Product Development, Operations, and

Financial Plan
The Business plan will not be
complete if the operations and
financial plan are not included.
These two play a crucial role in
ensuring that the business is
operationally feasible and financially
viable. Even if the marketing plan
looks promising, the business will
not be successful without a
detailed operations and financial
plan. These two will tell if the big About Us
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 4M’s
Fundamentals of product development and the operational
requirements of business

Manpower
Method
Machine
Materials
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 Fundamentals of
Product Development
Before commercializing a new
product or service, the
entrepreneur must focus first on
refining the product or service and
validate its market acceptability.

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Product Development- is a process developing, testing , and
commercializing a product or service with the ultimate
objective of solving the problem of the primary target
market .

The 4 sequential steps of Product Development

1. Developing a product or service description

About Us
2. Creating a prototype
3. Testing the prototype
4. Validating the market
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adipiscing elit. Etiam aliquet eu mi quis
lacinia. Ut fermentum a magna ut.

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Product or Service Description
• The Product or Service Description is simply describes how a product or
service works and how it benefits the customers . A clear product or
service description is more important because this will serve as the
blueprint of all the business operations. Therefore the entrepreneur has
to take the note of the following regarding the product or service
description.
• 1. It should directly address the primary target market in a personal
manner using everyday language.
• 2. It should highlight the features that will cater to the customer’s needs
or address the customer’s problem.
• 3. Realistic superlatives should be used for the product description.

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Creating a Prototype of the Product or Service
• A prototype is a preliminary model or sample of a new product or service
that is CREATED TO TEST A PRODUCT concept or service process.
• ADVANTAGES OF CREATING A PROTOTYPE
• 1. Enables the entrepreneur to engage in trial and error , provides room
for improvements , and refines the functionality of the product design or
service process.
• 2. Provides the entrepreneur a window to test the performance and
specifications of various materials and service processes.
• 3. It elicits respect key stakeholders and customers.

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Testing the Product Prototype
• All the efforts exerted in the creation of a prototype will be put to waste if the
prototype will not be tested. Testing the prototype is a vital process before
an actual product or service is launr.11ed to the market. Testing the
prototype will uncover the final loopholes that need to be fixed before
commercialization. It gives the entrepreneur a leeway to examine and
scrutinize the prototype and provide feedback as to what can be improve
before the launch. These improvements and changes must be completed first
before moving forward to the next step. For a prototype that has already
been refined, testing it for the last time after the changes have been made
will validate its readiness for commercialization. The following testing
methods are applied by the entrepreneur:

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• Focus group discussion - The participants will provide relevant insights about the new product or service. The
objective of the FGD is to identify errors, deficiencies, and issues that may impede the success of the product.
Participants also need to provide suggestions and practical solutions on how to improve these deficiencies.
• -.Legality and ethical test - Prior to launching, the entrepreneur must ensure that the product or service complies with
all relevant laws and regulations and has a necessary license or permit to operate a particular business. For example,
food products must be cleared first with the Bureau of Food and Drugs (BFAD) before they are offered to the public.
The entrepreneur must also make sure that the manufacturing/production of goods or offering of the service does not
generate ethical issues such as being threats to health, safety, and environment.
• Safety test - The entrepreneur must ensure that the product is safe to use, safe to be consumed (food andbeverages),
andsafetobeapplied (cosmetic products). Theproduct should not in any way harm the customer or put the customer in peculia r
situations. In services, the entrepreneur must ensure that the processes to be performed by the service provider must not be
detrimental to the safety and health of the customer.
• Product costing test-Theentrepreneur must examine everystage of the manufacturing process or every process of the service
blueprint to evaluate and finalize the costs involved. This is the time when the entrepreneur can match the expected costs versus his
or her budget. Modification in the manufacturing process or service blueprint can still be made at this point to align with the cost
objective of the entrepreneur.
• Component test - Each component of the product or service must be tested independently to identify component failures for goods
or service failures for services. Any failure identified must be redesigned and tested again until it becomes fully operational and
functional.
• Competitors' product/ service test - The entrepreneur must test a similar line of products or the competitors' product or service
itself to compare and get the best practices to be applied to the new product or service.

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Validation of
Market
Acceptability

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Validation of Market Acceptability
Validation of market acceptability is the process of finding out if the intended primary
target market will be buying the product or availing the service. Market acceptability is a
critical factor that the entrepreneur must validate before launching the product or
service, because this can strongly suggest if the business will be successful or not. It
either validates or disconfirms the perception of the entrepreneur about the suitability of
the chosen primary target market. It also tests whether the value proposition and unique
selling proposition are appropriate or there's a need to improve on them. This is also the
time to deeply understand the value that the product or service brings to the customer
and their prospective purchase behavior, because it helps the entrepreneur build a more
relevant and meaningful product or service. This process is the last step before the
product or service can be introduced to the market. The following objective questions
are more likely to be answered in the whole process of market acceptability validation:

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Validation of Market Acceptability
Q1. Will the primary target market like the product or service?
Q2. Will the primary target market buy the product or service when it is already in the
market?

These questions can easily be answered if the entrepreneur will perform the following
activities:
1. Use the most strategic marketing research tool (FGD, survey, observation,
interview, online survey, e-mail, or a combination of these research tools), wherein
the entrepreneur can get the most relevant answers in the cheapest way possible.
2. Prepare relevant open-ended questions that answer the objectives above. Do not go
around the bush and be straight to the point. Keep the questions to a minimum
because the target market might get bored and not finish the whole questionnaire.

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Validation of Market Acceptability
3. Find market experts who also target the same market but are not directly competing with the
entrepreneur. For instance, a market expert sells cars to a specific market segment and it so
happens that an entrepreneur sells real estate. The entrepreneur can leverage on the
knowledge of the market expert regarding that market segment becausethey almost have the
same demographic data requirements.The entrepreneur can use these data to improve the
product or service.
4. Collate all the data, analyze them, and prepare a summative report that answers the objective
questions that were mentioned earlier.

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The 4M’s Validation
The operations plan is an important part of the business plan because it
simply states the details in operating the business. Operations management,
on the other hand, controls the implementation of the business plan. A
strong operations plan should have the four operational aspects-called the
4Ms of operations: the methods, or the processes to be followed in
effectively manufacturing or delivering a product or service; the manpower,
or the right human resources who will handle certain business operations;
the machines, or the technology used in efficiently operating the business,
and the materials to be used in creating a product or performing a service,
which includes supply chain management.

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• The methods aspect represent the day-to-day operations
of a business. It describes how an entrepreneur will nm
the business from all facets of the business such as the
manufacturing of goods, service delivery process,
distribution of goods and services, logistics for delivery
of goods, and inventory management, to name a few.
The entrepreneur has to be very detailed in formulating
these processes and must ensure that the customer
experience will be pleasant and seamless. Internally, the
processes must also abide with industry standards and
policies where the business belongs (e.g., ISO
certification).
• The entrepreneur must also set standard operating
procedures (SOPs) both in manufacturing goods and
rendering of services.TheseSOPs must be monitored
tovalidate compliance. The entrepreneur must also
critically consider the effects of these processes to the
Methods
environment and to the public

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 •The entrepreneur who will engage in
producing his or her own products will
have to consider the basic guidelines and
principles in manufacturing. Manufacturing
is the process of translating raw materials
into finished goods that are acceptable to
the customer's standards. It consists of
three elements:
• Inputs -the materials or ingredients to be used in
creating the product
• Process - the transformation phase where inputs
are processed by manpower and machines to
come up with the final product
• Output - the final product of the process stage,
which is intended to be sold to target customers
• Here is an example for the production of palay
or rice Manufacturing of Goods

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 The entrepreneur must also consider the most efficient manufacturing site in which the manufacturing process
will take place. Depending on the entrepreneur's objective and financial capacity, he or she can opt to have any of
the following manufacturing sites:
• Home-based - Most start-ups do not have financial capacity to establish a manufacturing site. Thus, their only option
is to manufacture goods at home.This option is the cheapest and highly flexible. The entrepreneur can start with
products that are usually manageable to be processed at home such as food products and customized clothes.
• Commercial space for rent - This is advisable if the business really requires a commercial space for the processing of
goods and if the home option is not viable anymore. A commercial space gives the entrepreneu r a more specialized
and suited manufacturing site than manufacturing at home. However, this is more expensive than manufacturing athome
and requires long-term commitment because the entrepreneur will need to sign a lease agreement.
• Commercial space purchase - This option requires the biggest amount of capital expenditure, but it also provides the
entrepreneur substantial freedom and flexibility to design and run the commercial space. Compared with renting,
purchasing a commercial space is considered more of an investment than an expense.

• Once the entrepreneur has chosen a manufacturing site,he orsheshould consider location, where the delivery of raw
materials and finished goods will be conducted .The transportation routesfrom ortothe manufacturing
siteshouldbeefficient, sothat the delivery of raw materials and finished goods will be seamless. The location should also
be accessible to major types of transport vehicles. Last, the location must operate in an environment-friendly manner so
as not to contribute to various types of pollution in the environment.

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 The internal layout or the floor plan of the manufacturing site must also be critically done by the
entrepreneur because it affects the efficiency of the business operation. Each space should be maximized
to save on manufacturing costs (specifically overhead costs).An efficient floor plan illustrates how raw
materials and finished goods can efficiently be transferred, processed, and released from one processing
unit to another.There are two options for the floor plan: (1) the product-based layout, where the facilities
are prearranged according to the flow of the manufacturing operations, and (2) the process-based layout,
where the facilities are grouped according to their function.
Last, the entrepreneur must prepare a manufacturing process flow, which serves as a step-by-step
guide of the employees and the manufacturing equipment. The objective of the process flow is to ensure
that the right inputs are properly used in production, that the process is performed according to the set
standards, and that acceptable outputs are produced. Not having a process flow will result in
inconsistencies in the process, high expenses, and disagreements among employees.
The entrepreneur's ultimate objective for all the operational processes is to ensure that maximum
efficiency are met-from the requisition of materials to processing them into finished goods up to the
distribution to the customers.
.

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 Most established products or services in the market are owned by top corporations. The great thing about being a
manufacturer is that entrepreneurs can manage the entire supply chain. Manufacturers take charge of acquiring
materials, production and delivery schedules, product quality, and inventory or safety management. Manufacturers
also handle product delivery, marketing, and selling . Because of this, manufacturers often seek the help of distributors
or agents for the distribution of goods.
Distributors are entrepreneurs who often buy products or services from the manufacturers and sell them at a
markup price to either wholesalers or retailers. Distributors buy the products in bulk for a discounted price. The
bought products or services are now owned by the distributors, so any damage, spoilage, or other liabilities to the
product will be their sole responsibility. Distributors become wholesalers when they sell the product to another
distributor.
Agents, on the other hand, don't own the products or services because they do not buy these from the manufacturer.
Instead, they negotiate with buyers as to how much or how many are to be sold, so the manufacturer will be ableto
deliver the goods directly to the buyer. Agents get the commission for every product sold. Some agents do
consignment, wherein agents get the products in advance to demonstrate them live to the customers. If unsold, agents
just return the merchandise to the manufacturers. They are not held liable for any damages or losses incurred.
Manufacturers turn to distributors when they have limited resources or they don't have people with expertise in
selling the product. The distributor or agent can assist the entrepreneur/manufacturer in the following:(1) sharing
industry knowledge, behavior, and activities of the primary target market, (2) pertinent rules and regulations imposed
by the government, (3) best practices in marketing and selling the product, (4) best practices in operating the
business, and (5) their respective sticky relationship with business associates such as suppliers, financial institutions,
or retailers, to name a few.
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• Payment Process
The entrepreneur must also establish a seamless payment process. Generally, there are no problems if the customers
pay in cash. But there are instances when they do not want to pay in cash and are usually attracted by flexible and
customer-friendly payment terms such as credit cards, installment plans, or a simple accounts payable or pautang .The
entrepreneur must ensure that credit payments are seamless and that the customers are aware of the terms and
conditions of the credit.
Some entrepreneurs put point-of-sale (POS) machines in their shops to accommodate those who will pay through
their credit or debit cards. For traditional ones, they put the credit purchase in a ledger and indicate the due dates.
Once the due date arrives, the entrepreneur has to collect payments from the customers. The objective for all
entrepreneurs is to ensure efficient collection of accounts receivables and avoid bad debts. He or she must conduct due
diligence first before allowing a customer to purchase via credit.

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Manpower
At the beginning of the entrepreneur's business, he or she usually maximizes himself or herself, his or her partner,
or his or her family members to handle all the aspects of the business. But as it grows, the entrepreneur will need the
expertise of qualified employees that can handle operational functions, so that he or she will be free from daily
activities and can thus focus on the strategic and management functions of the business. The entrepreneur needs to
plot a table of organization based on his business objectives. Each position has to be relevant. To. verify if a position
is really necessary, the entrepreneur must devise a detailed job description and job qualifications of the future
employee. This will be his or her basis in deciding whether to hire an employee or not. The entrepreneur must be very
keen in selecting and hiring an employee. He or she must ensure that due diligence is performed to check the
background of the applicant. Manpower is one of the highest costs of operating a business but is also the most
instrumental to its success. Having the right people encompasses a myriad of advantages.
Job Description
Job description enumerates the duties and responsibilities of the potential employee, including the scope,
limitations, and terms and conditions of employment.The heading of a job description is the job title, which is the
summary of what the employee will do. The entrepreneur should devise a respectable and decent job title because the
title boosts the self­confidence of the employee.
After the job title is the compensation and benefit range, which details the potential salary and benefits that the
employee will get. Next are the duties, which clearly describe the job that the employee will assume with allowance
for flexibility. Duties are usually high­ level descriptions only. Responsibilities and accountabilities follow next,
which must be communicated well to the employee so that he or she knows what to expect with the job.
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• Work schedules, including work hours, must alsobe clearly indicated inthejobdescription. The specific days and working
hours must be written so that the employee will be able to align the work schedule with his or her personal schedule.
Work schedules are highly driven by business requirements (e.g., a security agency business will need to indicate the
work schedules of the security guards it will hire).

Employee Qualification
In hiring suitable employees for the job needed, entrepreneurs will have to look for the following criteria:
• 1. Educational Background - This gives the entrcpreneul' an idea on the degree of the candidate's knowledge of basic th
ings. However, it is not the sole factor in selecting a candidate.
• 2. Work experience -Thiswill tell him orher what to expect from the applicant and what he or she can potentially
contribute to the business based on his or her past positions and experiences.This will also establish the training needs of
the candidate.
3. Specific skill or knowledge - This one is important especially on technical jobs that require high proficiency. Itwill be easy for
entrepreneurs to place highly skilled people into specialized jobs because they can help right away. This is also less expensive
because entrepreneurs don't have to train them thoroughly to acquire such skills. Examples of potential candidates that have specific
skills or knowledge are engineers, architects, scientists, accountants, and information technology specialists.
4. Work attitude - This deals with the worker's integrity and how he or she deals with his or her coworkers, bosses, and customers.
Entrepreneurs also need people with relationship skills because communication is important in applying their expertise. A good work
attitude involvesbeing punctual, havinggood leadership andcommunication skills, being a team player, making ethical decisions,
obeying superiors, and being passionate and dedicated to the company. Entrepreneurs, however, wilJ decide what they are looking
forain
Add selecting the best candidate.
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 Preparatory Selection of Job Applicants
Once the job description and employee qualifications are finalized by the entreprenur, he or she now preselects a
set of candidates for the positions required. When the business is already sizeable, entrepreneurs usually establish a
human resource (HR) department that will handle the selection and recruitment of candidates.The entrepreneur can
initially choose from his or her personal list of trustwm1hy people whom he or she thinks can contribute to the
business venture. Ifthis list does not exist, he or she can turn to employment agencies or manpower agencies that can
do the job.
• Headhunters help companies find a set of people suited for their requirements. They usually charge a finder's fee once the
entrepreneur has decided to accept an applicant. Manpower agencies, on the other hand, recruit temporary employees
under a short contract. The entrepreneur can also opt to advertise job vacancies via print such as genera] circulation
newspapers or other publications if the intention is to promptly get a candidate from the public.Ifthe intention is to hire
candidates with specific knowledge or skills,the entrepreneur must tum to magazines or publications of the specific
industry where the prospect belongs (e.g.,The magazine BluPrint if the entrepreneur wants to hire architects).
• One viable option isto consider recommendations and referrals from friends,relatives,or business partners with an
untainted reputation. Recommendations from those with doubtful characters should of course not be considered by the
entrepreneur. Another move is to look for his or her business networks, or the people whom the entrepreneur has worked
with in the past. This is a better way of preselecting the employee than the traditional way (interviews) because the
entrepreneur already knows the work ethics and qualifications of the potential employee.
• Last, one of the revolutionary waysof preselecting potential employees is through digital media. With the power of the
Internet, an entrepreneur can easily postjobvacanciesthrough his or her Web site, social media accounts, e-mails, online
affiliates, search engines, podcasts, orbiogs. He or she can alsochoose to advertise via mobile through either short
messageservice (SMS) or mobile application, or simply mobile apps.
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