COMPETENCY BASED LEARNING

MATERIAL

SECTOR: ICT
QUALIFICATION TITLE : VGD NC III
UNIT OF COMPETENCY : Facilitate Entrepreneurial Skills for
Micro-Small-Medium Enterprises
(MSMEs)
MODULE TITLE : Facilitating Entrepreneurial Skills for
Micro-Small-Medium Enterprises
(MSMEs)

MARY MEDIATRIX OF ALL GRACES ACADEMY, INC.

Corner Mabini Extension-Sta.Ana Avenue,San Miguel, Digos City

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 HOW TO USE THIS COMPETENCY-BASED LEARNING
MATERIALS
Welcome!
The unit of competency, “Facilitate Entrepreneurial Skills for
Micro-Small-Medium Enterprises (MSMEs)”, is one of the competencies of
VGD NC III, a course which comprises the knowledge, skills and attitudes
required for a Visual Graphic Designer trainer to possess.

The module, Facilitating Entrepreneurial Skills for Micro-Small-

Medium Enterprises (MSMEs), contains training materials and activities
related to preparation the reception and interpretation of design brief,
generate and assess ideas, conduct research, select media materials, apply
visual design and techniques and evaluate design.

In this module, you are required to go through a series of learning

activities in order to complete each learning outcome. In each learning
outcome are Information Sheets, Self-Checks, Task Sheets, Operation Sheets
and Job Sheets. Follow and perform the activities on your own. If you have
questions, do not hesitate to ask for assistance from your facilitator.

Remember to:
 Read information sheets and complete the self-checks. Suggested
references are included to supplement the materials provided in this
module.
 Perform the Task Sheets and Job Sheets until you are confident that
your outputs conform to the Performance Criteria Checklist that
follows the sheets.
 Submit outputs of the Task Sheets and Job Sheets to your facilitator
for evaluation and recording in the Achievement Chart. When you
feel confident that you have had sufficient practice, ask your trainer to
evaluate you. The results of your assessment will be recorded in your
Progress Chart and Achievement Chart.
You need to complete this module before you can proceed to the
next module.

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 VISUAL GRAPHICS & DESIGN NC III

COMPETENCY-BASED LEARNING MATERIALS

List of Competencies

No. Unit of Competency Module Title Code

Lead workplace Leading workplace
1. communication 400311319
communication

2. Lead Small Teams Leading Small Teams 400311320

Apply Critical Thinking Applying Critical Thinking

and Problem Solving and Problem Solving
3. 400311321
Techniques in the Techniques in the
Workplace Workplace

Work in Diverse Working in Diverse

4. 400311322
Environment Environment

Propose Methods of Proposing Methods of

Applying Learning and Applying Learning and
5. 400311323
Innovation in the Innovation in the
Organization Organization
Use Information Using Information
6. 400311324
Systematically Systematically
Evaluate Occupational Evaluating Occupational
7. Safety and Health Work Safety and Health Work 400311325
Practices Practices

Evaluate Environmental Evaluating Environmental

8. 400311326
Work Practices Work Practices

Facilitate Facilitating
Entrepreneurial Skills Entrepreneurial Skills
9. 400311327
for Micro-Small-Medium for Micro-Small-Medium
Enterprises (MSMEs) Enterprises (MSMEs)

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 MODULE CONTENT

UNIT OF COMPETENCY : FACILITATE ENTREPRENEURIAL SKILLS

FOR MORE MICRO-SMALL-MEDIUM
ENTERPRSISES (MSMEs)

MODULE TITLE : FACILITATING ENTREPRENEURIAL SKILLS

FOR MORE MICRO-SMALL-MEDIUM
ENTERPRSISES (MSMEs)

MODULE DESCRIPTOR : This unit covers the knowledge, skills and

attitudes to lead small teams including
setting and maintaining team and individual
performance standards.

NOMINAL DURATION : 8 hours

LEARNING OUTCOMES:
Upon completion of this module the students/ trainees will be able to:
1. Develop and maintain micro-smallmedium enterprise (MSMEs) skills
in the organization
2. Establish and maintain client-base/ market
3. Apply budgeting and financial management skills

ASSESSMENT CRITERIA:
1. Demonstrated basic entrepreneurial skills
2. Demonstrated ability to conceptualize and plan a micro/small
enterprise
3. Demonstrated ability to manage/operate a micro/small-scale
business

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 LEARNING OUTCOME NO. 1

Develop and maintain micro-small-medium enterprise

(MSMEs) skills in the organization
Contents:

 Environmental Forces
 Forms of Business Organization

Assessment Criteria

1. Appropriate business strategies are determined and set for the

enterprise based on current and emerging business environment.
2. Business operations are monitored and controlled following
established procedures.
3. Quality assurance measures are implemented consistently.
4. Good relations are maintained with staff/workers.
5. Policies and procedures on occupational safety and health and
environmental concerns are constantly observed.

Conditions
The students/trainees must be provided with the following:
 CBLM
 Paper
 Learning Materials
 Pen

Assessment Method:

 Written test
 Self-Paced
 Oral Questioning
 Modular


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 Learning Experiences
Learning Outcome 1
Develop and maintain micro-small-medium enterprise
(MSMEs) skills in the organization

Learning Activities Special Instructions

Go through the learning activities
1. Read Information Sheet 2.1-1 outlined for you on the left column
“Providing team leadership”. to gain the necessary information
or knowledge before doing the tasks
to practice making the parts of the
evaluation tool.
2. Answer Self-Check 2.1-1
“Providing team leadership” The output of this LO is a complete
Institutional Competency
Evaluation Package for one
3. Check answers with answer Competency of your qualification.
key 2.1-1 “Providing team
leadership” Your output shall serve as one of
your portfolio for your Institutional
Competency Evaluation for Post
4. Perform Task sheet 2.1-1 Transactions
“Providing team leadership”
Feel free to show your outputs to
your trainee as you accomplish
them for guidance and evaluation
of your output.
5. Check Output to performance
checklist 2.1-1 “Providing
team leadership” After performing the activities of
LO1 “Assessed quality if received
materials ” you may proceed to LO2
“Assign Responsibilities”

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 Information Sheet 1.1-1

Environmental Forces

Learning Objectives:
After reading this Information Sheet you should be able to:
 Analyze various forces/elements influencing local and international
business environment

Environmental Forces and Environmental Scanning

The environment in which a business operates is a major

consideration in determining an organization’s design structure.
Considerations such as uncertainty, procurement, and competition are
linked with the external environment. A company’s strategy and approach to
operations must also be aligned with the limitations of its external
environment.

Definition of Terms

 Environmental scanning means seeking for and sorting through

data about the environment
 External business environment refers to the factors/elements
outside the organization which may affect, either positively or
negatively, the performance of the organization.
 Internal business environment refers to the factors/elements within
the organization which may affect, either positively or negatively, the
performance of the organization

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 The various components of business environment are External
environment consists of those factors that affect a business enterprise from
outside. External environment includes shareholders, competitors,
customers, society, government laws and regulations, policies and
technology.

 Micro-environment includes those players whose decisions and

actions have a direct impact on the company. Production and selling
of commodities are the two important aspects of modern business.
Accordingly, the micro-environment of business can be divided.

 Macro-environment is the condition that exist in the economy as a

whole, rather than in a particular sector or region. In general, the
macro environment includes trends in the gross domestic product
(GDP, inflation, employment, spending, and monetary and fiscal
policy.

The various constituents of micro-environment are as under:

1. Suppliers of inputs: An important factor in the external micro-

environment of a firm is the supplier of its inputs such as raw
materials and components. Normally, most firms do not depend on a
single supplier of inputs. To reduce risk and uncertainty business
firms prefer to keep multiple suppliers of inputs.

2. Customers: The people who buy and use a firm’s product and
services are an important part of external micro-environment. Since
sales of a product or service is critical for a firm's survival and growth,
it is necessary to keep the customers satisfied. A concern for
customers’ satisfaction is essential for the success of a business firms.
Besides, a business firm has to compete with rival firms to attract
customers and thereby increase the demand and market for its
product.

3. Marketing intermediaries: In the firm's external micro-environment,

marketing intermediaries play an essential role of selling and
distributing its products to the final customers. Marketing provides an
important link between a business firm and its ultimate customers.

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 4. Competitors: Different firms in an industry compete for sale of their
products. This competition may be based on pricing of their products
and non- price competition through competitive advertising such as
sponsoring some events to promote the sale of different varieties and
models of their products. Because of liberalization and globalization of
the Indian economy since the adoption of economic reforms there has
been a significant increase in the competitive environment of business
firms. Now, Indian firms must compete not only with each other but
also with foreign firms whose products can be imported. In America,
American firms faced a lot of competition from the Japanese firms
producing electronic goods and automobiles.

5. Publics: Finally, publics are an important force in external

microenvironment. Environmentalists, media groups, women’s
associations, consumer protection groups, local groups, Citizens
Association are some important examples of publics which have an
important bearing on the business decisions of the firm. The existence
of various types of publics influences the working of business firms
and compels them to be socially responsible.

External Macro Environment

Apart from micro-environment, business firms face large external

environmental forces. An important fact about external macro
environmental forces is that they are uncontrollable by the management.
Because of the uncontrollable nature of macro forces a firm must adjust or
adapt it to these external forces. These factors are:
1. Economic Environment: Economic environment includes all those
forces which have an economic impact on business. Accordingly, total
economic environment consists of agriculture, industrial production,
infrastructure, and planning, basic economic philosophy, stages of
economic development, trade cycles, national income, per capita
income, savings, money supply, price level and population.

2. Political-legal Environment: Business firms are closely related to the

government. The political- legal environment includes the activities of
three political institutions, namely, legislature, executive and judiciary
which usually play a useful role in shaping, directing, developing and
controlling business activities.

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3. Technological Environment: Technological environment is exercising
considerable influence on business. Technology implies systematic
application of scientific or other organized knowledge to practical
tasks or activities. Business makes it possible for technology to reach
the people in proper format.

4. Global or International Environment: Global environment plays an

important role in shaping business activity. With the liberalization
and globalization of the economy, business environment of an
economy has become totally different wherein it has to bear all shocks
and benefits arising out of global environment.

5. Socio-cultural Environment: Social and cultural environment also

influences the business environment indirectly. These include people’s
attitude to work and wealth, ethical issues, role of family, marriage,
religion and education and also social responsiveness of business.

6. Demographic Environment: The demographic environment includes

the size and growth of population, life expectancy of the people, rural-
urban distribution of population, the technological skills and
educational levels of labor force. All these demographic features have
an important bearing on the functioning of business firms.

7. Natural Environment: Natural environment influences business in

diverse ways. Business in modern times is dictated by nature. The
natural environment is the ultimate source of many inputs such as
raw materials and energy, which firms use in their productive activity.
The natural environment which includes geographical and ecological
factors such as minerals and oil reserves, water and forest resources,
weather and climatic conditions are all highly significant for various
business activities.

8. Ecological Environment: Due to the efforts of environmentalists and

international organizations such as the World Bank the people have
now become conscious of the adverse effects of depletion of
exhaustible natural resources and pollution of environment by
business activity. Accordingly, laws have been passed for conservation
of natural resources and prevention of environment pollution. These
laws have imposed additional responsibilities and costs for business
firms.

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Internal Environment
The factors in internal environment of business are to a certain extent
controllable because the firm can change or modify these factors to improve
its efficiency. However, the firm may not be able to change all the factors.
The various internal factors are:
1. Value system: The value system of an organization means the ethical
beliefs that guide the organization in achieving its mission and
objectives. It is a widely acknowledged fact that the extent to which
the value system is shared by all in the organization is an important
factor contributing to its success.

2. Mission and objectives: The business domain of the company,

direction of development, business philosophy, business policy etc.
are guided by the mission and objectives of the company. The
objective of all firms is assumed to be maximization of profit. Mission
is defined as the overall purpose or reason for its existence which
guides and influences its business decision and economic activities.

3. Organization structure: The organizational structure, the

composition of the board of directors, the professionalism of
management etc. are important factors influencing business
decisions. The nature of the organizational structure has a significant
influence over the decision-making process in an organization. An
efficient working of a business organization requires that the
organization structure should be conducive for quick decision-
making.

4. Corporate culture: Corporate culture is an important factor for

determining the internal environment of any company. In a closed and
threatening type of corporate culture the business decisions are taken
by top level managers while the middle level and lower level managers
have no say in business decision making. This leads to lack of trust
and confidence among subordinate officials of the company and
secrecy pervades throughout the organization.

5. Quality of human resources: Quality of employees that is of human

resources of a firm is an important factor of internal environment of a
firm. The characteristics of the human resources like skill, quality,
capability, attitude and commitment of its employees etc. could
contribute to the strength and weaknesses of an organization.

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 6. Labor unions: Labor unions collectively bargains with the managers
for better wages and better working conditions of the different
categories of workers. For the smooth working of a business firm good
relations between management and labor unions is required.

7. Physical resources and technological capabilities: Physical

resources such as, plant and equipment and technological capabilities
of a firm determine its competitive strength which is an important
factor for determining its efficiency and unit cost of production.
Research and development capabilities of a company determine its
ability to introduce innovations which enhances productivity of
workers.

SELF –CHECK 1.1-1

Environmental Forces

IDENTIFICATION

Directions: Identify the following statements below. Write your answer in

the space provided before the number.

1. ______________consists of those factors that affect a business

enterprise from outside. It includes shareholders, competitors,
customers, society, government laws and regulations, policies and
technology.

2. ______________has various internal factors such as value system,

mission and objectives, organization structure, corporate culture,
quality of human resources, labour unions and physical resources
and technological capabilities.

3. ______________the parties likely to be affected by the activities of the

organization.

4. ______________patronize the organization’s products and services.

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 5. ______________ensure the organization’s continuous flow of needed
and reasonably priced inputs or materials required for producing
their goods and rendering their services or materials required for
producing their good and rendering their services.

ANSWER KEY 1.1-1

Environmental Forces

1. External environment
2. Internal environment
3. Stakeholders
4. Customers
5. Suppliers

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 Information Sheet 1.1-2

Forms of Business Organization

Learning Objectives:
After reading this Information Sheet you should be able to:
 Analyze the forms and economic roles of business organizations

Partnership

Partnership consists of two or more persons who bind themselves to

contribute money or industry to a common fund, with the intention of
dividing the profits among themselves. The most common example of
partnerships are professional partnerships, like in the case of law firms and
accounting firms. Just like a corporation, it is registered with the Securities
and Exchange Commission (SEC).

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 Advantages of a Partnership
 Partnerships are relatively easy to establish; however time should be
invested in developing the partnership agreement.

 With more than one owner, the ability to raise funds may be
increased.

 The profits from the business flow directly through to the partners’
personal tax return.

 Prospective employees may be attracted to the business if given the

incentive to become a partner.

 The business usually will benefit from partners who have

complementary skills.

Disadvantages of a Partnership
 Partners are jointly and individually liable for the actions of the other
partners.
 Profits must be shared with others.
 Since decisions are shared, disagreements can occur.
 Some employee benefits are not deductible from business income on
tax returns.
 The partnership may have a limited life; it may end upon the
withdrawal or death of a partner.

Types of Partnerships that should be considered:

1. General Partnership
Partners divide responsibility for management and liability, as well as
the shares of profit or loss according to their internal agreement.
Equal shares are assumed unless there is a written agreement that
states differently.

2. Limited Partnership and Partnership with limited liability

“Limited” means that most of the partners have limited liability (to the
extent of their investment) as well as limited input regarding
management decision, which generally encourages investors for short
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 term projects, or for investing in capital assets. This form of
ownership is not often used for operating retail or service businesses.
Forming a limited partnership is more complex and formal than that
of a general partnership.

3. Joint Venture
Acts like a general partnership but is clearly for a limited period of
time or a single project. If the partners in a joint venture repeat the
activity, they will be recognized as an ongoing partnership and will
have to file as such and distribute accumulated partnership assets
upon dissolution of the entity.

SELF –CHECK 1.1-2

Forms of Business Organization
Multiple Choice
Directions: Read the questions carefully and encircle the letter of the
correct answer. Write your answer in a yellow paper.

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1. Which of the following is a form of business which has unlimited liability.
Creditors may proceed not only against the assets and property of the
business, but also after the personal properties of the owner.
a. Corporation b. Sole Corporation
c. Partnership d. Sole proprietorship

2. Philippine Cooperative Code of 2008 is under of what Republic Act?

a. RA 9521 b. RA 9520
c. RA 9522 d. RA 9250

3. When the preconditions for take-off are met, a society can take off.
a. Drive to Maturity b. Take-off
c. Traditional Society d. None of the above

4. It acts as a general partnership but is clearly for a limited period or a

single project.
Which of the following is CORRECT answer?
a. General Partnership b. Limited Partnership
c. Joint Venture d. None of the above

5. In which a type of partnership that divides responsibility for management

and liability, as well as the shares of profit or loss according to their
internal agreement.
a. General Partnership b. Limited Partnership
c. Joint Venture d. None of the above

ANSWER KEY 1.1-1

Forms of Business Organization

1. D
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 2. A
3. B
4. C
5. A

LEARNING OUTCOME NO. 2

Establish and Maintain Client-Base/Market

Contents:

 The Potential Market

 The Market Need

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Assessment Criteria

 Good customer relations are maintained

 New customers and markets are identified, explored and reached out
to.
 Promotions/Incentives are offered to loyal customers
 Additional products and services are evaluated and tried where
feasible.
 Promotional/advertising initiatives are carried out where necessary
and feasible.

Conditions
The students/trainees must be provided with the following:
 CBLM
 Paper
 Learning Materials
 Pen

Assessment Method:

 Written test
 Self-Paced
 Oral Questioning
 Modular

Learning Experiences
Learning Outcome 2

Establish and Maintain Client-Base/Market

Learning Activities Special Instructions

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 Go through the learning activities
outlined for you on the left column
1. Read Information Sheet 2.2-1 to gain the necessary information
“Assigning responsibilities or knowledge before doing the tasks
among team members”. to practice making the parts of the
evaluation tool.

The output of this LO is a complete

Institutional Competency
Evaluation Package for one
Competency of your qualification.

2. Answer Self-Check 2.2-1 Your output shall serve as one of

“Assigning responsibilities your portfolio for your Institutional
among team members” Competency Evaluation for Post
Transactions

Feel free to show your outputs to

your trainee as you accomplish
them for guidance and evaluation
of your output.
3. Check answers with answer key
2.2-1 “Assigning After performing the activities of
responsibilities among team LO2 “Assign responsibilities ” you
members” may proceed to LO 3 “Setting
performance expectations for team
members”

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 Information Sheet 1.2-1

The Potential Market

Learning Objectives:
After reading this Information Sheet you should be able to:
1. Recognize a potential market

The Potential Market

1. Potential market is the part of the total population that has

shown some level of interest in buying a particular product or
service. Potential market is also called Total addressable market
(TAM) (MBA Skool Team, 2018).
2. A potential market is the part of the market you can capture in
the future. It includes the demographic groups that are not
currently your customers but could become customers in the
future (Lake, L, 2019).
3. Market potential is the total demand for a product in a given
business environment (Bhasin, H., 2018).

The Importance of Potential Markets (Lake, L., 2019)

• Potential markets are an important part of a business's

future growth.
• Ensure the future of your business by identifying new
customers.
• Think proactively about ways for your business to grow
and change.
• Show the potential of your business to investors or
collaborators.
• Increase your revenue.
• Create a plan B that will weather changes in the economy
or market.

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How to Identify Your Potential Markets (Lake, L., 2019)

• Consider every target demographic that you currently sell

to, as well as those you have not yet targeted. Identify what
they have in common with each other, new milestones that
they will encounter in their lives that will impact their
buying patterns, and where they overlap or diverge from
your current customers.

Ask yourself these questions that will help you identify both
new ways to market your current products or services, as well as new
products and services that you can begin selling.

• What other products do my customers need now?

• What related products will they need in the future?
• Who else could make use of the products I am selling
now?
• What demographic information does that new group have
in common with my current customers?
• What demographic information does that new group have in
common with each other?

For example, a business that makes face masks and PPEs could
identify potential markets such as:
• Hospitals and other health related industries whose
employees are prone to COVID -19 virus and other viruses.
• Business industries and other organizations who want to
ensure the health condition of their employees.
• Employees and workers who need to report to work to
earn income.
• Households who needs to go out for their necessities.

Note: Depending on the size and age of your company, as well as

your industry, you may have a clear picture of the potential markets
that are available.

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Reaching Your Potential Market (Lake, L., 2019)

Once you've identified and chosen a potential market to begin

targeting, you will need new marketing strategies in place to
communicate with them. Use this profile to identify:
• The demographic information that people in a group have
in common.
• The best forms of media to reach them.
• How they prefer to shop and make purchases.
• The concerns, struggles, or problems that you can help
them overcome.
• What values matter to them, both in everyday life and
when
shopping.
• The language that resonates with them.

The figure below depicts what is a potential market with

respect to the total population and how it can be converted to a
penetrated market:

MBA Skool Team, 2018

Available Market
• Prospects who are willing and capable (have sufficient
resources) buyers, and have access to a particular market or
service (www.businessdictionary.com).
• Defined as the number of people who are both willing and
capable of buying a particular product or service in a particular
market (MBA Skool Team, 2020).

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Target Market

 Refers to a group of potential customers to whom a company

wants to sell its products and services. Target markets are
generally categorized by age, location, income, and lifestyle.
Defining a specific target market allows a company to home in
on specific market factors to reach and connect with customers
through sales and marketing efforts. (Kenton, W., 2019).

Penetrated Market

 A set of customers or clients who are already using a particular

product or service. A penetrated market means that the
potential users of a product or service are aware of it, and in
many cases are active consumers of it.
(www.businessdictionary.com).

The size of a potential market helps a company understand

the level of investment it should make further in the market, while
taking into consideration other factors. If the potential market is
very small, it means there is a very small fraction of the total
population showing any interest in the product or category. This
means that it is better that the company doesn’t invest further in the
product or category because people won’t buy it. If the size of the
potential market is large, it means that there is a huge fraction of
the total population which is showing interest in the product, so
further investment can be made on the product development or
modification, marketing, promotions etc. The size of the potential
market gives an estimate of what all a company should do and how
much it should invest (MBA Skool Team, 2018).

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 SELF –CHECK 2.2-1
The Potential Market

Direction: Read and analyze the statements below about “Market”. Determine
whether the statement is TRUE OR FALSE. Write TRUE if the
statement is correct and write FALSE if otherwise. Write your
answer in the space provided.

__________1. A market is any place where two or more parties can meet to
engage in an economic transaction—and should only involve legal tender.

__________2. Market includes retail stores and other similar businesses that
sell individual items to wholesale markets selling goods to other distributors
but may not be virtual.

__________3. Market refers to the whole area of operation of demand and

supply.
__________4. A market signifies any arrangement in which the sale and
purchase of goods take place.

__________5. The market establishes the prices for goods and other services.

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 ANSWER KEY 2.2-1
The Potential Market

1. True
2. False
3. True
4. True
5. True

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 Information Sheet 1.2-1

The Market Need

Learning Objectives:
After reading this Information Sheet you should be able to:
1. Analyze the market need

The Market Need

1. Need
 A motivating force that compels action for its satisfaction. Needs
range from basic survival needs (common to all human beings)
satisfied by necessities, to cultural, intellectual, and social
needs (varying from place to place and age group to age group)
satisfied by necessaries (www.businessdictionary.com).
 A driver of human action which marketers try to identify,
emphasize, and satisfy, and around which promotional efforts
are organized (www.businessdictionary.com).
2. Market
 A Market is a place where two parties can gather to facilitate the
exchange of goods and services. The parties involved are usually
buyers and sellers. The market may be physical like a retail
outlet, where people meet face-to-face, or virtual like an online
market, where there is no direct physical contact between
buyers and sellers (Kenton, W. & Boyle, M., 2020).
 A market does not refer to a particular place but it refers to a
market for a commodity or commodities. It refers to an
arrangement whereby buyers and sellers come in close contact
with each other directly or indirectly to sell and buy goods
(Shaikh, S., retrieved 2020).
 A market is any place where sellers of particular goods or
services can meet with buyers of those goods and services. It
creates the potential for a transaction to take place. The buyers
must have something they can offer in exchange for the product
to create a successful transaction (Moffatt, M., 2019)

Your market consists of (Stull, C., Myers, P.& Scott D.M. (2008) as
cited in: https://learn.marsdd.com/):

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Existing customers: People who have already purchased your
product.
Prospects: People who have not yet purchased your product but are
considering it.
Target market users: People in your target market who are not
currently looking for a solution.

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Define the Market Need for Your New Business

Why is it important to clearly define market needs?

The market now demands that your business align to their
needs. In order to properly align your marketing efforts ‒ and your
content, in particular ‒ to what buyers need, you have to have a clear
understanding of the many intricacies, pains and pressures within
your market. To achieve such alignment, the ability to define market
patterns, needs, interests, preferences, etc. for a comprehensive view
of the buying process is critical (www.aberdeen.com).
Below are ways to define your market (Lancaster SCORE (2010):

 Consider whether the business offers a new solution to an old

problem or complements an emerging trend.
 Have a clear picture of your target market. Determine the
benefits that your product or service offers.
 Examine industry data that can confirm whether there is a
sustained, growing demand for your product or service.
 Identify the percentage of market share that it is realistic for you
to capture. The more competition you have, the lower the
margins will be.
 Consider how realistic your pricing is. How can you present
your product or service to potential customers so that it appears
to be a good value, while still affording you a healthy profit?

SELF –CHECK 2.2-1

The Market Need

MATCHING TYPE. Match the definitions in Column A with the

word/phrase in Column B. Write your answer in the space provided.

Column A Column B
1. It is a company’s marketing goals and objectives A. Market
combined into a single comprehensive plan.
2. Refers to a person or organization that uses a B. Target Market
commodity or service.
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3. This is an area or arena in which commercial dealings C. Potential Market
are conducted.
4. This is used to give a general idea of the size of a D. Need
company in relation to its market and its competitors.
5. This is one part of the total market for a good or E. Demographic group
service.
6. It is also called Total addressable market (TAM). F. Market Strategy
7. A person or business that purchases a commodity or G. Market size
service.
8. Circumstances in which something is necessary, or H. Customers
that require some course of action; necessity.
9. The study of the characteristics of human I. Consumers
populations, such as size, growth, density,
distribution, and vital statistics.
10. The number of buyers and sellers in a particular J. Market share
market.

ANSWER KEY 2.2-1

The Market Need
1. F
2. I
3. A
4. J
5. B
6. C
7. H
8. D
9. E
10.G

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 LEARNING OUTCOME NO. 3

Apply Budgeting and Financial Management Skills

Contents:

 The Steps in the Financial Planning Process

 Formula and Format for the Preparation of Budgets and Projected
Financial Statement

Assessment Criteria

 Enterprise is built up and sustained through judicious control of cash

flows

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  Profitability of enterprise is ensured though appropriate internal
controls
 Unnecessary or lower-priority expenses and purchases are avoided

Conditions

The students/trainees must be provided with the following:

 CBLM
 Paper
 Learning Materials
 Pen

Assessment Method:

 Written test
 Portfolio Analysis
 Oral Interview

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 Learning Experiences
Learning Outcome 3

Apply Budgeting and Financial Management Skills

Learning Activities Special Instructions
Go through the learning activities
1. Read Information Sheet 1.3-1
outlined for you on the left column
“Setting performance
to gain the necessary information
expectations for team
or knowledge before doing the tasks
members”.
to practice making the parts of the
evaluation tool.
2. Answer Self-Check 1.3-1
“Setting performance The output of this LO is a complete
expectations for team Institutional Competency
members” Evaluation Package for one
Competency of your qualification.
3. Check answers with answer
key 1.3-1 “Setting performance Your output shall serve as one of
expectations for team your portfolio for your Institutional
members” Competency Evaluation for Post
Transactions

Feel free to show your outputs to

4. Perform Task sheet 2.3-1
your trainee as you accomplish
“Setting performance
them for guidance and evaluation
expectations for team
of your output.
members”

After performing the activities of

5. Check output to performance LO3 “Setting performance
criteria 2.3-1 “Setting expectations for team members”
performance expectations for you may proceed to LO 4 “Perform
team members” Computer Operation”

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 Information Sheet 2.3-1

The Steps in the Financial Planning Process

Learning Objectives:
After reading this Information Sheet you should be able to:
1. Determine and apply the tools used in planning and forecasting
2. State and apply the tools used in budgeting
3. Illustrate the formula and format for the preparation of budgets and
projected financial statements

BRIEF INTRODUCTION

All individuals, professionals, businessmen will have their goals to be

in profession or business. However, about objectives at business finance, we
have to plan them. You should know how you can save a lot, you must
know your goals. Here is the step by step financial planning process which
includes six steps in financial planning process which will assist you. You
should be aware of the life cycle approach of financial planning process to
structure your goals.

The long-term goals that you plan to achieve in the future, play an
important role in everyday life as you already have in mind a set of plans for
the next five years. If you are not yet sure what you want in five years from
now will probably still have an idea of what kind of life you want. You are
still in the process of planning.
Planning is an important aspect of the firm’s operations because it provides
road maps for guiding, coordinating, and controlling the firm’s actions to
achieve its objectives. Management planning is about setting the goals of
the organization and identifying ways on how to achieve them.

There are two phases of financial planning. Financial planning starts with
long term plans which would then translate to short term plans.

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 Strategic vs. Tactical Planning

Long-term financial plans or the strategic plans are a set of goals that
lay out the overall direction of the company. A long-term financial plan is
an integrated strategy that takes into account various departments such as
sales, production, marketing, and operations for the purpose of guiding
these departments towards strategic goals. Those long-term plans consider
proposed outlays for fixed assets, research and development activities,
marketing and product development actions, capital structure, and major
sources of financing. It also include would be termination of existing
projects, product lines, or lines of business; repayment or retirement of
outstanding debts; and any planned acquisitions.

Short-term financial plans or the tactical plans specify short term financial
actions and the anticipated impact of those actions. Part of short term
financial plans include setting the sales forecast and other forms of
operating and financial data. This would then translate into operating
budgets, the cash budget, and pro forma financial statements.

The Financial Planning Processes

There are six steps of financial planning processes that you should
know. It includes:

Step 1: Determine Your Current Financial Situation

In this first step of the financial planning process, you will determine
your current financial situation with regard to income, savings,
Long-Term Planning Short Term Planning
Persons More participation from
Involved top management Top management is still involved but there is more
participation from lower level managers (production,
marketing, personnel, finance and plant facilities)
because their inputs are crucial at this stage since
they are the ones who implement these plans

Time Period 2 to 10 years 1 year or less

Level of Less More

Detail
Focus Direction of the company Everyday functioning of the company

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living expenses, and debts. Preparing a list of current asset and debt
balances and amounts spent for various items gives you a foundation for
financial planning activities.

Step 2: Develop Financial Goals

You should periodically analyze your financial values and

goals. This involves identifying how you feel about money and why you
feel that way. The purpose of this analysis is to differentiate your needs
from your wants. Specific financial goals are vital to financial planning.
Your financial goals can range from spending all of your current income
to developing an extensive savings and investment program for your
future financial security.

Step 3: Identify Alternative Courses of Action

Developing alternatives is crucial for making good decisions.

Although many factors will influence the available alternatives, possible
courses of action usually fall into these categories:
• Continue the same course of action.
• Expand the current situation.
• Change the current situation.
• Take a new course of action.
• Not all of these categories will apply to every decision situation;
however, they do represent possible courses of action.
• Creativity in decision making is vital to effective choices.

Step 4: Evaluate Alternatives

You need to evaluate possible courses of action, taking into
consideration your life situation, personal values, and current economic
conditions.

Consequences of Choices. Every decision closes off alternatives. For

example, a decision to invest in stock may mean you cannot take a vacation.
A decision to go to school full time may mean you cannot work full time.
Opportunity cost is what you give up by making a choice. Decision making
will be an ongoing part of your personal and financial situation. Thus, you
will need to consider the lost opportunities that will result from your
decisions.

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 Evaluating Risk. In many financial decisions, identifying and evaluating
risk is difficult. The best way to consider risk is to gather information
based on your experience and the experiences of others and to use
financial planning information sources.

Financial Planning Information Sources. Relevant information is

required at each stage of the decision-making process. Changing
personal, social, and economic conditions will require that you
continually supplement and update your knowledge.

Step 5: Create and Implement a Financial Action Plan

In this step of the financial planning process, you develop an
action plan. This requires choosing ways to achieve your goals. As you
achieve your immediate or short-term goals, the goals next in priority
will come into focus. To implement your financial action plan, you may
need assistance from others. For example, you may use the services of
an insurance agent to purchase property insurance or the services of an
investment broker to purchase stocks, bonds, or mutual funds.

Step 6: Re-evaluate and Revise Your Plan

Financial planning is a dynamic process that does not end
when you take a particular action. You need to regularly assess your
financial decisions. Changing personal, social, and economic factors may
require more frequent assessments. When life events affect your
financial needs, this financial planning process will provide a vehicle for
adapting to those changes. The figure below represents the financial
planning processes.

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 Determine current
financial situation

Re-evaluate and Develop financial

revise the plan goals

Create and Identify

implement a alternative
financial action plan coursse of action

Evaluate alternatives

SELF –CHECK 2.3-1

The Steps in the Financial Planning Process

Directions: Choose the letter corresponding to the correct answer for

each of the questions provided below.

1. Which of the following statements about budgeting is incorrect?

a. Budgets provide direction and coordination.
b. Budgets motivate staff.
c. A budget is a financial plan.
d. A budget looks back and review performance.

2. Which of the following is normally prepared first?

a. Cash Budget
b. Production Budget
c. Sales Budget
d. None of the above

3. What is a sales budget?

a. A plan of items to be sold.
b. A plan of how much an item will cost.
c. A plan for how much money should be made in a given period.
d. A plan for tracking an inventory and how much they sell.

4. Why many small businesses do not use budget?

a. Budgeting is for large firms only.

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b. Budgeting can be time consuming.
c. Small businesses do not record variances.
d. All of the above.

5. Which of the following is NOT a benefit of budgeting?

a. It is a source of motivation.
b. It is a means of coordinating business activities?
c. It prevents company to incur net losses.
d. It promotes study, research, and focus on the future.

ANSWER KEY 2.3-1

The Steps in the Financial Planning Process
1. B
2. C
3. D
4. B
5. C

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 Information Sheet 1.3-2

Formula and Format for the Preparation of Budgets and

Projected Financial Statement
Learning Objectives:
After reading this Information Sheet you should be able to:
1. Illustrate the formula and format for the preparation of budgets and
projected financial statements

The Sales Budget

This is how a sales budget is formulated. The most important
account in the financial statement in making a forecast is sales. To forecast
means is to plan beforehand. Since most of the expenses are correlated
with sales, the sales budget is formulated. Financial Statement analysis
discussed in your Accounting subjects that cost of sales ratio, gross profit
ratio, and variable operating expenses ratio are based on the sales figure.
Given the importance of the sales forecast, the financial manager must be
able to support this figure with reasonable assumptions.

SALES BUDGET
Formula: Forecasted unit sales x Price per unit= Total gross sales
The following external and internal factors should be considered in
forecasting sales:

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 External Internal
• Gross Domestic • production capacity
Product • man power requirements
(GDP) growth rate • management style of
• Inflation managers
• Interest Rate • reputation and network of
• Foreign Exchange Rate the controlling stockholders
• Income Tax Rates
• financial resources of the
• Developments in the company
industry
• Competition
• Economic Crisis
• Regulatory
Environment
• Political Crisis
Figure 2: Factors that Influence Sales
Let us discuss the external and internal factors that influence sale.
External Factors

Macroeconomic Variables. Macroeconomic variables such as the GDP rate,

inflation rate, and interest rates, among others play an important role in
forecasting sales because it tells us how much the consumers are willing to
spend. A low GDP rate coupled by a high inflation rate means that
consumers are spending less on their purchases of goods and services. This
means that we should not forecast high sales of the periods of low GDP.
Developments in the Industry. Products and services which have more
developments in its industry would likely have a higher sales forecast than a
product or service in slow moving industry. Consumer trends are always
changing, thus the industry should be competitive to be able to appeal to
more customers and stay in the market.
Competition. Suppose you are selling bread and you know that each
person in your community eats an average of one loaf of bread a day. The
population of your community is 500 people. If you are the only person
selling bread in your town, then your sales forecast is 500 units of bread.
However, you also have to take account your competition. What if there are
4 other sellers of bread? You will need to have to divide the sales between
the 5 of you. Does this mean your new forecast should be 100 units of
bread? Not necessary. You should also know the preference of your

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consumers. If more of them would prefer to buy more bread from you, then
you should increase your sales forecast.
Internal Factors
Production Capacity and manpower. Suppose that you have already
evaluated the macroeconomic factors and identified that there is a very
strong market for your product and consumers are very likely to buy from
you. You forecasted that you will be able to sell 1,000 units of your product.
However, you only have 20 employees who are able to produce 20 units
each. Your capacity cannot cover your expected demand hence, you are
limited by it. To be able to increase capacity, you should be able to expand
your operations.
There is an implications if sales budget is not correct. If understated, there
can be lost opportunities in the form of forgone sales. If it is too optimistic,
the management may decide to unnecessarily increase capacity or hire more
employees and end up with more inventories.

Production Budget
What a production budget is and how it is formulated? A production budget
provides information regarding the number of units that should be

Jan Feb Mar Apr May

Units 2,000 2,200 2,500 2,800 3,000

produced over a given accounting period based on expected sales and

targeted level of ending inventories. It is computed as follows:
Required production in units = Expected Sales +
Target Ending Inventories - Beginning Inventories
Let us have the following examples:
Company A forecasts sales in units for January to May as follows:

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 Note: Ending inventory of current period is beginning inventory of
next period

Moreover, Company A would like to maintain 100 units in its ending

inventory at the end of each month.

-Beginning inventory at the start of January amounts to 50 units.

-How many units should Company A produce in order to fulfill the expected
sales of the company?

The answer is here:

MONTH

Jan Feb Mar Apr May Total

2,000 2,200 2,500 2,800 3,00 12,500
Projected Sales 0
100 100 100 100 100
Target level of 100
ending
inventories
3,10
2,100 2,300 2,600 2,900 12,600
Total 0
Less:
beginning 50 100 100 100 100 50
inventories
2,050 2,200 2,500 2,800 3,00 12,500
Required 0
production
Source: Teaching Guide for Senior High School, Business Finance, Published by the
Commission on Higher Education, 2016

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PROJECTED FINANCIAL STATEMENTS

Projected financial statements is a tool of the company to set

an overall goal of what the company’s performance and position will be
for and as of the end of the year. It sets targets to control and monitor
the activities of the company.
A historical financial statement is provided for you to make your forecast.
Here are the following reports that may be forecasted:
Projected Income Statement
Projected Financial Position
Projected Cash Flows
Financial forecasts assist businesses in the attainment of their goals. They
are the future predictions of finances which provide details of actual the
results or progress of performances. Predicting the financial future of a
business needs a lot of considerations especially if the business has not yet
been established and has none financial history. The forecasting and
making adjustments will enable a business to become more precise and
accurate in numbers in the future.

Projected Income Statement

Company A
Income Statements
For the years ended December 31
2014 2013 2012 2011 2010
4,310,00
Net Sales 5,250,000 4,770,000 3,910,000 3,547,000
0
3,663,50
4,305,000 3,959,100 3,128,000 2,979,480
Cost of sales 0
Gross Profit 945,000 810,900 646,500 782,000 567,520

Operating 314,750 297,890 246,231 221,500 217,538

expenses
Operating
630,250 513,010 400,259 560,500 349,982
income
Interest
250,000 250,000 250,000 450,000 300,000
Expense
380,250 263,010 150,259 110,500 49,982
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Income before
taxes
Taxes 114,075 78,903 45,078 33,150 14,995

266,175 184,107 105,181 77,350 34,987

Net Income
What Is Projected Income?
Wood, C. (2020) said the projected income is an estimate of the
financial results you'll see from your business in a future period of time. It
is often presented in the form of an income statement, although it doesn't
have to be. The chart above represents a projected income of Company A.

How It's Estimated?

Let's say the Grand Mall Supermarket is considering an expansion. You
have decided to put together a projected income statement for the following
year to see if the new products are dominating the market.

SELF –CHECK 1.3-2

Formula and Format for the Preparation of Budgets and

Projected Financial Statement
MATCHING TYPE Directions. Match column A to Column B. Write your
answer on the space provided. Column A Column B.

Column A Column B
1. This financial statement a. Forecasting
reports a Forecasting
Operations’ sales, expenses,
profits Budget Or losses for a
period of time.
2. An integral part of the b. Budget
planning
Process that makes future
predictions regarding sales
trends.
3. It is a detailed schedule c. Income Statement
showing the expected sales for
the budget period.
4. It is a detailed schedule d. Production Bud
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 showing the expected sales for
the budget period.
5. It is a detailed schedule e. Sales Budget
showing the expected sales for
the budget period.

ANSWER KEY 2.3-1

Formula and Format for the Preparation of Budgets and
Projected Financial Statement

1. Income Statement
2. Forecasting
3. Sales Budget
4. Budget
5. Production Budget

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