READING MATERIALS IN ENTREPRENEURSHIP

ENTREPRENEURSHIP comes from a french word `Entrependre’ and the German word
`Unternehmen’ both meaning individuals who are `undertakers’ i.e. those who took the
risk of a new enterprise.

ENTREPRENEURSHIP is a dynamic activity which helps the entrepreneur to bring

changes in the process of production, innovation in production, new usage of materials,
creator of market etc. It is a mental attitude to foresee risk and uncertainty and do
something new in an effective manner to achieve certain goals.

An ENTREPRENEUR is an economic change agent with knowledge, skills, initiative, drive

and spirit of innovation to achieve goals. He identifies and seizes opportunity for economic
benefits. He is a risk bearer, an organizer and an innovator.

ACCORDING TO ECONOMISTS → An entrepreneur is the one who brings resources,

labour, material and other assets into combination to produce a socially viable product,
and also one who introduces changes, innovation and new order.

ACCORDING TO MANAGEMENT → A person with a vision and action plan to achieve

it is an entrepreneur.

FUNCTIONS OF AN ENTREPRENEUR
 Identification of opportunities
 Introduction of a new product
 Gathering resources or Introducing new methods of production
 Developing new markets

CHARACTERISTICS OF AN ENTREPRENEUR
 Vision – He is able to visualize market demand, socio-economic environment and
the future of business venture.
 Knowledge – He has sound conceptual knowledge about all the technicalities of his
business.
 Desire to succeed – He has multiple goals and a seeks opportunities to be productive.
 Independence – He is independent in work and decision making
 Optimism – He knows how to exploit opportunities.
 Value addition – He does not follow the conventional rule of thumb, they have a
desire to create, innovate and add value.
 Initiative – He takes the initiative to make an action plan from limited resources.
 Goal setting – He sets realistic goals.
 Problem solver – He is creative in problem solving.
 Good human relations – He is a good leader, motivator and team builder.
 Communication skills – He has the ability to persuade others.

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TYPES OF ENTREPRENEUR

(I) ACCORDING TO CLARENCE BANHOF

1. AGGRESSIVE/INNOVATIVE ENTREPRENEUR – The one who uses various
combinations of information and factors of production to assemble and engineer
new and innovative products.
2. IMMITATIVE/ADOPTIVE ENTREPRENEUR – The one who simply adopts a
successful innovation introduced by other entrepreneurs.
3. FABIAN ENTREPRENEUR – The one who is timid and cautious in making bold
decisions. Such an entrepreneur adopts innovations in his business only when he
fears that not innovating may damage his business.
4. DRONE ENTREPRENEUR – A drone entrepreneur is one who refuses to adopt
new innovations even at the cost of reduced returns.

(II) ACCORDING TO AUTHUR H. COLE

1. EMPIRICAL ENTREPRENEUR – An entrepreneur who does not innovate and
follows the rule of thumb.
2. RATIONAL ENTREPRENEUR – An rational entrepreneur is one who keeps
himself updated with his business, the market and economic conditions, and
introduces revolutionary ideas.
3. COGNITIVE ENTREPRENEUR – An entrepreneur that seeks advice and services
of experts to make changes which are revolutionary and reflect a complete shift
from its existing structure.

(III) ACCORDING TO OWNERSHIP

1. PUBLIC ENTREPRENEURSHIP – These are individuals who partner with the
government to create enterprises which serve the public in innovative ways.
2. PRIVATE ENTREPRENEURSHIP – These entrepreneurs are profit oriented and
do not enter market which have low monetary rewards associated with it.

(IV) ACCORDING TO SCALE OF ENTERPRISE

1. LARGE SCALE ENTREPRENEUR – Large scale entrepreneurs are usually found
in developed countries. These entrepreneurs introduce revolutionary ideas and are
able to sustain high profits and develop new technologies as they possess the
financial capacity and necessary resources to do so.
2. SMALL SCALE ENTREPRENEUR – Small scale entrepreneurs do not have the
necessary funds and technology to initiate large scale production and introduce
revolutionary ideas.

NATURE OF ENTREPRENEURSHIP

 CREATION OF AN ENTERPRISE – It involves creation and operation of an

enterprise.
 ORGANIZING FUNCTION – It brings together various factors of production for
economic use.

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  INNOVATION – It is an automatic, spontaneous and creative response to changes
in the environment.
 RISK BEARING CAPACITY – It assumes uncertainty of future.
 MANAGERIAL AND LEADERSHIP FUNCTION – It is responsible for controlling
and coordinating the human resource and giving direction to an enterprise.
 GAP FILLING – It fills the gap between human needs and available products and
services.

PROCESS OF ENTREPRENEURSHIP

(A) IDENTIFY AN OPPORTUNITY – An Entrepreneur senses opportunities and

visualizes a market since they are creative and open to new ideas and seek challenges. They
look for needs, wants, problems and challenges that are not met or dealt effectively. Since
their ideas are innovative they gain first movers advantage which provides product
identification and higher credibility in the market.

(B) ESTABLISHING A VISION – It involves generation of ideas using past experience and
creativity to develop new and innovative ways to solve a problem, or satisfy a need. Out of
many ideas the most feasible and profitable are chosen and narrowed to one best idea. He
evaluates different opportunities and the business environment to assess the (i) Real and
Perceived value of the product/service (ii) Risks and rewards associated with the project
(iii) and differential advantage in its competitive environment.

(C) PERSUADE OTHERS – He forms a foundation team which consists of a group of

individuals who work together to turn his vision into reality. They may be partners,
financiers, family members etc.

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(D) GATHERING RESOURCES – It involves using a business plan to attract investors,
venture capitalists, partners, financial institutions, promoters etc. The main task is to
research and identify resources that are needed to turn the idea into a viable venture.

RESOURCES CAN BE CATEGORIZED INTO –

1. FINANCIAL RESOURCES – Personal savings, retained capital, banks, government
institutions, family, friends, partnerships, venture capital, public issue.
2. OPERATING RESOURCES – They can be Tangible or Intangible.
 Tangible – (a) machines (b) raw materials (c) land and building (d) office
equipments (An entrepreneur has to make a decision to buy, rent or hire them).
 Intangible resources – (a) company’s image (b) operating procedures (c)
transportation (d) management
3. HUMAN – Temporary/permanent employees, Amount of manpower needed,
Recruitment, Selection and Training of staff, Compensation, Organization culture.
4. INFORMATION – An efficient management information system is needed in order
to have timely info about customers, markets, competitors and external
environment. All the data is networked on real time basis to speed up actions based
on information.

(E) CREATE NEW VENTURE – When all the resources have been arranged, the next step
is Creation and establishment of a new venture and running the business venture
successfully. It requires a lot of enthusiasm and persuasion to gather optimum resources
and it requires a lot of perseverance and passion to believe in self.

(F) CHANGE/ADAPT WITH TIME – It is necessary to monitor and upgrade the

organization with changing market conditions. It requires availability of funds to make
changes and the adaptability of human resource towards changed environment.

FUNCTIONS OF ENTREPRENEURSHIP
(A) PRIMARY FUNCTIONS –
 Planning
 Organizing
 Decision Making
 Managing
 Innovating
 Risk bearing

(B) SECONDARY FUNCTIONS –

 Diversification of production
 Expansion of the enterprise
 Maintaining cordial employer and employee relations
 Tackling Labour problem
 Coordinating and communicating with third parties

(C) OTHER FUNCTIONS –

 Managing of scarce resources

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  Dealing with public bureaucracy
 Identifying parallel opportunities
 Building Strong customer relations

BARRIERS TO ENTREPRENEURSHIP

(I) ENVIRONMENTAL BARRIERS

(A) RAW MATERIAL – Non-availability of raw materials required for production during
peak seasons. It leads to increase in price of raw materials due to competition.

(B) LABOUR –
 Lack of skilled labour
 Lack of committed and loyal employee
 Quality and Quantity of labour

(C) MACHINERY – Machines are necessary but they are also costly and due to rapid
change in technology they become obsolete and require replacement which requires cash in
hand. It becomes very difficult for small business organization to keep updating its
production process.

(D) LAND AND BUILDING – Acquisition of land and construction of building at a prime
location require heavy expenditure. If the land is taken on rent, it becomes a fixed cost and
a constant concern for the entrepreneur.

(E) INFRASTRUCTURE SUPPORT – Adequacy of power, proper roads, water and

drainage facilities etc. There is less support from development authorities due to red-
tapism and corruption.

(II) FINANCIAL BARRIER → Availability of funds is a major concern. A delay in source

of finance results in delay of starting or running business.

(III) PERSONAL BARRIER → They are caused by emotional blocks of an individual.

They cause a mental obstruction. They are :-
(A) Lack Of Confidence – They think they will never find a successful business idea
and would be unable to attract necessary resources. Therefore, they dismiss the
thought of being self-employed.
B) Lack Of Dependability On Others – They aim to gain their additional expertise
through trail and error and experience, rather than seeking further development or
personal assistance from others.
(C) Lack Of Motivation – Lose interest and motivation when ideas don’t work.
(D) Lack Of Patience – When desire to achieve success in first attempt or to become
rich instantly are confronted with business challenges/problems they lose interest.
They give up at during initial losses.
(E) Inability To Dream – Sometimes they are short of vision or satisfied with what
they have achieved and lose interest in further expansion of business.

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 (F) Sense Of Pride/Embarrassment – they are too proud or too embarrassed to take
help.

(IV) SOCIETAL BARRIER

 Socio-cultural norms and values
 Degree of approval or disapproval of entrepreneurial behaviour
 Financial stability and family background
 Caste and religious affiliation

(V) POLITICAL BARRIER

 Government incentives and concessions
 Facilitating socio-economic setting
 Interest in economic development of society

SCOPE OF ENTREPRENEURSHIP

Individuals are opting for entrepreneurship as a career due to reasons such as –

 Desire of control over one’s future
 More profits
 Lack of employment opportunity
 Government measures to promote entrepreneurship

Entrepreneurship provides employment and source of earning to people. It helps in

reducing the monopoly of rich businessman and achieving a balanced regional
development and growth in economy. Government is conducting development programmes
to identify entrepreneurial potential and assistance from financial and non-financial
institutions are being provided to entrepreneur. Entrepreneurship training institutes have
been established and financial and operational support is being provided to young
entrepreneurs.

DISTINGUISH BETWEEN THE TERMS ENTREPRENEUR AND

ENTREPRENEURSHIP.
Though both the terms entrepreneur and entrepreneurship are almost similar they possess
several differentiating terms with them. The differences between the entrepreneurs and
entrepreneurship are as follows:-

ENTREPRENEUR ENTREPRENEURSHIP

An entrepreneur one who undertakes and Entrepreneurship is the practice of starting

operates a new enterprise and assumes new organizations, particularly new
some accountability for the inherent businesses generally in responses to
risks. identified opportunities.

Entrepreneur is often synonymous with Entrepreneurship ranges in scale from solo

founder. projects to major undertakings creating
many job opportunities.

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The person who starts and operates a The process in which an entrepreneur starts
business enterprise is an entrepreneur. and operates his business enterprise is
entrepreneurship.

The entrepreneur is a coordinator as he Entrepreneurship is the coordination

coordinates all the three elements of maintained by an entrepreneur.
production i.e. land, labor and capital.

The person who innovates something new The innovation of something new or the
is an entrepreneur. process of innovation is entrepreneurship.

He who leads an enterprise towards its The way in which an entrepreneur leads his
vision thorough leadership, motivation is manpower, motivates them for the
an entrepreneur. achievement of the firms goal is
entrepreneurship.

He who bears risk of the firm for the sake The risk bearing practice that is done by an
of making a reasonable profit is an entrepreneur is entrepreneurship.
entrepreneur.

From the above table we can easily distinguish between these two terms entrepreneur and
entrepreneurship as they are far different from each other.

DEVELOPMENT OF BUSINESS PLAN

BUSINESS PLAN is an integral part of the management of a financial institution. It should

build the institution’s aims and objectives. It is a documented conclusion of how the
business will create its resources to achieve its goals and how the institution will evaluate
progress.

Business plan is an inclusive plan, which is the outcome of comprehensive planning by the
institution’s managers and management. It should practically predict market demand,
customer base, competition, ecological and economic conditions. The plan must mirror
sound banking standards and illustrate practical assessment of risk with respect to
economic and competitive conditions in the market to be served.

SOURCES OF PRODUCT

The motto of sourcing a product might seem exciting to a new entrepreneur, but it's really
very simple and easy. It simply means searching for products at an average price that can
easily resell at a retail price.

While establishing a new enterprise like some e-commerce site or a physical retail business,
an entrepreneur needs a stable, flexible and reliable source of inventory. Otherwise, the
entrepreneur ends up disappointing the customers through absence of product variety,
back orders and many more.

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PRE-FEASIBILITY STUDY

A feasibility study provisions as a filter, cleaning and screening of ideas with absence of
potential for building a successful entrepreneurship. An entrepreneur promises the
required resources for constructing a business plan. On the other hand, business planning
is a “planning tool or machinery used for converting an idea into reality.

It constructs on laying a base of the feasibility study but ensures a more comprehensive
examination of the business. It is very important to motivate feasibility study whenever
necessary by entrepreneurs as they target the workability and profitability of a business
venture. It regulates if the business plan is viable or not, so that the client’s money, time,
effort, and resources for an entrepreneurship could be saved.

CRITERIA FOR SELECTION OF PRODUCT

Mostly, it is preferred to select a bunch of criteria depending on which selection of the
product could depend on. Ranks or costs or weights are allocated to each criteria to achieve
an objective examination.

There are three basic stages or steps in selection of products or services. These are −

1. Idea Generation − Ideas or investment opening come from different sources, like
business or economical newspapers, institutes for researches, consultation firms,
natural resources, universities, competitors and many more. Idea generation begins
from a simple examination of the business’s strengths and weakness. Ideas are also
spawned through brainstorming, desk research and different types of management
consensus procedures.

2. Evaluation − Screening or filtering of the product ideas is the initial stage of

evaluation. They mark the potential value of a product, time, money and tools
required, fitting of potential product into the business’s long range sales plan and
availability of skilled people to monitor its marketability. Every product or asset
that is identified should be modestly examined. A pre-feasibility study is expected at
this stage in order to get a clear picture for different associated aspects like cost and
benefit of the product market, technical and financial aspect, etc.

3. Choice − A product that is commercially viable, technically feasible and

economically desirable is chosen and relevant machineries are set in motion.

OWNERSHIP
Owning a business is the first decision to be made in constructing a business. The main
reasons to own a business are −
 Being the sole trader
 Being a partner
 Being a shareholder or stakeholder

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Sole ownership means all decisions are to be made by self and profits can be owned.
However, the sole trader needs to monitor lots of responsibilities and duties and needs to
work extremely hard.

Establishing a partnership makes it possible to distribute the workload, but profits have to
be shared and there may be conflicts between partners. Establishing a private company,
makes it possible to increase extra capital for the business by selling shares. In contrast,
building up a company needs time and paper work. Shareholders take a portion of the
profits. When the business is expanded across the nation, it is declared as a public company
and its shares are traded on the stock exchange.

CAPITAL
In terms of entrepreneurship, capital can be described as a region's funding with factors
conducive to the construction of new entrepreneurship and it creates a positive impact on
the region's economic output.

Higher level of entrepreneurship capital regions express higher levels of output and
productivity, in contrast to those lacking entrepreneurship capital that tend to produce
lower levels of output and productivity. The result of entrepreneurship capital is powerful
than that of knowledge capital.

Entrepreneurs are expected to hold three types of capital to acquire success in starting a
new venture −

SOCIAL CAPITAL − It is a quality acquired from the structure of an individual’s network

relationships. It is not an intrinsic feature of an individual. The network is owned by the
members of the network and is not solely the property of the individual. Social capital
ensures the relationships by which an entrepreneur receives opportunities to utilize human
and financial capital.

HUMAN CAPITAL − It indicates attributes possessed by individuals like personality,

education, intelligence, and job experience. Creating value by the acquisition of human
capital, specifically building a management team tends to be the biggest challenge for seed
stage founders and investors of new ventures. A start-up with an experienced management
team will receive a higher valuation by investors.

FINANCIAL CAPITAL − It is any economic resource scaled with respect to money used
by entrepreneurs and businesses to purchase what they need to make their products, or to
facilitate their services to the sector of the economy upon which their operation is based,
like retail, corporate, investment banking, etc.

GROWTH STRATEGIES IN BUSINESS

Small companies or businesses always look for ways to grow their business and increase
sales and profits. There are probable techniques that companies must use for executing a
growth strategy. The technique used by a company to expand business is highly dependent
upon its financial situation, the competition and even government regulations and policies.

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Some common growth strategies marked in small scale business are −
 Market Penetration
 Market Expansion
 Product Expansion
 Diversification
 Acquisition

MARKET PENETRATION
One of the growth strategies reported in business is market penetration. A small company
uses a market penetration strategy when it agrees to market existing products within the
same market. Increasing market share is the only way of growing through existing
products and markets.

Market share is the share of unit and currency sales a company acquires within a certain
market when compared to all other competitors. The best way to increase the market share
is by lowering the prices of the commodities.

MARKET EXPANSION
Market expansion is another remarkable growth strategy, which is often referred to as
market development that involves selling current products in a new market. There are
different reasons explaining why a company needs to consider a market expansion strategy.

Competition may be such that there is no scope for growth within the current market. If an
entrepreneur is unable to search for new markets, then it is not possible to increase sales or
profits. A small company considers using market expansion strategy if it successfully finds
use of its product in a new market.

PRODUCT EXPANSION
A small scale company can expand its line of products or add new features to increase sales
and profits. When small companies use a product expansion technique, it is also referred as
product development.

The selling continues within the current market. A product expansion growth strategy
basically works well when there is a change in technology. Companies may also be
compelled to add new products as older ones become outdated.

DIVERSIFICATION
Growth strategies in business involve diversification. By diversification, we mean a
company selling new products in new markets. This type of strategy is highly prone to risk
and losses.

A small company acknowledges the plan carefully while utilizing a diversification growth
strategy. Marketing research is important to identify if consumers in the new market will
potentially like as well as buy the new products.

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ACQUISITION
Growth strategies or method to expand business also engages acquisition of other
businesses. In acquisition, a company purchases another company to expand its functions.
A small company uses this type of strategy to bolster its product line and enter new
markets.

An acquisition growth strategy is very risky, but not as risky as a diversification strategy,
as in this case the products and market are already authorized. A company must have
complete knowledge of exactly what it wants to achieve when using an acquisition strategy,
mainly due to the significant investment required to execute it.

BUSINESS PLAN
Entrepreneurs who plan to enter any business must have a business plan on hands to guide
them throughout the process. Different business plans are prepared for different purposes.
 There are business plans written prior to setting up an enterprise, which are similar
to a prefeasibility study and a feasibility study.
 There are business plans that are written during the first few years of the enterprise
in order to guide the entrepreneur on which strategies would be most beneficial for
the enterprise to take.
 There are business plans that are focused on bringing the enterprise to a higher
level of growth, a period where the enterprise has already reached its peak and
would want to enter into another endeavor by recreating and re-establishing itself.

A business plan serves many masters. First, to serves the entrepreneur who must set a
navigational course. Second, it serves investors and cautious financiers. And third, it serves
the managers and staff of the organization so that they will know the strategies and
programs of the enterprise.

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BUSINESS CONCEPT AND THE BUSINESS MODEL
A business concept contains the essence of the enterprise in a concise but powerful manner.
It stresses the value of the product offering to the target customers who would mostly likely
to buy it. The business concept must then be translated into business model.

A business model is a formula on how the enterprise exactly plans to make money out of it
of the business.

THE BUSINESS GOALS: VISION, MISSION, OBJECTIVES, AND PERFORMANCE

TARGETS
The BUSINESS GOALS show the future and long-term prospects of the enterprise. It is
composed of the vision, mission, objectives, key result areas, and performance indicators of
the enterprise.
OBJECTIVES must be more specific than the vision and mission statements. They should
be measurable, achievable, and time-bound The objectives should be translated into key
results areas or KRA’s. KRA are the qualitative manifestations that the objectives are
being achieved. In turn, the key result areas must be rendered into quantified performance
measurements, otherwise called performance indicators. These performance indicators or
PI’s serve as the aspirational scorecard of the enterprise managers and the motivational
results of the investors.

THE EXECUTIVE SUMMARY

The executive summary contains everything that is relevant and important to the business
audience.
 A synthesis of the entire plan containing the major argumentations of the business
proponent on why the business will work and succeed

 Should provide the business plan audience all the arguments on why they should
participate in the business venture

 The executive summary should then introduce and highlight the good qualities of:
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 the major service providers.

 Should likewise describe the products/services of the enterprise, their features and
attributes, and why they are the right ones to deliver to the customers.

 Should then proceed to discuss and justify the Enterprise Strategy and Enterprise
Delivery System
ES (Enterprise Strategy) - Builds and develops the game plan for attaining
competitiveness.
EDS (Enterprise Delivery Systems) - This is the entire process of converting
input (resources) into output and these output into outcomes.

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  Should also contain a section on the environmental and regulatory compliance of
the proposed business, as well as the more proactive programs to become a more
responsible corporate citizen

 Should present the capital structure of the proposed business and show how this
structure respond to the investment programs and financial forecast of the
enterprise.

However, the Executive Summary can only be written last in order to capture the findings
and insights of the other parts, but for presentation purposes, it is placed in the first part of
the business plan.

THE BUSINESS PROPONENTS

The third section of the business plan contains information about the business proponents
or stakeholders. There are four types of stakeholders:
1. Resource mobilizers and financial backers
2. Technology providers and applicators
3. Governance and top management
4. Operating and support team

THE TARGET CUSTOMERS AND THE MAIN VALUE PROPOSITION

The fourth section of the business plan is the Target customers and the Main Value
Proposition
 The business proponents must be very precise about the target audience or target
customers.
 Target Customers must be of sufficient paying capacity, and have sufficient interest
to purchase the products being offered by the enterprise.
 The Main Value Proposition is the unique selling proposition of the enterprise.

MARKET DEMAND AND SUPPLY, INDUSTRY DYNAMICS, AND MACRO

ENVIRONMENTAL FACTORS

 The business proponent should examine all the opportunities in this bigger market
in order to determine what exactly influences this bigger market.

 The business plan should estimate the total market supply and demand for the
product offerings of the enterprise. The business plan should then determine the
major critical factors that influence this market demand and supply.

 The business plan discuss the relevant industry dynamics:

1. Who are the competing enterprises in the industry and what are their
comparative advantages and disadvantages? What business models and
strategies are they employing?

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 2. Who are the suppliers in the industry and what are their capabilities and
bargaining power?
3. What are the channels of distribution being used by the industry? How
effective are these channels?

 Both the industry players and the market are affected by the macro environment,
which includes the social, political, economic, ecological, and technological (SPEET)
forces the business plan should discuss the major trends and changing the partners
in the macro-environment, which would have significant impacts on the relevant
industry and the behaviour of consumers.

1. SOCIAL ENVIRONMENT includes the demographics and cultural

dimensions that govern the relevant entrepreneurial behavior. The structure,
social status, and dynamics of the population at large, as well as the people’s
beliefs, tastes, mores, customs, and traditions dictate the major parameters of
market behavior.
2. POLITICAL ENVIRONMENT defines the governance system of the country
or the local area of business. It includes all the laws, rules, and regulations on
allowable and disallowable business practices.
3. ECONOMIC ENVIRONMENT is mainly driven by supply and demand
forces. It is the same factor that drives the interest and foreign exchange
rates to fluctuate with the movement of the market forces.
4. ECOLOGICAL ENVIRONMENT includes all natural resources and the
ecosystem that defines the habitat of man, animals, plants, and minerals.
5. TECHNOLOGICAL ENVIRONMENT makes or breaks competing
participants in any industry. New scientific and technological discoveries
often lead to the launch and commercialization of new products with
superior attributes or to rendering the old ones obsolete.

PRODUCT/SERVICE OFFERING: DESCRIPTION, EVOLUTION, AND

JUSTIFICATION

The products/services must be described by highlighting the features and attributes that
would most appeal to the target customers. The business plan should also prove that the
products/ services would be accepted and carried by the distribution channels.

ENTERPRISE STRATEGY AND ENTERPRISE DELIVERY SYSTEM

 The business plan should expound on the Enterprise Strategy by mapping the
competitive landscape and by situating the enterprise and its competitors as their
strategies and chosen positioning.
 The business plan should then show how the Enterprise Delivery System would
enable the business to implement the Enterprise Strategy.

FINANCIAL FORECASTS: EXPECTED RETURNS, RISKS, AND CONTINGENCIES

From the financial forecasts, the business plan should then calculate the expected returns
from the business. The important return calculations are the following (1) expected return

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on sales; (2) expected return on assets or investments; (3) expected return on stockholders’
equity.

ENVIRONMENTAL AND REGULATORY COMPLIANCE

The business plan must articulate the laws, rules, and regulations governing the business,
and the industry that the enterprise is in. It should ascertain that all the necessary permits,
licenses, and authority to use proprietary intellectual capital had either been secured or
would definitely be secured.

CAPITAL STRUCTURE AND FINANCIAL OFFERING: RETURNS AND BENEFITS

TO INVESTORS, FINANCIERS AND PARTNERS
The tenth section of the business plan contains the capital structure and financial offerings
of the enterprise including some discussions on who are the investors, the financiers and
the partners of the enterprise. Finally, the business plan must appeal to its target audience.
It must highlight for them the main features of the business plan that they are looking for.

OPPORTUNITY SEEKING, SCREENING, AND SEIZING

OPPORTUNITY SEEKING
Entrepreneurs are innovative opportunity seekers. They have an endless curiosity to
discover new or different ideas that will work in the marketplace. This curious streak is
what separates them from the ordinary businessman whose obsession is, simply, to make a
profit from producing, buying and selling goods. A lot of wannabe businessmen set up shop
to repeat what everybody else is doing but this is not really entrepreneurship. It is just
doing “business as usual.”

ENTREPRENEURIAL MIND FRAME, HEART FLAME, AND GUT GAME

Essential to an entrpreneur’s opportunity seeking are:

1. The ENTREPRENEURIAL MIND FRAME allows the entrepreneur to see things in
a very positive and optimistic light in the midst of crisis or difficult situations.

2. The ENTREPRENEURIAL HEART FLAME, also known as surging passion, refers

to the entrepreneur’s fulfillment in the act and process of discovery.

3. The ENTREPRENEURIAL GUT GAME, also known as intuition, refers to the

ability of the entrepreneur to sense without using the five senses.

SOURCES OF OPPORTUNITIES

MACRO ENVIRONMENTAL SOURCES OF OPPORTUNITIES

1. Socio-cultural Environment
2. Political Environment
3. Economic Environment
4. Ecological Environment
5. Technological Environment

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INDUSTRY SOURCES OF OPPORTUNITIES

Participants in and industry include:

1. Rivals or competitors in a particular type of business. True rivals or competitors are
those competing for the same or similar markets.
2. Suppliers of input to rivals as well as suppliers of machinery and equipment,
suppliers of manpower and expertise, and supplies of merchandise.
3. Consumer market segments being served by rivals or competitors.
4. Substitute products or services, which customers shift or turn to.
5. All other support and enabling industries.

MARKET SOURCES OF OPPORTUNITIES

MICROMARKET refers to the specific target market segment of a particular enterprise.

These are the target customers that represent the immediate customers of an enterprise,
meaning those who are currently buying the goods or services offered by the enterprise and
its direct competitors. It likewise pertains to a clearly defined location or specific customer
group that an enterprise wishes to serve.

CONSUMER PREFERENCES, PIQUES, AND PERCEPTIONS

Consumer preferences refer to the tastes of particular groups of people. In contrast,

consumer dislikes refer to the things that irritate customers. Either way, the entrepreneur
can explore opportunities brought about by consumer preferences or dislikes.
There are times when the product is not changed by the enterprise but what changes is the
way consumers perceive the product.

OTHER SOURCES

Another potential source of opportunity is the entrepreneur’s own set of skills or expertise,
or hobby. New knowledge as well as new technology can be the source of highly innovative
opportunities.
1. Customer preferences change over time.
2. People’s tastes in clothes, music, shoes, entertainment, dance, sports, hobbies, and
even careers have evolved over the years.
3. What piques customers is a great source of opportunities.
4. Before the customer is won over, there is first a battle for the mind. Next, there is a
battle for the heart. Finally, there is a battle for the wallet.
5. The longer the customer wants to use the product, the greater the chances of
creating lasting loyalty.
6. Opportunities abound in shaping consumer perceptions or occupying spaces in their
minds or places in their hearts that have not yet been filled.
7. New inventions, new systems and work processes, new insights about the human
psyche, new applications for old knowledge, new revelations about how the physical
world works, new interpretations, new combinations based on the convergence of

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 previous technologies, new outlooks about how life should be led, and a host of other
new things are tremendous sources of opportunities.
8. Determining personal preferences and competencies lay the foundation for a new
business venture.
9. Unexpected occurrences in both the external and internal environment of the
enterprise indicate that significant changes are happening and opportunities are
sprouting.

OPPORTUNITY SCREENING
After opportunity seeking comes the rigorous process of Opportunity Screening. Because of
the many opportunities possible for the entrepreneur, it is important to come up with a
short list of a few very promising opportunities, which could be scrutinized in detail.

THE PERSONAL SCREEN

In screening opportunities, the entrepreneur first has to consider his or her preferences
and capabilities by asking three basic questions:
1. Do I have the drive to pursue this business opportunity to the end?
2. Will I spend all my time, effort, and money to make the business opportunity work?
3. Will I sacrifice my existing lifestyle, endure emotional hardship, and forego my
usual comforts to succeed in this business opportunity?

If “YES” is your answer to all of the above, then you can begin your earnest pursuit of
that opportunity.

THE 12 Rs OF OPPORTUNITY SCREENING

1. RELEVANCE to vision, mission, and objectives of the entrepreneur. The
opportunity must be aligned with what you have as your personal vision, mission,
and objectives for the enterprise you want to set up.
2. RESONANCE TO VALUES. Other than vision, mission, and objectives, the
opportunity must match the values and desired virtues that you have or wish to
impart.
3. REINFORCEMENT OF ENTREPRENEURIAL INTERESTS. How does the
opportunity resonate with the entrepreneur’s personal interests, talents, and skills?
4. REVENUES. In any entrepreneurial endeavor, it is important to determine the
sales potential of the products or services you want to offer. Is there a big enough
market out there to grab and nurture for growth?
5. RESPONSIVENESS TO CUSTOMER NEEDS AND WANTS. If the opportunity
that you want to pursue addresses the unfulfilled or underserved needs and wants of
customers, then you have a better chance of succeeding.
6. REACH. Opportunities that have good chances of expanding through branches,
distributorships, dealerships, or franchise outlets in order to attain rapid growth are
better opportunities.
7. RANGE. The opportunity can potentially lead to a wide range of possible product
or service offerings, thus, tapping many market segments of the industry.
8. REVOLUTIONARY IMPACT. If you think that the opportunity will most likely be
the “next big thing” or even a game-changer that will revolutionize the industry,
then there is a big potential for the chosen opportunity.
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 9. Returns. It is a fact that products with low costs of production and operations but
are sold at higher prices will definitely yield the highest returns on investments.
Returns can also be intangible; meaning, they come in the form of high profile
recognition or image projection.
10. RELATIVE EASE OF IMPLEMENTATION. Will the opportunity be relatively
easy to implement for the entrepreneur or will there be a lot of obstacles and
competency gaps to overcome?
11. RESOURCES REQUIRED. Opportunities requiring fewer resources from the
entrepreneur may be more favored than those requiring more resources.
12. RISKS. In an entrepreneurial endeavor, there will always be risks. However, some
opportunities carry more risks than others, such as those with high technological,
market, financial, and people risks.

THE PRE-FEASIBILITY STUDY

The ultimate goal of doing the opportunity screening matrix is to narrow down the
many opportunities into one or two most attractive ones. The next step is to conduct a
pre-feasibility study to ascertain the viability of the opportunity. The idea is to focus on
a few key items that could make or break the business concept.

FACTORS THAT ARE CONTAINED IN A PRE-FEASIBILITY STUDY

 Market potential and prospects
 Availability and appropriateness of technology
 Project investment and detailed cost estimates
 Financial forecast and determination of financial feasibility

THINGS TO CONSIDER IN WRITING THE FEASIBILITY STUDY

 A more in-depth study of market potential to ensure that the business proposal
will reach the forecasted sales figures
 Proof that the product or services being offered has the right design, attributes,
specifications and preferred features
 Proof that the entrepreneur and his or her team have the necessary experience,
skills, and capabilities to maximize the venture’s chances of success
 Legal visibility
 More detailed costing on the different assets and more justification for the
production and operating expenses
 More thorough analysis of the technology and its sustainability

OPPORTUNITY SEIZING
After Opportunity Seeking and Screening, the entrepreneur is ready for Opportunity
Seizing, the final stage. At this stage, the entrepreneur must be able to determine the
critical success factors that enable other players in the same industry to succeed while, at
the same time, be vigilant about those factors that cause other businesses to fail.

The question for the entrepreneur in Opportunity Seizing is… “Will I be able to manage, to
my advantage, the critical success factors and avoid the critical failure factors?”

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CRAFTING A POSITIONING STATEMENT
in crafting a positioning statement, the entrepreneur is advised to look at other competitors
(or substitutes) in the marketplace. Going through the process of questioning, the
entrepreneur will be able to come up with each of the competing products’ Main Value
Proposition (MVP) and from there, work on his own positioning.

Key Points in Going about the “Questioning” to Craft a Positioning Statement

1. What are the main customer segments?
2. What are the different product attributes and features of each of the competitors?
3. What are the existing marketing practices of the various competitors?
4. What are the market preferences of consumers when it comes to the products being
offered?

CONCEPTUALIZING THE PRODUCT OR SERVICE OFFERING

After making an assessment of the competing products, the entrepreneur must then
conceptualize his or her own products. A Concept is an idealized abstraction of the
product or service to be offered to the preferred market of the entrepreneur.

OPTIONS OR DIRECTIONS IN COMING UP WITH A PRODUCT/SERVICE

CONCEPT
1. The first is to create a concept similar to the winning products in the marketplace
and ride with the obvious market trends
2. The second is to find a market niche that has not been filled by the competitors.
3. The third is to conceptualize a product in a positioning category where the
participants are rather weak.
4. The fourth is to conceptualize a product that would change the way customers
think, behave, and buy, thus making existing products “obsolete” and “old-
fashioned.”

DESIGNING, PROTOTYPING, AND TESTING THE PRODUCT

From conceptualization, the entrepreneur proceeds to the design, prototyping, and testing
of the concept.

Designing means that the entrepreneur must render the concept and translate it into its
very physical and very real dimensions (measurement). This entails building a prototype of
the product that will be ready for actual testing by the entrepreneur and then, later on,
subject to testing by potential customers through focus group discussions (FGD), surveys,
product demonstration sessions, and the like.

GETTING TO KNOW THE MARKET

“Entrepreneur, know thy market well!” This warning should be fully embraced by the
entrepreneur who wants to fully maximize his or her market. The concept of a market (the
people you want to sell your product or service to) can be confusing unless you delve into
what the word means in terms of potential sales, achievable sales, and realizable profits.

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The more you know about your market, the better you’ll be able to segment and reach
your customers, position your products, promote your brand, set the best price, and choose
the right location.

MARKET RESEARCH

Important market information can only be obtained by conducting a good market

research. In order to aid the entrepreneur in gathering relevant market information, there
are several market research methodologies using scientific approaches that can be
employed.

Basic Questions in Market Research

MARKET RESEARCH METHODOLOGIES

 SALES DATA MINING

 FOCUS GROUP DISCUSSION (FGD) is one of the most common qualitative
research tools. It is effective in extracting consumer and non-consumer experiences
regarding products, places, or programs. This method can also be used for
generating initial insights.
 OBSERVATION TECHNIQUE is probably one of the best ways of gathering data
about customers in their natural setting without having to interact or talk to them.
One has to simply observe people as they go about their usual activity such as
buying and using products and services and assess how they behave.
 SURVEY RESEARCH is the most preferred instrument for in-depth quantitative
research.

CUSTOMER PROFILING

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For entrepreneurs, getting to know the customer very well cannot be overemphasized.
Customer knowledge starts with good customer profiling.

METHODS OF CUSTOMER PROFILING

1. Demographics
2. Psychographics
3. Technographics

IN DEMOGRAPHIC CLASSIFICATION, WE CATEGORIZE CUSTOMERS INTO

THE FOLLOWING:
1. Age
2. Income classes
3. Social classes/Reference groups
4. Ethnic backgrounds
5. Religious beliefs
6. Occupations
7. Domiciles

PSYCHOGRAPHICS DEFINES THE CUSTOMER’S:

1. Motivations
2. Perceptions
3. Preferences
4. Lifestyle

TECHNOGRAPHICS CLASSIFIES PEOPLE ACCORDING TO THEIR LEVEL OF

EXPERTISE IN USING A PRODUCT OR A SERVICE. FOR EXAMPLE:
1. Sports beginners might just want basic equipment.
2. Sports regulars may be looking for more sophisticated equipment.
3. Finally, sports professionals would want the best of the best for competitive
purposes.

APPLICATION OF CUSTOMER PROFILING

the entrepreneur can use or apply customer profiling in two ways.
1. The first way is to develop a product or service to test out in the marketplace.
 The customers most attracted to the product or service can then be profiled.
 After profiling, the next step is to find out how huge this market is for
exploitation purposes.

2. The second way is to profile the different types of customers in a given industry or
area as to their needs and wants.
 From these types, the entrepreneur could then choose the customer group with
the best potentials.
 Products or services can be developed by the entrepreneur to match this chosen
customer group
MARKET MAPPING

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  Market mapping refers to grouping customers and products according to certain
market variables.
 The purpose of market mapping is to provide the market analyst a better
understanding of the market as a whole and to paint a clearer picture of where the
different competitors are relative to the different market segments.
 Market mapping would also allow entrepreneurs to discover market segments that
are relatively unserved or underserved. They could then develop products and
services that fulfill the gaps in the marketplace.

LOCATION ANALYSIS
Location. Location. Location. This is the often-recited mantra of sales people who want to
have the best access to their customers. But finding a good location is one thing.
Maximizing the potentials of such a location is another.

LET THE MARKET KNOW YOU BETTER

In its broadest Sense, marketing is about creating and accumulating customers. Marketing
plans are designed to capture market share and defeat competitors. The marketing
function and the marketing mix serve the overall business strategy. It is summarized in 7
Ps by which the enterprise will engage competitors and gain customers.

SEVEN P’S OF MARKETING

1. Positioning
2. Product
3. Packaging
4. Place
5. People
6. Promotion
7. Price

POSITIONING
 Positioning, in the context of a marketing battle plan, has three overlapping
objectives.
 Positioning has an enterprise perspective.
 Positioning has a competitive perspective.
 Positioning takes the customer’s perspective.
 Enterprises can establish their positioning either by starting with their own product
creations or with their customers’ outcome expectations. The competitors will
always be part of the positioning equation, whether the enterprise starts with the
product or the customer perspective.
 In determining its positioning, the enterprise should be mindful of the main value
proposition (MVP) to its customers relative to its competitors. In determining the
MVP, the enterprise must assess its products from the customers’ viewpoint. It must
evaluate the other six Ps of marketing to find out if they complement and reinforce
one another.
 To establish the positioning of its various products in the marketplace, the
enterprise endeavors to build the brand of each product. Branding serves three

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 purposes. First is to differentiate the product from other products. Second is to
avoid a commodity image for the product. Third is to fill a space in the consumer’s
mind that would prevent other products from occupying the same space.

PRODUCT
 A product is the tangible good or the intangible service that the enterprise offers to
its customers in order to satisfy their needs and to produce their expected results.
 Products are often identified with their brand names to distinguish them from other
products in the market.
 General Types of Products
 Breakthrough products -Offer completely new performance benefits
 Differentiated products -Try to claim a new space in the mind of the
customer different from the spaces occupied by existing product
 Copycat products -
 Niche products -Are products with lower reach, lower visibility, lower prices,
and lower top of mind

PACKAGING
IMPORTANT PURPOSES OF PACKAGING
 Packaging identifies the product, describes its features and benefits, and complies
with government rules on specifying its contents, weight, chemical composition, and
potency.
 Packaging differentiates the product from its competitors and even from its other
brand offerings.
 Packaging lengthens the lifespan, physically protects, and extends the usefulness of
the product.

PLACE
In finding a good location, one needs to consider the following:
 The number of customers residing or working in the area, and the number of
customers who frequently pass through the area.
 The density or number of customers per unit area.
 The access routes to alternative locations and their traffic count in those routes.
 The buying habits of customers or where they buy, at what time and how frequent.
 Locational features such as parking spaces, foot access, creature comforts, and the
like.

The final choice of location must be based on the following:

 Image and location conditions
 Exact fit to target customers
 Clustering of competitor establishments
 Future area development
 Fiscal and regulatory requirements

PEOPLE
 People are the ultimate marketing strategy. People sell and push the product. People
search hard to find the right market. People distribute, promote, price, and sell the
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 products in the most attractive market places. People aim to please the customers
through continuing service and product enhancements long after the customers
have bought the product. People are the regular contact points between the
enterprise and its market.
 The marketing efforts of people are organized at four levels: (1) to create customer
awareness; (2) to arouse customer interest; (3) to educate customers as they evaluate
their buying choices; and (4) to close the sale and deliver the products.

PROMOTION
 Promotion is the explicit communication strategy adopted by an enterprise to elicit
the patronage, loyalty, and support not only from its customers but also from its
other significant stakeholders.

 Promotion encompasses all the direct communication efforts of the enterprise, such
as advertising, public relation campaigns, promotional tours, product offerings,
point-of-sale displays, websites, flyers, emails, letters, telemarketing, and others.

PRICE
 Pricing depends on the business objectives set by the enterprise.
 Different Pricing Strategies
 Profit maximization
 Revenue maximization
 Market share maximization
 Attainment of the desired prestige or quality leadership
 Penetration, survival, or liquidation
 Scarcity pricing or market skimming
 Cost recovery
 Subsidy pricing
Other Pricing Strategies Marginal pricing
 Introductory or promotional pricing to launch a new product
 Charge different prices in different geographical areas to take care of
additional logistics costs in farther locations or to accommodate the lower
purchasing power in poorer geographic areas
 Discount pricing given to loyal and regular customers to maintain their
patronage

THE 4MS OF OPERATIONS IN RELATION TO THE BUSINESS OPPORTUNITY

 Manpower
 Machine
 Material
 Method

4MS #1: MANPOWER

 This refers to the workforce, whom will help a business to produce more products.

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  An entrepreneur needs to hire good and competent people to produce quality
products.

4MS #2: MACHINE

 Refers to the devices and equipment used to perform specific type of work and
usually uses energy (electricity) to perform a task.
 For example: in food industries, food processors are indispensable in producing
products.

4MS #3: MATERIAL

 Pertains anything used as inputs to production or manufacturing.
 It can be a finished product or an uprocessed raw material.
 Raw materials are first harvested, extracted and processed to produce semi-finished
materials.

4MS #4: METHOD

 This refers to the ways of producing a particular product from raw materials.
 This may refer to traditional method, such as producing the product manually, or it
may be machine-assisted and automated.

https://negosentro.com/smes-free-seminars-for-march-from-dti/

Below are downloadable files that are useful in starting a business, culled from the DTI
site:
Mag-Negosyo Tayo!
Mga Gabay sa Pamamalakad ng Negosyong Pagkain
Starting a Business – Banana Chips Processing
Starting a Business – Backyard Tilapia Production
Starting a Business – Beadworks Accessories
Starting a Business – Beauty Salon
Starting a Business – Candle Holder Centerpiece
Starting a Business – Christmas Wreath
Starting a Business – Commercial Hamburger
Starting a Business – Commercial Siomai
Starting a Business – Decorative Balloons
Starting a Business – Dipped and Molded Candles
Starting a Business – Flower Arrangement
Starting a Business – Franchising
Starting a Business – Gift Box
Starting a Business – Herbal Bath Soap (Akapulko and Guava)
Starting a Business – Herbal Bath Soap (Papaya, Radish, Calamansi, Cucumber, Kamias)
Starting a Business – Home Bakeshop: Pandesal
Starting a Business – Honey Bee and Honey Production
Starting a Business – Internet and Computer Services
Starting a Business – Kaong Processing

ENTREPRENEURSHIP READING MATERIALS Page 25

Starting a Business – Mushroom Culture
Starting a Business – Native Longganisa
Starting a Business – Powdered Detergent Fabric Softener Dishwashing Liquid
Starting a Business – Saba Banana Production
Starting a Business – Salted Dried Fish (Tuyo)
Starting a Business – Salted Dried Split Fish (Daing)
Starting a Business – Skin Care (Herbal Bath Soap)
Starting a Business – Smoked Boneless Bangus
Starting a Business – Smoked Fish (Tinapa)
Starting a Business – Smoked Sausage
Starting a Business – Tocino
Starting a Business – Water Refilling Station
Starting a Business – Vermicomposting
Starting a Business – Vinegar From Banana Peeling

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ENTREPRENEURSHIP READING MATERIALS Page 27