The Entrepreneurial

Mind
JASMIN S. ACOSTA
Instructor
 Chapter 7
Developing a Business Plan
Topic Outline
• Introduction
• Environmental Scanning
• Strengths, Weaknesses, Opportunities, and Threats (SWOT)
• The Identification of Business Opportunity
• Tips in Choosing the Business Name
• Organizing the Business Enterprise
• The Event Formation Process for Entrepreneurs
• Business Plan
• Basic Phases of Business Plan
• General Format of a Comprehensive Business Plan
• Micro Business Plan
Learning Objectives
• Discuss the factors that should studied before venturing a new
business;
• Explain the importance of environmental scanning;
• Explain the importance of selecting the proper business location;
• Discuss the important role of SWOT analysis before starting the
business;
• Discuss the importance of a business formation;
• Give the different phases of a business plan; and
• Prepare a comprehensive business plan.
INTRODUCTION
The entrepreneurs are not discouraged with the constraints
along the causes of our economic malady. It should be turned
into positive and new solutions must be made to make them
different from other individuals. There are lots of opportunities for
entrepreneurs who are hardworking, creative and resourceful.
Business opportunities are wide open for people who would like
to invest their money into gainful business activities. They need
to find out this new venture that interests them and how they can
harness their technical knowledge of the trade.
DISCUSSION
1. Environmental Scanning
2. Strengths, Weaknesses, Opportunities, and Threats (SWOT)
3. The Identification of Business Opportunity
4. Tips in Choosing the Business Name
5. Organizing the Business Enterprise
6. The Event Formation Process for Entrepreneurs
7. Business Plan
8. Basic Phases of Business Plan
9. General Format of a Comprehensive Business Plan
10.Micro Business Plan

(Source: https://www.needpix.com/photo/914323/entrepreneur-digital-marketing)
 The search for business opportunity should start with the individual
entrepreneur. He has to find out the skills and talent for that particular type of
business activity. His talent and skills are beginning of his great investment in
the trade. He must have the passion for independence and willingness to
work hard and long to keep up with his dream of being an entrepreneur.
Before venturing into the field of business, the new entrepreneur should
look into the following factors:
1. Know your product or service.
First, one must believe on the product or service that one will offer to the
costumer. If it is a new idea or concept, then one must be able to convince
that have a unique product that would satisfy costumers’ needs and wants.
2. Analyze the market potentials.
The costumer base will determine the success of one business
venture. The wider the market potential, the more changes of growth and
success.
3. Determine the marketing strategy.
A unique product or service needs effective distribution strategy to get
costumer into the basket of demand potential. Continues supply
determines product growth. Costumers must have access to the product
when they need it.
4. Know the competitors.
In launching a product existing competitors, one must know their
strengths and weaknesses. Develop new product and marketing strategy
and turn their weaknesses as new opportunity for the product.
5. Do not set your laurels.
The landscape of business is continuously changing. Your initial success
in your business activities needs more proactive analysis for expansion and
growth and overcome possible competitors. Develop advertising and
promotion strategy to penetrate the wider market.
ENVIRONMENTAL SCANNING
The environmental of business is vast with opportunities and the
entrepreneur must have a greater look into this potential as well as
the conditions prevailing in the community. The entrepreneurs’
ultimate objective in diving into the business world is to make profit.
Investment in money and effort should generate financial gain for the
entrepreneur. To generate income for his product of service he must
be able to deliver customer satisfaction.
The following factors are contributory to the development of customer
satisfaction:
1. Business Location for Small Entrepreneurs
A retail outlet would need a site that is convenient to prospective
costumer in terms of parking space or availability and transportation. A
restaurant or an entertainment center would need ample parking area
where costumers would not worry on where to leave their cars while
enjoying their stay. The same could be true with a grocery store.
In choosing the location, the following factors must be looked
into by the entrepreneur:
a. Rent and Space – the cost of rent is a regular monthly
expense and it must be sustained with the possible income
that will be generated. It is the operating cost that will be
added to the price to the product or service. The price input
must be competitive enough with those in the same location.
b. Terms of Lease of Merchandise – The term of lease must
be studied carefully as some owners of space might take
advantage of lessee. The owners increase the rent of the space
when the business condition becomes favorable and then take
over the business.
c. Type of Goods or Merchandise – A convenient store is
located where there are pedestrians passing by. They need
quick and easy access to the store and would not spend a lot of
time to purchase their goods.
d. Income Level of Prospective Customer – The type of
pedestrians and the income level of costumer must be taken in
to account. A good barber shop or a beauty salon with facilities
of air conditioning units and other amenities need to be located
in the community with higher income bracket.
e. Prospective Sales Volume – High density sales volume
need to be located in shopping areas where customers
converse to buy essential goods. Lower sales volume could be
located in the community or secondary areas like subdivisions
or the BARANGAY.
f. Municipal or City Ordinances including taxes and fees –
The location must not violate city or municipal ordinances and
the taxes and fees must be reasonable for the owners of
business. Excessive taxation will not encourage the growth of
business in the area.
g. Location of the Areas – The area must be free from floods
and other calamities that will endanger the business. It must be
free from fire hazards or other environmental factors that will
disturb the operation of the business.
2. Location for Small industrial Plant or Manufacturing
Facilities
Environmental factors in locating a manufacturing plant or
industrial facilities need to be studied carefully as plant location
is a great factor in the investment of funds and its profitability in
the long run. The industrial facility must be suitable to the kind
of operation. It must comply with government zoning regulation
related to population and environmental laws.
The following are important factors to consider:
a. Land Area – The contour of the land, its size, and shape must be suitable
to the plant site. It must be free from floods or other environmental hazards
that will disturb operation.
b. Facilities and Expansion – The land area must have ample space for
plant expansion and provisions for parking facilities for customers and
employees.
c. Power and utilities – availability of power supply and the cost of
electricity involve in the operation are great factors in the production of
goods. Continuous power supply is needed to keep the plant in operation for
its target production. Water supply is also needed and the proper disposal of
waste must be put in place to comply with environmental law.
d. Building and Other Utilities – The building must be within the
restrictions code of the municipality or city. The utilities like canteens and
other employees’ facilities must be put in place in compliance with the labor
code. Sidewalks and gutters are important component in employees’ safety
while in the plant site. Fire safety and hazards signs are mandatory
requirements.
e. Plant Site Accessibility – The plant site must be accessible to public or
service transport for its employees and valued customers. It must be near
highways or expressways to provide ease in travel time and reduce cost in
he transport of raw materials and finish product. Delay in transport systems
and added cost that must be avoided.
STRENGHTS, WEAKNESSES, OPPORTUNITIES,
AND THREATS (SWOT)
SWOT ANALYSIS is an entrepreneurial tool in the profitability of
the business operation. Opportunities carries with it some risk involved
and this should be looked into carefully. The strengths and
weaknesses are internal factors to the entrepreneur while the
opportunities and threats are external factor.
The product must be evaluated along the following areas:
1. Product strength in the market must have the following:
a. Available technology in product processing – Technology is an
important component in producing the product as the economies of scale
determines the price index. The more products are produced, the lower the
price it can be offered to the market.
b. The Source of Raw Materials must be Abundant and at Lower Price
– The constant supply of raw materials is an important factor in the
production of the product. Cheap raw materials that are processed into
good products would be able to penetrate the market as its price could be
competitive.
c. Skilled Workers must be Available- Technology must have the
component of skilled workers that shall operate the machineries and other
equipment. They may need training in machine operation as quality
products also come from skilled workers.
d. Capital Investment in Machinery and Operating Expenditures – A
starting venture may have little investment in terms of machinery and
equipment but starting with small capital should generate profitable
operation.
e. Expertise and technical Skills of the Management Team – A good
product is the making of well-conceive idea of the management team.
Improvements in products quality is a continuing process and it must be the
management objective to get customers patronage.
2. Characteristics of Weak products and Weak Management

a. Poor quality and High Price – the entrepreneur should not launch a
poor product in the market as it will surely fail to advance in the sales
and profit. It is not wise to invest in the production of poor products.

b. Product design and Appeal – Product design should appeal to

customers demand. Poor design of the product is making of people
with no technical expertise in handling the customer wants in terms of
features. Artistic designs are conceptualized and approved by the
possible users.
c. Product Cost – Production costs is the price determinant.
Entrepreneurs cannot make maximum profitability on products whose
production cost cannot survive market competition.

d. Supply and Demand – Intermittent supply to the market will make

customers shift to other products. The supply chain management must
be put in place to make products available to valued customers.

e. Weak product Management – weak management is created when

people at the top of the organization fail to sustain a vigorous effort for
expansion and growth when management sets on his initial laurels and
ventured on vices and other extra activities that will lose his total
investment.
3. Sustainable Product opportunities in the Market:
a. Product Demand – Product demand is the greatest opportunity of
an entrepreneur. Demand is the essence of profit and this must be
sustained by the entrepreneur before wide competition appeared in
the market place.
b. Presence of Poor Quality in the Market – The presence of poor
quality product in the market place is an opportunity for the
entrepreneur. The alternative is on the side of the entrepreneur to
supply the market with quality product and sustain patronage.
 
c. Government Policies and Support – The government support to
local entrepreneur is an opportunity for grater expansion. The
government should support the local entrepreneur in terms of taxes and
government activities.

d. Liberal Credit terms and Interest Rates – Liberal credit terms by

banks and other government institutions will generate expansion for the
local entrepreneurs. Banks and financing institutions serve as conduit of
business in their expansion program.
4. Threats to product and Market expansion:

a. Entrance of competition – The entrance of many competitors in the

market place will definitely give problem to entrepreneurs. Competition will
reduce profitability as the price has to be competitive with those in the
market place.

b. the supply of raw materials will be limited as other competitors will

be getting the same supplier – As demand for raw materials become
competitive in prices, production inputs go higher and this will affect
product pricing. Increased production cost means changes in product price.
c. The Emergence of Leftwing Labour Unions – Many companies close
shops with the advent of labour unions with leftist philosophy as they want
more wages and benefits that the company could give.

d. The Presence of Double Taxation – The government already imposed

a lot of taxes to the entrepreneur. Honest businessmen could not profit in
their operations as there are lots of taxes that government would like to
collect.
e. Peace and Order in the Area of Business Operation – Peace and
order are components of business growth. Criminality and killings would
drive away investors. Killing competitors by those ridding in tandem
syndrome scares people to go into business. Hold up gangs and robbery
syndicates are not good to business growth.
 
f. The cost of Power Supply – Cost of production increases with the cost
of utilities like current and water. The government private partnership in the
operation of power and water utilities has increased the cost of power by
about 400 percent.
The Entrepreneurs should look deeper into the following areas:

1. The management Team

Management must be able to set the direction of the enterprise with a clear
MISSION and VISION as the guiding tool for its plans and programs. Plans and
programs are tentative activities that will make a definite step towards the
accomplishments of target objectives. Objectives set into motion and goals of the
enterprise to profitability.
The technical and manpower complements are important factors in the success of
the business. The entrepreneur cannot do the task alone as he needs people with the
same outlook and perseverance as he has, especially at the early stage of the business.
They must work hard, persistent and must focus on the vision and mission of the
business.
2. The Production Process
Product specification must be maintained according to product standards
that are acceptable to costumer. Product quality is now the name of the game
in business. Customers are now aware of product quality and they must be
able to get their money’s worth. The physical properties must be attractive and
mechanical or electronic component must appeal to customers demand.
The management must look up into cheap available raw materials in the
production of goods. Good quality materials should not be sacrificed in terms of
price as poor quality will affect the production of quality products. Quality and
price must be looked into carefully by the management.
3. The Marketing Program
The marketing program needs demand analysis for the last 5 years as to
the major users of the product. A new product would need customer view point
before it is launched into the market. Product samples may be necessary at the
initial stage so that customers’ tastes and preferences could be considered
before mass production.
The demographic profile of the target customer must be taken into
accounts as the success of the product depends on the target customer. The
target market must be specified accordingly and their needs and wants must be
satisfied. Customers would like to have a lot of choices yet when they like
product we turn them into regular customer.
4. The Financial Management
Venturing into a business needs financial resources. Money is needed to
finance the activities of business. Whatever capital is available determines the
kind of business operation. Many small entrepreneurs start with limited capital
but they were able to make business empire as they knew how to invest their
money in profitable operation. Savings and wise investments are
characteristics of successful business entrepreneur.
The internal source of capital will come from the savings and assets of the
starting entrepreneur. Liquid assets in cash or banks are the usual starting
point. Real properties and personal properties may be put in as guarantee for
loans that may be used for operating expenses.
THE IDENTIFICATION OF BUSINESS OPPORTUNITY

The entrepreneur’s desire to establish his business is visible idea yet it

must come into a test whether it is a visible business option. It needs a
careful analysis of opportunity evaluation. The entrepreneur who fails to
evaluate his noble idea because of his eagerness to plunge into the
business world often discovers later that he has more problems to solve
and at times abandons the idea after spending his time and money.
The following steps will help the prospective entrepreneur evaluate the idea
before going into business:

1. The Starting Point of Conceiving the Idea of the type of Business

Conceiving a new product is a process of innovation and when this come
into a reality, the product must be different from an existing product. New
product needs customer evaluation and his process needs exposure to the
target market as to its economic value. This new product must satisfy
customers’ needs and wants. It needs market exposure and public acceptance
before it could take off the ground.
2. The Technical Feasibility and Time Frame
 
An idea is not only concentrated on one entrepreneur. The entrepreneur
might have conceived an idea that is also in the mind of other person. The case
of cellular phone is a concrete example. Many companies tried the venture but
the leader in the industry is till NOKIA. Others begin to follow the strong
completion emerged in the process but the leading brand has taken off the
ground before others followed tailing behind.
TIPS IN CHOOSING THE BUSINESS NAME
1. Easy to recall or remember – The business name must be
understandable so it is easily stored in the memory.
2. Pleasant meaning creates pleasant feelings – It produces positive or
favorable feeling upon saying or mentioning to the public.
3. Easy to pronounce – the business name must be cited as freely as it
can be.
4. Easy to spell – The business name must be simple. Words that are
used in everyday communication will be an advantage.
5. Related to the product – The business name must describe the
product. It represents the features of the product.
ORGANIZING THE BUSINESS ENTERPRISE
  The prospective entrepreneurs before going into the
intricate field of the business world should first go into deep
analysis of their personal and social attitudes. It is not enough
that you have the capital and resources to go into business
as it involves not only material assets but personal values
and characteristics. Before venturing into the field of
business, It is wise to develop entrepreneurial studies that will
help determine the feasibility of the project.
1. The Desirability of the Business Concept
The desirability of the business concept is usually born by the
experience of the entrepreneur from his previous employment or exposure.
The take-off the business comes from the idea generated for the
prospected income.
2. The Feasibility of Implementation
The business project must be feasible whether it is an entirely new
venture or an expansion. It must be able to produce or sell products or
services for an attractive rate of return of investments to the entrepreneur. It
requires intensive planning and analysis of the market conditions prevailing
in the community.
BUSINESS PLAN
An entrepreneur must see for himself the kind of management control
and how the business will be able to generate his projected profitable
investment. He sees the wide open market of opportunities and the
possible problems before he plunges into the intricate operation of the
enterprise. Wise investment through a careful analysis of the business
environment would minimize business failure.
The following steps in the business formation have been done by
entrepreneurs that applied a more scientific study of the business
conditions. A business project either new or an expansion must undertake a
careful planning of the project which will serve as guide in the
implementation.
In creating or searching to business opportunities, one must consider the
following factors:
1. The needs of the society
2. Availability of capital resources
3. Business inclination
4. Clientele
5. Availability of raw materials
6. Human resources
7. Nature of product or service
BASIC PHASES OF BUSINESS PLAN
1.Management Structure and Component
It is designing form of ownership of the business which at the
outset is known to the investors. It shall also define the
organizational structure of the organization and the operational
system that must be put in place. It shall define the duties and
responsibilities of the people in the organizational structure.
Management should organize different operating departments and
delegate corresponding authority.
2. Marketing and Distribution System
The marketing and Distribution Study shall deal with product
demand analysis. It should show the competitive product advantage
over existing product or service and designing the marketing
program of the enterprise. It should analyze market share and
system of promotion, distribution, advertising media and other
marketing mix strategies to ascertain product market acceptance
and patronage.
3. Production and Technology
  Production and technology Studies refer to the need in making
product or service. This refers to the machineries, plan location, and
other technical aspect in the making of the product. It shall describe
the physical layout of the building and the equipment that will be
used in production. For services, it shall specify the equipment that
will be used and the manpower needed to render the activity.
4. Financial Management
  The Financial Management aspect refers to the capital
investment and sources of funding the operation of the
business. It shall show financial projections over a period of
one year and five years program and shall determine the rate
of return on investments. It must be able to show the return on
equity and break even sales as well as pricing sensitivity test.
GENERAL FORMAT OF A COMPREHENSIVE BUSINESS PLAN
 
I. INTRODUCTION
  The introduction contains the rationale and the background of the study
undertaken. It should include the importance of the project and the proponent’s
background and their desire to establish the business.
II. PROJECT SUMMARY
A. Name of the Firm
B. Business Location
C. Brief Description of the Business
1. Brief history or how the business was organized.
2. Highlights of the findings in every phase of the business study.
 
III. MANAGEMENT AND PERSONNEL COMPONENTS
IV. MARKETING STUDIES

A. Market Profile – This refers to the market segmentation for the distribution of the
product or service. The study must cover the possible users of the product and how to
reach the particular market segments.

B. Demand Analysis
1. Projected consumption in the first year of operation, then Five years and ten
years operation.
2. Major segment users of the product and their location.

C. Supply Analysis
1. Source of Product Supply.
a. Foreign Suppliers
b. Local Suppliers
2. Factor Analysis of the past and Future Supply Chain.
D. Competitive Analysis

1. Selling Price – This refers to the selling price of the product.

2. Competitions – It refers to the competing product in the markets as to its
quality and market acceptability.
3. Distribution and Cost of Transportation – It refers to the transfer or
movements of products from the producer to the ultimate user. The usage of
different vehicles and ways to transport the product should be easily defined.
4. Channel of Production Distributions – A mean of reaching the target
market or it is the method or strategy to penetrate a particular market segments.
5. General Competitive Practice – It is the analysis of how competitors
distribute the product to existing users.
E. Program Analysis of Marketing Strategies

1. Geographic Segmentation Strategy – This refers to the place of target market

and the approaches to penetrate the market niche.

2. Psychographic Strategy – The educational background and the lifestyle of

target market.

3. Demographic Segmentation Strategy – It means the target market as sex, age,

Income and the other personal factors of the target market.

4. Pricing Strategy – This has something to do with the price index of any pricing
strategy that will attract customers. a

5. Channel of Distribution – The choices could be retailers, wholesalers,

dealership, franchise, or direct marketing.

6. Promotion and Advertising – Media network, personal selling, billboard, or any

media penetration strategy.
V. PRODUCTION
 
A. Product Specification – It tells about the product or service that the
entrepreneur will offer to its target market. It is an elaborate presentation of the
properties of the products and the benefits related therein. It is the service that
will be offered to the target consumer.
B. Production of Process – It is the detailed layout of the production process
as the products hoes into the production line indicating the flow process,
materials and equipment to be used and normal time table that the product will
be finished.
C. Plant Related Capacity – This refers to the volume of production per shift
per day or a monthly basis considering target market consumption. It must also
make projections for five years forecast and the technical factors involved.

D. Machinery and Equipment – It involves the kind of machine to be used, its

sources, spare parts, working guarantees, rated capacity per day, and the cost
estimates involved in its purchase.

E. Plant Location – A drawing or plant location and the vicinity map as to its
accessibility to supply or raw materials, and the transport of finished product to
the market. It must show advantages and other plus factors for employees and
other services.
F. Building and Facilities – It must describe the type of building that will be
constructed or sketch of the building plan, electrical plants, drainage, and other
utilities. It must contain the cost estimates involved and the total floor plan.
 
G. Raw Materials – It deals with the raw material requirements and its
specification, its source, cost and terms of payment, availability and the
possible long term supply. It must also show alternative suppliers of other
sources.
H. Power Supply and Utilities – Utilities refer to the supply of electricity, water,
and its availability in the processing of the product. It also has to do with
environmental disposal of waste and compliance with government
requirements. Drainage system has to comply with sanitary requirements
imposed by municipal and national laws.
 
I. Product Cost – This refers to the direct labor and administrative cost in the
processing the products. Unit cost must be computed as basis for pricing the
marketing strategies.
VI. FINANCIAL STUDIES
 
A. For New Business Venture

1. Total Project Cost – This has to do with the entrepreneur fixed cost and the
working capital in the operation of the business.

2. Capital Investments Required.

3. Pre-operating cash flow and its relation to time-table – financial

projections for the first year of operation, for the five year operation in projected
balance sheets and income statements.

4. Supporting Schedules in the Financial Statements and Income.

a. Collection Period for Projected Sales or Revenue
b. Inventory Levels
c. Payments for Purchases and Expenses
d. Production Costing, Administrative Expense and Cost of Sales and other
Projected Financial Expenses.

5. Projected Financial Estimates showing return on investments, return on

equity, break-even analysis, price analysis.
B. For Existing Project
1. Audited Financial Statement – last 3 years
a. Balance Sheet
b. Income Statement
c. Cash Flow
2. Fixed Assets, Capital Investments, Depreciation used in Capital Assets.
3. Tax Assessment, Liabilities, and other Payables.
4. Financial Trends and Ration Analysis.
5. Financial Cost for Administrative Expenses, Production and Selling Expense.
6. Financial Projection for the Next Five Years.
7. Financial Analysis for Return of Investment, Return of Equity, Break even
Analysis, Production Volume and Price Analysis.
MICRO BUSINESS PLAN
 
The major objective of business plan is to assess, examine and analyze
the viability or feasibility of the study. Business plans is the ticket to
success. It is also a blueprint to success and document details what you
plan to do with your business, according to Elizabeth Manuel, Chief of the
Trade Business Management Division of the government run Philippine
Trade Training Center.
A. Executive Summary
Synopsis of your business plan so ideally, this part should be written last in
order to include all the necessary information and target points of the document. You
must possess the ability to predict the financial path or your venture in correlation to
the present economy. If your external analysis tells you what you can and cannot do,
your internal analysis tells you are able or not able to do.
B. Marketing Plan
Push or pull, you must be able to tell how fast or slow tour product will move in
the market, whether it would make use of a push or pull strategy or both. The push
strategy tells how I will move my products to the marketplace, while the pull strategy
tells how I will make customers ask for my product. The pull strategy promises, the
push strategy outlines what makes the business stay.
C. Operations Plan
Ernesto Pineda, director of the UP, Institute of Small Scale Industries, Defines
the operations plan as the company’s expected sales for the coming year and the
costs of running the business in general. It keeps track of the business performance
for its conception down to its purchase. Determining the number of people to hire to
keep your perspective business running smoothly is also a must. Managing your
inventory and computing the production costs ate crucial at this point so you can
project possible profits.
D. Financial Plan
According to Dr. Ferreria, “you financial plan must show much money is needed
to generate sales; how much is going to be spent on a particular item; and how
much will be borrowed and paid” The income statement describes your company’s
ability to generate cash by computing for sales and expenses. The balance sheet
shows your financial condition by accounting for your assets (cash, receivables,
inventory, equipment, property, investments) and liabilities (accounts payable,
salaries, taxes, and bonds, notes and mortgage payables).