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CHAPTER 5.1

BUSINESS PLAN

• A business plan is a formal written description of your business future by defining your goals,
strategies to meet the goals, and the timeframe for the achievement of those goals.

REASONS OF WRITING A BUSINESS PLAN

As cited by Edralin (2016), the Department of Trade and Industry through the Bureau of Small and
Medium Enterprise Development mentioned the following reasons of writing a business plan.

1. Minimize or remove risk of losing money.

➢ Investment on poorly researched business that may result to financial instability should
be avoided. You must see all sides of the venture before letting go of any resources.
2. Avoid costly mistakes.
➢ Unplanned decisions may result to negative outcomes that may hurt the business.
3. Anticipate the financial requirements.
➢ Futuristic view of the increase or decrease of demand on the given product/service
will prepare you in meeting business obligation.
4. Organize the activities beforehand.
➢ Thinking in advance, you must look at the near and distant future. Contingency plans
must be present for anticipated concerns that may arise.
5. Assess actual performance against set goals.
➢ Having a clear goal will help you achieve your target in terms of sales, revenues or
even expenses.
6. Apply for financing from lending institutions.
➢ There are cases that financial assistance from other people or organization is needed
to start a business. A good business plan may encourage investors to entrust you their
resources but remember to be wise whenever you are lending money and make sure
to use the money for its intended purpose for the growth of the business.
In writing a business plan, you must have a specific audience in mind and answers to possible
important questions that may arise. To start, you may follow the format below (Edralin, 2016) for the
growth of the business.

i. Executive Summary
ii. Management and Organization
iii. Product/Service Plan
iv. Market Plan
v. Financial Plan
EXECUTIVE SUMMARY

• This part can be found at the beginning of the plan but is the last to be accomplished
since this synthesizes the whole plan. This contains a brief introduction and summarizes
everything that is relevant and important to the prospect business audience.
THESE ARE THE INFORMATION NEEDED TO GUIDE YOU:

➢ description of your proposed business and business model

➢ description of the market opportunity you want to capture or market problem the
business solves
➢ reasons why this is an attractive business opportunity
➢ key distinctions or differentiators of your business versus competitors
➢ overview of the sales, marketing, and operations strategy and plan
➢ description of your executive planning timeline
➢ description of your executive planning timeline
➢ overview of the projected financials containing revenues, cost, profits, and assumptions
of your business

MANAGEMENT AND ORGANIZATION

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• This part includes all the basic information of your business. This also describes the
workflow (organizational structure; the background, experience and role of each) of your
business from the highest position up to the lowest.
THESE ARE THE INFORMATION NEEDED TO GUIDE YOU:

➢ Company Name, Logo, and Address

➢ Vision and Mission Statements
➢ Key Personnel
➢ Organizational Chart
➢ Ownership Capitalization, Compensation, and Incentives
➢ External Management Support
PRODUCT/SERVICE PLAN

• This part describes the highlight of the product or service offered to the customers so that
they will be encouraged to patronize your product or service. It also explains how the
products or services will be accepted and carried by the distribution channels.
PARTS OF THE PRODUCT/SERVICE PLAN

o Purpose of your Product or Service

o Product’s/Service’s Unique Features
o Material Requirements and Sources of Supply
o Processing Equipment that will be Used to Manufacture the Product or Render the Service
o Production or Service Process and Controls
o Distribution Logistics
o Regulatory and Other Compliance Issues
MARKET PLAN

•This includes your business strategies, the target market, value proposition of your product
or services that may increase the company sales (Chen, 2019).
PARTS OF MARKETING PLAN

o Market Analysis
o Marketing and Sales Strategies
o Product or Service Characteristics
o Pricing Policy
o Sales Projection
MARKET ANALYSIS

• This includes the process of how you divide the total market into smaller groups seeking
similar needs and wants (market segmentation) and the characteristic analysis of the
business in relation to internal and external factors (SWOT Analysis).
• SWOT analysis, on the other hand, is a popular tool to evaluate the internal environment
pioneered by George Albert Smith Jr. and Ronald Christensen, two Harvard business
professors (Aduana, 2016). SWOT stands for strengths, weaknesses, opportunities and
threats.

STRENGTHS

➢ things your company does well

➢ qualities that separate you from your competitors
➢ internal resources such as skilled, knowledgeable staff
➢ tangible assets such as intellectual property, capital, proprietary technologies, etc.
WEAKNESS

➢ things your company lacks

➢ things your competitors do better than you
➢ resource limitations
➢ unclear unique selling proposition
OPPORTUNITIES

➢ undeserved markets for specific products

➢ few competitors in your area
➢ emerging need for your products or services
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➢ press/media coverage of your company

THREATS

➢ emerging competitors
➢ changing regulatory environment
➢ negative press/media coverage
➢ changing customer attitudes toward your company
▪ Strengths refer to strong attributes or capabilities of the business that provide great advantage
in exploiting the business opportunity.
▪ Weaknesses are poor attributes or deficiencies that give disadvantage to the business. Both
strengths and weaknesses are considered internal origins, meaning they are attributes inside the
business venture.
▪ Opportunities are business situations that must be exploited due to their potential in terms of
profit and growth.
▪ Threats are possible external factors that may harm the business. Both opportunities and threats
are outside origins and are attributes outside the business.
MARKETING AND SALES STRATEGIES

These are also known as the product PUSH. These have three key characteristics that allow to perform
marketing function of persuading customers to buy right away (Go, 2010).

1. Temporary

➢ sales promotions are conducted at short periods creating a sense of urgency on the
part of the customers.
2. Better Value

➢ sales promotions are used to create short-term differentiation by offering a better

product value.
3. Beneficial

➢ sales promotions promote growth sometimes even at artificial level.

PRODUCT/SERVICE CHARACTERISTICS

• VALUE PROPOSITION
➢ value proposition answers the question, why should your customers buy from you and
not from other similar businesses? These contain the convincing reasons that buyers
should see that will make them purchase your products/services.
➢ BDO: “We find ways”. Before this pandemic, while other banks operate from 8AM-
3PM Mondays to Fridays, BDO offers services until 6PM and even operates during
weekends fulfilling their promise of “finding ways” for the customers.
• PRICING POLICY
➢ This part specifies the price of the product/service. It must be noted that quality
and price cannot be separated in marketing (Aduana, 2016). You must be careful
in setting the price of your product/service considering the costs of production,
competitors’ pricing, and customers’ perception.
➢ Filipinos are generally price conscious. We tend to check the price tag of a
product first before whether to buy or not to buy a commodity. “SALE” and
“PROMO” tags are consumer magnets. In cases wherein the prices of the product
cannot be decreased, the entrepreneur should be able to give emphasis on the
benefits of his/her product to convince the customer of its value.
• SALES PROJECTION
➢ This is also called sales forecast or the prediction of the amount of revenue your
company expects to earn at some point in the future. This shows the quantity of
product sold or service rendered and its corresponding amount within a given
period.
FINANCIAL PLAN

• This is a document containing your current financial situation as an entrepreneur and

long-term monetary goals, as well as tactics to attain those objectives. You may create
a financial plan on your own or with the assistance of someone who is knowledgeable
about handling finances such as certified financial planner.
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PARTS OF A FINANCIAL PLAN

o Start-Up Cost Requirement

o Financial Projections
o Break-Even Analysis
o Budget
o Financial Plan
START-UP COSTS REQUIREMENTS - These are expenses that you will be needing during the course of
creating a new business.

FINANCIAL PROJECTIONS - These are estimates of your future profits and expenses.

BREAK-EVEN ANALYSIS - This is a financial tool that will help you determine at what stage (or period)
your company will start gaining profit.

BUDGET - This includes the amount needed for business operations as well as sources of such funds
(equal shares or through a creditor

CHAPTER 5.2

DEVELOPING A BUSINESS PLAN: OPPORTUNITY SPOTTING

1. Which of the statements best describes entrepreneurship?

➢ D. It is a science of converting ideas into business

2. What is the desired end of the entrepreneur after processing the product and services into business?

➢ profit
3. Which of the following core traits that an entrepreneur should possess in order to direct all
subordinates towards the achievement of objectives?

➢ d. good communicator
4. Which of the following common traits that an entrepreneur should possess in order to make bigger
ideas that can add value to their existing business?

➢ d. innovative
5. Which of the following traits that entrepreneurs should possess in order to attend to the different
challenges in the business environment?

➢ b. balanced
BUSINESS PLAN

➢ is written document describing the nature of the business, the sales and marketing
strategy, and the financial background, and containing a projected profit and
loss statement.
Some people think you don't need a business plan unless you're trying to borrow money. But a business
plan is more than a pitch for financing; it's a guide to help you define and meet your business goals. A
business plan won't automatically make you a success, but it will help you avoid some common causes
of business failure, such as under-capitalization or lack of an adequate market. One could not write a
business plan without going into the first process which is looking into the business concept.

BUSINESS CONCEPT

➢ is an idea for a business that includes basic information such as the service or
product, the target demographic, and a unique selling proposition that gives a
company an advantage over competitors
A business concept may involve a new product or simply a novel approach to marketing or delivering
an existing product. Once a concept is developed, it is incorporated into a business plan. To bring
about the business concept, the entrepreneur should be able to recognize an opportunity in terms of
product or services.

PRODUCT OPPORTUNITY
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➢ exist when there is a gap between what is currently on the market and the possibility for
new or significantly improved products that result to emerging trends.
Opportunity Recognition is relevant to an entrepreneur, it is the active, cognitive process/es
through which individuals conclude that they have identified the potential to create something new
that has the potential to generate economic value and that is not currently being exploited or
developed, and is viewed as desirable in the society in which it occurs (i.e. its development is consistent
with existing legal and moral conditions).

SOURCES FOR INNOVATIVE OPPORTUNITY (DRUCKER, 1985, P. 35)

• People might be wondering how entrepreneurs come up with potential products.

Systematic innovation involves “monitoring seven sources for innovative opportunity”
(Drucker, 1985, p. 35).
• INTERNALLY FOCUSED
➢ The unexpected (unexpected success, failure, or outside events);
➢ The incongruity between reality as it actually is and reality as it is assumed to be or as
it ought to be.
An entrepreneur may be able to discover opportunity such as in failures like overproduction of
fresh tomatoes thus the entrepreneur was able to preserve tomatoes through drying or boiling.

Children doesn’t choose vegetables over meat but now in reality entrepreneurs are making
ways that children will love vegie foods like shawarma, vegie dumplings, and the like. INCONGRUITY
refers to a discrepancy, a dissonance, between what is and what 'ought' to be, or between what is
and what everybody assumes it to be.

➢ Innovation based on process need;

➢ Changes in industry structure or market structure that catch everyone unawares.
In the pandemic, medical face mask become scarce to cope with the need, entrepreneurs
provided reusable facemask for non-medical practitioners.

The market competition becomes an opportunity like the popping up of convenience stores
which grew like mushrooms around the city blocks.

• EXTERNALLY FOCUSED

➢ Demographics (population changes);

➢ Changes in perception, mood, and meaning;
➢ New knowledge, both scientific and non-scientific.
Like age, status, and race, sex is an entrepreneurial bases for opportunity for each factor that
needs to be considered in providing goods and services.

The uniqueness of every individual creates differentiation of the offered goods and services like
the choice of perfume scents.

Acquired information both from scientific or in non-scientific way can easily get into the ideas
of an entrepreneur.

•Entrepreneurs discover opportunities when they search for them in existing markets. This
means they observe technological, economic, or social trends.
• Recognizing opportunities is a cognitive process. It relies on the ability of people to
recognize patterns and connect the dots.
• To identify business opportunities is to know the market and its potential.
• Entrepreneurs create opportunities when they engage with others in bouncing ideas
back and forth, and each time it becomes more specific what the user needs are and
how they are going to be solved.
• Creating opportunities is a social process. It relies on the ability of entrepreneurs to
interact.
2 WAYS TO RECOGNIZE OPPORTUNITIES:

DISCOVERY

➢ An entrepreneurial process begins with the idea generation, wherein the entrepreneur
identifies and evaluates the business opportunities.
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➢ The key is to balance your focus to ensure that you are really listening to your entire market
at the same time.
➢ Key factors in order to make solutions to the problems:
• Don’t focus only on innovation and the competition, focus in solving the problem.
• Don’t focus only on customers. Customers understand problems, but they cannot
help you to move your product forward. They know what you provide, and tend
to stay inside that mindset.
• Don’t focus only on revenue. It is critical to find a balance between prospects and
customers to ensure that your future revenue is protected, while still keeping
existing customers happy.
SPOTTING BUSINESS OPPORTUNITIES

• To spot an opportunity is to find the problem.

Anyone can spot the opportunities either by watching others having a problem or find a solution
to their own problem which many others may also be facing. Observation skills and keeping an ear to
the ground are traits of successful entrepreneurs. Spotting an opportunity is the only first step but to
convert the idea to a business requires good execution skills.

• To identify the market need is to make the solution to the problem.

The opportunity should also have sufficient market. If the market already has similar
products/services, how can one differentiate their product from others will determine whether
opportunity becomes a reality.

Business opportunities are like buses. If you miss one, there is always another one.
•
To make sure that the spotted opportunity will be delivered, the entrepreneur should
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identify the target market.
RECOGNIZING A POTENTIAL MARKET PROBLEM

MARKET PROBLEMS

➢ are your target market’s stated or silent problems which refer to existing inefficiencies,
awkward workflows, or non-optimal solutions.
WHAT DO WE MEAN BY MARKET?

•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.
WHAT’S THE DIFFERENCE BETWEEN STATED AND SILENT MARKET PROBLEMS?

• STATED NEEDS are explicit statements from your market that declare, “I want a product
like this.”
• While stated needs are important, they are not as powerful as silent needs.
• SILENT NEEDS which are problems with as yet undefined solutions.
Example:

While doing market research, a major TV manufacturer uncovered the problem that people regularly
misplace their TV remote control.

• Customers did not identify this as a problem that needed solving, but it was a common issue.
HOW DO WE EVALUATE A POTENTIAL MARKET PROBLEM?

URGENCY

➢ Is the market problem urgent?

➢ The problem needs immediate solution. Customers should care if the problem is not
solved. Customer don’t have another way to solve the problem.
PERVASIVENESS

➢ Is the market problem pervasive?

➢ The identified market problem applies to a significant percentage of your target market.
TIPS

• Use quantitative research to collect the data

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•Methods of data collection include surveys, census information and other primary market
research.
WILLINGNESS OF THE BUYERS

➢ Will your buyers pay to have this problem solved?

➢ If the problem is significantly urgent and pervasive, chances are good that customers
would agree to pay for a solution.

CHAPTER 5.3

CONCEPTS ABOUT PRODUCT AND SERVICE

•As would-be entrepreneurs, there is a need to find the right products or services for your
target market. The product or service should deliver superior customer value (Claessens,
M., 2015).
PRODUCT

• can be defined as anything that we can offer to a market for attention, acquisition, use
or consumption that could satisfy a need or want.
However, the definition of product does not only involve tangible goods such as a car, a fridge
or a phone. The definition is extended to include intangible objects as well, because they can be
offered to a market.

• Therefore, the broad definition of product includes services, events, persons, places,
organisations or even ideas (Claessens, M., 2015).
• A product is a tangible item that is put on the market for acquisition, attention, or
consumption.
SERVICES

• are special form of product which consists of activities, benefits or satisfactions offered
for sale that are intangible and do not result in the ownership of anything.
A service can thus include banking, airline travel, communication services, hotel services and
so on (Claessens, M., 2015). A service is an intangible item, which arises from the output of one or more
individuals.

THE DIFFERENCE OF PRODUCT AND SERVICE

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IDENTIFYING AND MEETING CUSTOMER NEEDS

CUSTOMER NEEDS

➢ are the named and unnamed needs of customers when they come in contact with the
different business establishments or when they search for the solutions which businesses
provide.
In addition, providing superior customer service means meeting customers’ needs by providing
them with the products and services they want or by providing effective solutions to their problems.

Similarly, innovation comes from identifying customers’ needs and providing solutions that meet
those needs (Sauro, n.d.).

WHY “IDENTIFYING CUSTOMER NEEDS” MATTER?

Correctly identifying customers’ needs is essential for ensuring customer satisfaction and loyalty.

➢ To ensure customer satisfaction, entrepreneurs must correctly identify customers’ needs.

1. Customers have unique needs.
➢ To identify needs, entrepreneurs must both listen and ask the right questions.
2. Often, customers either aren’t clear about what they need or they don’t really know
what they want.
➢ After identifying needs, always check for additional or related needs.
3. Identifying clients’ needs creates satisfied customers, and satisfied customers are less
likely to have reason to enter into disputes with the organization or contemplate legal
action.
➢ As an entrepreneur, use your knowledge and experience to identify and present
the right products, services, and solutions to meet your customers’ needs.
HOW TO MEET THE NEEDS OF CUSTOMERS?

1. Identify what the customers need through keyword research, focus groups, or social listening.
2. Distribute the information to relevant stakeholders in the organization.
3. Craft product features or create content that speaks to the customer’s needs.
4. Collect customer feedback in order to meet their expectations.

CHAPTER 5.4

OPPORTUNITY SCREENING

a rigorous process of scrutinizing, in detail, many opportunities to come up with the most
•
promising ones (Eduardo Morato Jr.)
METHODS OF OPPORTUNITY SCREENING

1. Personal Screening
2. Risk-Return Grid
3. The 12 R’s Screening
4. The Pre-Feasibility Study
5. The Feasibility Study
PERSONAL SCREEN

• DRIVE TO PURSUE
➢ Do I have the drive to pursue this business opportunity to the end?
• WILLINGNESS TO SPEND RESOURCES
➢ Will I spend ALL my time, effort and money to make the business opportunity?
• WILLINGNESS TO MAKE SACRIFICES
➢ Will I sacrifice my existing lifestyle, endure emotional hardship, and forego comforts
to succeed in this business opportunity?
THE 12 R’S
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1. RELEVANCE - opportunity must be aligned with your personal vision, mission and
objectives for the enterprise you want to set up
2. RESONANCE - opportunity must match the values or virtues that you have or wish to
impart.
3. REINFORCEMENT OF ENTREPRENEURIAL INTEREST - opportunity must match the
entrepreneur’s personal interests, talents and skills
4. REVENUES - there should be sales potential and the market are big enough to nurture
growth.
5. RESPONSIVENESS - the opportunity addresses the unfulfilled or underserved needs and
wants of customers for a better chance of succeeding.
6. REACH - the opportunity has a good chance of expanding through branches,
distributorship, dealerships or franchise outlets in order to attain rapid growth.
7. RANGE – the opportunity can lead to a wide range of possible products or service
offerings thus tapping many market segments.
8. REVOLUTIONARY IMPACT - the opportunity can be the “next big thing” or a “game-
changer” that will revolutionize the industry.
9. RETURNS - the opportunity can produce products with low costs of production and
operations but are sold at higher prices thus yields the highest returns on investments.
10. RELATIVE EASE OF IMPLEMENTATION - the opportunity will be relatively easy to implement
and has less obstacles and competency gaps to overcome.
11. RESOURCES REQUIRED - the opportunity that requires fewer resources is more favorable
than those requiring more.
12. RISKS - the opportunity should bear minimal risks as possible when it comes to
technological, market, financial and people risks.
THE 12 R’S POSITIVE AND NEGATIVE INDICATORS

• POSITIVE INDICATORS
➢ Relevance
➢ Resonance
➢ Reinforcement of Entrep’s Interest
➢ Revenues
➢ Responsiveness
➢ Reach
➢ Range
➢ Revolutionary Impact
➢ Returns
➢ Relative of Ease of Implementation
• NEGATIVE INDICATORS
➢ Resources Required
➢ Risks
❖ The higher the score with these indicators, the better.
❖ The lesser the score with these indicators, the better.
RISK-RETURN GRID

• Determine the best and worst opportunities. Fill out the numbered cells with FAIR, GOOD,
BEST, BAD, & WORST.

RISK Low Risk Medium Risk High Risk

RETURN
High Return 1 4 7
Medium Return 2 5 8
Low Return 3 6 9

RISK Low Risk Medium Risk High Risk

RETURN
High Return BEST GOOD FAIR
Medium Return GOOD FAIR BAD
Low Return FAIR BAD WORST
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PRE-FEASIBILITY STUDY

• Market Potential and Prospects

• Availability and Appropriateness of Technology
• Investment Requirements and Production Costs
• Financial Forecasts and Financial Feasibility
MARKET POTENTIALS

➢ based on the estimated numbers of possible customers who might avail of the product
or service
Customers makes the final choice on what to buy according to several factors such as:

1. their purchasing power or disposable income;

2. proximity or accessibility to the goods or services;
3. individual desires and preferences;
4. age or generational groupings;
5. their social, cultural, or ethnic background;
6. peer group preferences;
7. gender;
8. season of the year;
9. personal identification with trend setters;
10. educational attainment;
11. technical proficiency and product expertise;
12. motivational impetus;
13. lifestyle preferences;
14. susceptibility to certain advertising and promotional appeals and many others.
• MARKET ESTIMATION is the most difficult task of the entrepreneur because of many ways’
customers can be divide and segmented.
• SEGMENTING the market will be the most basic approach in determining the target segment. If
you want to go into more details, then you might have to look for other specific classifications
that are relevant to the market you are targeting such as psychological profiling and lifestyle
preferences of the different customers segments.
• ASSESSING COMPETITION – this process would determine how saturated the market is in the
given area or coverage.
2. TECHNOLOGY ASSESSMENT & OPERATIONS VIABILITY

1. QUANTITIES DEMANDED
➢ this would determine the needed capacity of operations
2. QUALITY SPECIFICATIONS DEMANDED
➢ this would dictate the quality of input or raw materials, goods in progress and the quality
output
3. DELIVERY EXPECTATIONS
➢ knowing how much, how frequent and when to deliver to customers
4. PRICE EXPECTATIONS
➢ selling price of the product or service would be evaluated by the customers according
to the value they would receive and this vale added be matched against competitors.
3. INVESTMENT REQUIREMENTS AND PRODUCTION/SERVICING COSTS

1. PRE-OPERATING COSTS
➢ these are the cost related to the preparation for the launch of the business
2. PRODUCTION FACILITIES INVESTMENT
➢ refers to the long-term investment for the actual business establishment including
investment in land, building machineries and the likes
3. WORKING CAPITAL INVESTMENT
➢ this is needed to operationalize the business composed of cash, accounts receivables
and inventories.
4. FINANCIAL FORECASTS & FINANCIAL FEASIBILITY

1. Income Statement
2. Balance Sheet
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3. Financial Ratios & Measurements

INCOME STATEMENT

• A financial instrument that measures an enterprise’s performance in terms of revenues

and expenses.
BALANCE SHEET

Financial report of a company's assets, liabilities and shareholders' (owner’s) equity at

•
a specific point in time, and provides a basis for computing rates of return and
evaluating its capital structure.
FINANCIAL RATIOS & MEASUREMENTS

•Financial computations that will show how long will it take to get back the
investments, the rate of return on sales and rate on return on investments.
FEASIBILITY STUDY

➢ is a formal project document that shows results of the analysis, research and evaluation
of a proposed project and determines if this project is technically feasible, cost-effective
and profitable.
PRIMARY GOAL:

➢ to assess and prove the economic and technical viability of the business idea.
WHY NEED A FEASIBILITY STUDY?

1. for bigger projects that entail millions of pesos worth of investment.

2. to convince the investors to put money into the business opportunity.
FEASIBILITY STUDY OUTLINE

• Introduction
• Product or Service
• Technology
• Market Environment
• Competition
• Industry
• Business Model
• Market and Sales Strategy
• Production Operations Requirements
• Management and Personnel Requirements
• Regulations and Environmental Issues
• Critical Risk Factors
• Financial Predictions Including: Balance Sheet, Income Statement, Cash Flow Statement,
Break Even Analysis, and Capital Requirements
• Conclusion

FEASIBILITY STUDY VS. BUSINESS PLAN

• The feasibility study would be completed prior to the business plan.

• The business plan is developed after the business opportunity is created.
• The feasibility study is about viability.
• The business plan is about growth and sustainability.