
and what needs or wants does it satisfy?
• Who are the potential customers for the product
or service and why will they purchase it from the
business instead of from the competition?
• How will the business reach potential customers?
• Where can the business get the financial resources
to start the business?

2.1.1 Purpose of a Business Plan

1. Financial tool
The business plan is used as a sales tool for approach-
ing and capturing financial sources including:
• Attracting investment capital funds from interested
investors or strategic business partners.
• Securing loans or finance from lenders such as
banks.

2. Management tool
The business plan helps a business track, monitor and
evaluate its progress. Timelines and milestones must be
established to measure progress and compare the pro-
jections to actual performance.

3. Planning tool
A business plan guides a business through the various
phases of its growth. A well-developed plan will pro-
vide short term and long term goals as well as identify
potential obstacles that can be avoided.

2.8.2 Basic format and layout of a business plan

Section A: Introduction and description of the business • Cover page

• Table of Contents
• Executive summary
Section B: Marketing plan • Target market
• Marketing mix
• Competitors
Section C: Operational plan • Equipment and facility requirements
Section D: Management plan • Human resources required
Section E: Financial plan • Sales forecast
• Projected income and expenditure
• Start-up costs
• Cash flow statement
• Projected balance sheet
Section F: Supporting Documents • Relevant CV’s
• Letters of intent
• Agreements or contracts

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 Entrepreneurship CHAPTER 2: BUSINESS PLAN

SECTION A: INTRODUCTION AND DESCRIPTION OF Product/Service

THE BUSINESS
1. Cover page:
A business plan needs to have a smart looking, profes-
sional cover page. The cover page is important as it is
the first information that the reader gets, and must have
a professional feel and appearance.
A cover page must have the following:
• The full name of the business.
• The entrepreneur’s/owner’s name.
• The entrepreneur’s/owner’s address and contact
details including email and cell phone number.
• Date of the plan.
• The logo of the business.
2. Table of Contents
A table of contents is a single page that lists the major
headings and page references
3. Executive summary
The executive summary is a brief (one-page) statement
of the business’ objectives. It provides a summary of
the business idea and should make the reader want to
continue reading the rest of the document. An interested
reader will read the summary to see if it is of value or
significance to them to read the business plan.
A description of the product or service will include an
analysis and statement of what need or problem the
business will try to satisfy. An explanation of the main
features of the organisation will include:
• The product/services to be sold by the business.
• The reason customers will make use of the product/
service.
• The features that will differentiate the product/
service from the competitors. In other words, what
makes the product/service unique?
• What the business provides that gives them a com-
petitive edge over its competitors.
Price
The cost of the product to the consumer. An analysis
must be done of what consumers are willing to pay for
the organisation’s product or service and should include
answers to the following questions:
• Is the products or services price profitable?
• Will the price of products or services cover the direct
costs and expenses?
• What price are the competitors charging?
• If the business charges a higher price, what advan-
tages are offered to justify the price?
NOTES

Although the executive summary is provided at the

beginning a business plan, it should only be written once
the business plan is complete. This is so that a complete
picture of the business plan is developed before making
a summary of it.

SECTION B: MARKETING PLAN

The marketing plan aims to explain:

• Who will buy the organisation’s product/service?

• What will the customer be prepared to pay for the
product/service?
• How will the organisation promote the products and
services?
• How will the organisation get the product to the
customer?
• Who are are the organisation’s competitors?

1. Description of the organisation’s possible target

market.
A description of the main customers includes:
• The market segment in terms of age, sex, occupa-
tion, lifestyle and income.
• The current size of the market.
• The percentage of the market the business expects
to have.
• The growth potential.

2. A description of the organisation’s marketing mix

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 Entrepreneurship CHAPTER 2: BUSINESS PLAN

Promotion • The qualifications and skills required.

The next step is to examine how the organisation will • CVs of all professionals involved.
communicate with potential customers as well as how • A detailed description of the organisation’s
to create awareness and demand for the product or organogram.
service.
This should include: SECTION E: FINANCIAL PLAN
• Packaging – is it unique, attractive and does it sup- The financial plan needs to show that the business will be
port the organisation’s image? profitable. The plan will also need to include the start-up
• Advertising used and the cost of the advertising and operational costs.as well as the funding required in
such as presentations to potential consumers, direct two, three, and five years to maintain business opera-
emailing, content marketing and social media. tions and allow for growth.
It includes:
Place • A detailed breakdown of the establishment costs
The place of distribution is important as it explains where such as product development costs, equipment
customers can get the product. The product could be and facilities costs, office furniture, market research
delivered to the consumer or there could be a fixed costs, legal fees (such as business registration fees).
location where customers can purchase the goods. The • Operating expenses such salaries, rent, insurance,
marketing plan should include the following information: water and electricity costs.
• The organisation’s projected income statement,
• Direct selling, retail distribution manufacturers’ rep- balance sheet and cash flow.
resentatives or an online store. • Sales forecast.
• What are the physical features the building?
• Will the business lease or own the building? NOTES
• What are the operating costs of the building?
3. Description of the organisation’s main competitors
A marketing plan will need to have analysed includes an
analysis of what the competitors are doing so that the
product that is offered is different from the competition
in terms of quality, price or uniqueness. This includes an
analysis of:
• The five closest competitors.
• The competitors’ marketing strategies.
• The competitors’ product range, specifications,
prices and delivery arrangements.
• The competitors’ strengths and weaknesses.
• Any similarities to the competitors’

SECTION C: THE OPERATIONAL PLAN

Describes the organisation’s facilities, equipment and
manufacturing capabilities.
Fundamental questions such as:
• What equipment will be required to provide the ser-
vices and products?
• What facilities will be necessary to produce and sell
the products?
• Who are the suppliers?
• What are the sources of raw materials?

SECTION D: THE MANAGEMENT PLAN

A description of all human resources involved in pro-
viding the services and products, including all directors,
consultants, advisors, employees and any other profes-
sionals involved in the business. The management plan
provides the following information:
• What is the management experience?
• What staff will be required?
• The salaries or wages of staff.
• Whether full time or part time staff are required.

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 Entrepreneurship CHAPTER 2: BUSINESS PLAN

XYZ sports club - Income statement XYZ SPORTING CLUB - BALANCE SHEET
For the period ending December 31, 2017 AS AT 31 DECEMBER 2014
INCOME R Note 2013 - R 2014 - R
Grant 22000.00
Development Funding 16000.00 ASSETS
Membership/affiliations 100001.25
CURRENT ASSETS
Awards, badges 2251.60 10 369,852 387,728
Cash and cash equivalents
Bank interest 0.00 11 170,851 165,169
Trade and other receivables
Bar takings 50468.00 12 9,660 4,711
Other current assets
Donations 1505.65
Fundraising 4136.57 TOTAL CURRENT ASSETS 550,364 557,608
Hire of gym 5168.50
Sponsorship 2500.00 NON-CURRENT ASSETS

TOTAL 204031.57 Financial assets 13 71,045 59,241

Property, plant and equipment 14 1,012,982 995,708
EXPENDITURE
Administrator TOTAL NON-CURRENT ASSETS 1,084,027 1,054,950
38124.56
Administrative assistant 22154.35 TOTAL ASSETS 1,634,391 1,612,557
Development officer 27259.86
Coaching coordinator 6145.38 LIABILITIES
Casual assistant 1258.26
Casual bar staff CURRENT LIABILITIES
18254.79
Telephone & fax Trade and other payables 15 346,033 228,565
9523.68
Stationery & postage Short-term provisions 16 59,890 64,008
13257.42
Travel 2894.65 TOTAL CURRENT LIABILITIES 405,923 292,573
Insurance 5874.55
Electricity 4326.89 NON-CURRENT LIABILITIES
Equipment repair 9548.96 Borrowings 17 270,427 298,977
Trophies 1458.76 Long-term provisions 16 82,397 55,180
Publicity & promotions 7586.50 Other 18 (11,721) 145,917
Coaching sessions 3897.25
Umpires seminars 1786.35 TOTAL NON-CURRENT LIABILITIES 341,103 500,074
Schools tournament 4875.69 TOTAL LIABILITIES 747,026 792,647
National affiliation 1000.00
Sundry 1785.36 NET ASSETS 887,365 819,910

TOTAL 181013.26 EQUITY

SURPLUS (DEFICIT) 23018.31 Reserves 19 125,000 45,000

Retained profits 762,365 774,910

TOTAL EQUITY FUNDS 887,365 819,910

NOTES
Cash flow statement for XYZ business
for the year ended 31st of December 2010
CASH FLOW FROM OPERATING ACTIVITIES:
Cash receipts from customers 83.000
Cash paid to suppliers and employees (56.000)
Cash generated from operations 27,000

Dividends received 250

Interest received 500
Interest paid (500)
Tax paid (2.450)
Net cash flow from operating activities 24 800

CASH FLOW FROM INVESTING ACTIVITIES

Additions to equipment (2.500)
Replacement of equipment (7,000)
Proceeds** from sale of equipment 500
Net cash flow from investing activities (9.000)

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from capital contributed 3,400
Proceeds from loan 16,000
Payment of loan (5400)
Net cash flow from financing activities 13.000

NET INCREASE/DECREASE IN CASH 28,800

Cash at the beginning of the period 2.430
Cash at the end of the period 31.230

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 Entrepreneurship CHAPTER 2: BUSINESS PLAN

SECTION F: SUPPORTING DOCUMENTS:

The supporting documents section provides a place for other relevant information and can include:
• Personal Curriculum Vitaes for all managers, advisors and staff.
• Personal financial statements.
• Letters of reference. Letters of intent from prospective suppliers or customers.
• Copies of all leases, contracts, or agreements, or other legal documents.
• Market research studies completed.

SWOT ANALYSIS

A SWOT analysis is conducted to help a business develop a strong business strategy. A company will need to anal-
yse the following:

Internal factors of the business

• Strengths (positive)
• Weaknesses (negative)

Factors outside of the business

• Opportunities (positive).
• Threats (negative).
Existing businesses
Existing business can use a SWOT analysis to respond to changes in the external environment. Business will be able
to act pro-actively through a well-developed strategy.

New businesses
A new business will use a SWOT analysis as part of their planning process to establish their organisation’s strategy.

A SWOT analysis is done in a brainstorming session with a group of people from different departments to get input
from a range of different people. A SWOT analysis table must be used to do the analysis.

STRENGTHS (positive factors, internal) WEAKNESSES (negative factors, Internal)

The strengths of the organisation - the internal positive features of The weaknesses of the organisation - the aspects of the business
the organisation. that reduce the competitive advantage and value the company
These factors are the tangible and intangible attributes that are offers.
within the control of the organisation. A business needs to enhance these areas to compete with
Includes: competitors.
1. The unique aspects of the business that offer a competitive Includes:
advantage over the competitors. • Areas that are lacking within the business - such as technical
2. The areas the company is good at. expertise or lack of knowledge or skills in certain areas.
3. The internal resources of the organisation including: • Areas that could be improved to accomplish the organisation’s
• Human resource skills, networks, qualifications or specialised goals.
knowledge. • Resources that are limited
• Physical resources such as specific technology or equipment,
capital, or existing customer base.
• Financial resources – capital or potential investors.

OPPORTUNITIES (positive factors, external) THREATS (negative factors, external)

Opportunities are external factors that are reasons for the business
to succeed.
Includes:
• Opportunities that exist in the market that benefit the
organisation
• Changes in market growth that create opportunities.
• Window of opportunity that require good timing.
Threats consist of factors external to the business that place the
business at risk. The business has no control over these factors but
can develop contingency plans to try and address them
Includes:
• Changes in economic conditions or government legislation that
affect sales.
• Changes or development of unfavourable trends affecting
revenues and profits.
• New products or technology has been introduced that make
the business’s products, equipment, or services obsolete.
• Changes in consumer behaviour.

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 HIGHER CERTIFICATE IN EXERCISE SCIENCE

ENTREPRENEURSHIP

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