Book Title

BookBook
Students Title
Students
FET FIRST
Book
Level 3
NATEDFET
Series
FIRST

Level
Author 3
Entrepreneurship and
Author
Business Management N4

Student's Book

Brian B. Brown
 FET FIRST Entrepreneurship and Business Management N4
Students Book
B. Brown, 2012

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Author: Brian B. Brown

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Contents
SYLLABUS GRID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Module 1: The challenges of entrepreneurship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Unit 1.1 The roles of entrepreneurs and intrapreneurs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Unit 1.2: Personal qualities of the entrepreneur. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unit 1.3: Personal resources of the successful entrepreneur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Unit 1.4: Economic importance of the entrepreneur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Unit 1.5: The merits of entrepreneurship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Unit 1.6: Why entrepreneurs fail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Unit 1.7: How to avoid the pitfalls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Unit 1.8: Task A self-analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Module 2: Creativity and idea generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Unit 2.1: Ideas and opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Unit 2.2: Innovation and creativity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Unit 2.3: Generating ideas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Unit 2.4: Creativity methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Unit 2.5: Protecting your ideas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Unit 2.6: Turning ideas into opportunities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Unit 2.7: Applying the creativity methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Unit 2.8: Selecting an opportunity for which to construct a proposed business plan . . . . . . . . . . . . . . . . . . . . 30

Module 3: Market feasibility study. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Unit 3.1: Detailing a product in a feasibility study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Unit 3.2: Identifying the market position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Unit 3.3: Marketing information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Unit 3.4: Applying market research techniques to test the market potential of a product. . . . . . . . . . . . . . . . . 44
Unit 3.5: SWOT analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Unit 3.6: Competitive advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Module 4: Financial feasibility study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Unit 4.1: The importance of financial feasibility concepts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Unit 4.2: Start-up costs, fixed assets and pre-operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Unit 4.3: Total operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Unit 4.4: Sales scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Module 5: Introduction to the business plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Unit 5.1: Elements of a business plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Unit 5.2: Where to find assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Unit 5.3: Naming the business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Unit 5.4: Completing the sections of a business plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Module 6: Marketing plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Unit 6.1: The marketing mix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Unit 6.2: Pricing for profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Unit 6.3: Promotion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Unit 6.4: Place or point-of-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Unit 6.5: Preparing a marketing plan for your business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Module 7: Management plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Unit 7.1: Types of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Unit 7.2: Which form of ownership?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Unit 7.3: Legal formalities for establishing a business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Unit 7.4: Owner involvement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Unit 7.5: Key personnel and responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Unit 7.6: Operating plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Unit 7.7: Equipment analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Unit 7.8: Supplier analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Unit 7.9: Office administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Unit 7.10: Preparing a management plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Module 8: Financial plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Unit 8.1: Sources of finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Unit 8.2: Financial management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Unit 8.3: Creating projected financial statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Unit 8.4: Loan requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Unit 8.5: Preparing a financial plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Module 9: Presenting and evaluating a business plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Unit 9.1: Presenting a business plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Unit 9.2: Evaluating a business plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Syllabus Grid: Entrepreneurship and Business Management N4
Page in Learning content Learning objectives
SB Students should be able to
Module 1: The challenges of entrepreneurship
1 1. Entrepreneurship 1. define the concept entrepreneurship
1 1.1 The role of entrepreneurs and intrapreneurs 1.1 distinguish between the role of
entrepreneurs and intrapreneurs
3 1.2 Personal qualities of the entrepreneur 1.2 name and briefly describe the qualities of
Confidence in their ability to succeed the entrepreneur and apply to case studies
Preference for moderate risk of successful entrepreneurs; complete a self-
Desire for responsibility analysis
Energetic
Identify opportunities
Skill at organising
Urge to achieve
Desire for immediate feedback
4 1.3 Personal resources of the successful 1.3 name and describe their personal resources;
entrepreneur list their strengths and weaknesses, possible
Knowledge and skills assistance to their businesses and calculate
Contacts and friends their net worth (assessing their investment
Finance (personal assets and liabilities) capabilities)
7 1.4 Economic importance of the entrepreneur 1.4 briefly discuss the economic importance of
Developing of natural resources the entrepreneur, especially with reference
Creates employment opportunities to the South African situation
Leads in production
Free market system dependant on
entrepreneurs
8 1.5 The merits of entrepreneurship 1.5 name and explain the advantages and
To gain control over your own destiny opportunities of entrepreneurship
To reach your full potential
To reap unlimited profits
To contribute to society and be
recognised for your efforts
9 1.6 Why entrepreneurs fail 1.6 name and explain the reasons why
Management incompetence businesses fail; discuss how they as future
Lack of experience entrepreneurs can overcome these
Poor financial control problems
10 1.7 How to avoid the pitfalls 1.7 name and describe the reasons why
Prepare a business plan businesses succeed
Know your business
Understand financial statements
Learn to manage people effectively
Entrepreneurial transition
15 1.8 Task: Complete a self-analysis, as well as 1.8 obtain a mark for this task which will
listing personal strengths and personal contribute to the practical mark for the
investment capabilities. semester
Didactic directives
1. Enthusiasm for entrepreneurship must be inspired in students. Students should feel excited and motivated
about discovering their entrepreneurial potential, as well as the available opportunities and possibilities.
2. Students must complete a self-analysis as an entrepreneur, as well as listing their personal strengths
and weaknesses, possible contacts and personal investment capabilities (including personal assets and
liabilities).
3. Students must be enabled to apply this knowledge to case studies of successful entrepreneurs and in issues
of social responsibility and ethical standards.

v
Page in Learning content Learning objectives
SB Students should be able to
Module 2: Creativity and idea generation
17 2. Creativity 2. discuss the concept creativity
17 2.1 Ideas and opportunities 2.1 explain the difference between an idea and
an opportunity
18 2.2 Innovation and creativity 2.2 describe the importance of innovation and
creativity
19 2.3 Generating ideas from: 2.3 name and explain the process of generating
Everyday activities ideas; provide examples and list the ideas
Other sources according to the three categories by
Generic needs practically exercising the process in the
classroom
21 2.4 Creativity methods 2.4 describe the various methods available
Existing concepts for creating ideas and opportunities; by
Attribute analysis applying and practising the methods in the
Problem redefinition classroom list examples of ideas generated
Forced connections in groups; generate as many ideas as
Mind mapping possible from which to make their final
Brainstorming selection
Metaphorical analogy
23 2.5 Protecting your ideas 2.5 name and explain the procedure for
Secrecy protecting their ideas, products, patents,
Patents etc.
Trademarks
Copyright
27 2.6 Turning ideas into opportunities 2.6 list their ideas and turn them into
opportunities
27 (i) Identify the good ideas: (i) explain how the ideas can be tested against
match ideas to your personal resources their own abilities, skills, family needs, etc.;
strengths, contacts and finance practically assess their idea against these
criteria
28 (ii) Identify opportunities (ii) describe the process of identifying
will it be worthwhile? opportunities; describe and explain the
will I make a profit? concept of feasibility with the aid of a
checklist (identify the factors that are
Profit: Difference between the selling price and critical to the success of their opportunities);
the cost price. Multiply by the number of items describe and calculate the profitability
sold and subtract the expenses.
29 2.7 Task: Apply the creativity methods to turn 2.7 obtain a mark for this task, which will
ideas into opportunities for your small contribute to the practical mark for the
business semester
30 2.8 Business plan: Students must select their 2.8 decide on an opportunity for which they will
specific product or service construct a proposed business plan
Didactic directives
1. The practical functioning and application of the creativity process must be emphasized throughout.
2. Students must complete a task on the creativity methods to turn their ideas into opportunities.
3. Students must decide on an opportunity/business idea for which they will construct a proposed business
plan.
4. Students must be enabled to apply this knowledge to cane studies of successful entrepreneurs.

vi
Page in Learning content Learning objectives
SB Students should be able to
Module 3: Market feasibility study
33 3. Importance of a feasibility study 3. define the concept; briefly explain the
importance of a feasibility study
34 3.1 Product description 3.1 describe the concept product; and give a
detailed description of their specific product
or service
34 3.1.1 Nature of product 3.1.1 describe the nature of a product with
Industrial products reference to the classification of products /
Consumer products services
Services
35 3.2 Identify the market position 3.2 describe their proposed market with
Identify target market reference to prescribed items; explain the
Market description, age, income, concept target market; describe the market
gender, education, location, occupation with reference to market description; market
and decision-makers segmentation and indicators of market
Market segmentation, target market, growth
methods of segmentation
Market share, or indicators of market
growth
40 3.3 Marketing information 3.3 describe the need for market research
41 3.3.1 Collection of data 3.3.1 name and differentiate between primary
Primary data and secondary data
Secondary data
41 3.3.2 Methods of collecting primary data 3.3.2 name and explain the methods of collecting
Surveys primary data with reference to the
questionnaire prescribed items; test the potential market
telephone through the practical application of the
postal prescribed methods
Observation
Experiments
test marketing
42 3.3.3 Developing the questionnaire 3.3.3 name and describe the type of questions
and the characteristics of a good
questionnaire; draw up a questionnaire to
test potential market
44 3.3.4 Collecting secondary data 3.3.4 name the important sources of secondary
data
44 3.4 Task: Students must apply the market 3.4 complete market research for business plan
research techniques in testing; market and obtain a mark for the task, which will
potential of their product/service contribute to practical mark for the semester
45 3.5 Assessment of the strengths and 3.5 describe what SWOT analysis is; complete
weaknesses of the enterprise SWOT analysis for their product / service for
Scan environment for opportunities and the business plan
threats (SWOT analysis)
47 3.6 Identification of competitive advantage 3.6 describe competitive advantage and analyse
Analyse competition competition with reference to a checklist
Didactic directives
1. The practical application of the market feasibility study must be emphasised throughout.
2. Students must complete a market feasibility, as well as SWOT analysis on their ideas and opportunities as an
entrepreneur.
3. Students must be enabled to apply this knowledge to case studies of successful entrepreneurs and in issue,
about market feasibility studies.

vii
Page in Learning content Learning objectives
SB Students should be able to
Module 4: Financial feasibility study
50 4. Financial feasibility study 4. explain the financial feasibility concepts
50 4.1 Importance of a financial feasibility study 4.1 explain the financial concepts of a business
Profit
Sales
Fixed costs
Operating costs
Break-even analysis
52 4.2 Start-up costs 4.2 determine start-up costs for their proposed
business as part of the financial feasibility
study
52 4.2.1 Fixed assets required 4.2.1 list assets required; describe and calculate
List of assets the amount required for the purchase of
Purchase price fixed assets, the methods of financing and
Expenditure the finance charges
Financing
52 4.2.2 Pre-operating costs 4.2.2 determine pre-operating costs
54 4.3 Total costs 4.3 explain the concepts and name examples
Fixed costs
Variable costs
58, 59, 4.4 Sales scenarios 4.4 determine the best and worst sales
60, 61 Cost price of product / service scenarios, i.e. how much they would be
Suppliers able to sell their product for and in what
Competition quantities to determine financial feasibility,
Selling price taking into account the factors mentioned
58 4.4.1 Contribution per unit or gross profit or 4.4.1 describe and calculate the gross income per
profit mark-up unit for retail, service and manufacturing
businesses as applicable to their business
plans
58 4.4.2 Turnover for a specific profit goal 1.4.2 calculate the number of units produced for a
specified goal
60 4.4.3 Break-even point 4.4.3 calculate the break-even point
In units
Turnover
Didactic directives
1. The student must complete the financial feasibility study for his / her specific business to enable him / her to
decide on the viability of the business idea.
2. All possible information required to determine the costs of the business need to be gathered at this stage.
3. For examination purposes less emphasis will be placed on calculations.
4. Use examples for retailing concern. Each student should adapt information according to the specific needs
of his / her proposed business, whether it be manufacturing / service related.
Module 5: Introduction to the business plan
64 5. The business plan 5. describe the reasons for doing a business
plan
64 5.1 Elements of a business plan 5.1 name the elements of a business plan
64 5.1.1 Cover sheet 5.1.1 describe the content; complete the cover
Business plan sheet
Entrepreneurs name
Address of business

viii
Page in Learning content Learning objectives
SB Students should be able to
65 5.1.2 Executive Summary 5.1.2 complete the executive summary after the
Highlights of key materials in the plan completion of Module 8 should indicate to
financial institution the feasibility of plan in
brief overview
65 5.1.3 Description of proposed business 5.1.3 describe the content; complete the
General description of the intended description
product or service
Key objectives
Significant characteristics of the
industry
Unique features of the product or
service
65 5.1.4 Marketing plan 5.1.4 describe the content; complete the
Target market, key customers, the marketing plan, after completion of
competition, market share and Module 6
opportunities, competitive advantage,
locality, promotion strategies
66 5.1.5 Management plan 5.1.5 describe the content; after completion of
Form of ownership, description of key Module 7 complete the management plan
peoples skills and responsibilities,
organisational structure, operating plan,
administrative policies
66 5.1.6 Financial plan 5.1.6 describe the content; after completion of
Start-up costs, cash flow statement, Module 8 complete the financial plan
income statement, loan amount
required and repayment schedule
66 5.1.7 Appendix of supporting materials 5.1.7 describe the content; complete the
Credit reports, reference letter, legal supporting materials for their business plan
documents, resumes, copies of
contracts and leases
68 5.2 Where to find assistance 5.2 know where to find assistance for the
SBDC prescribed items
Commercial banks
Small Business Advisory Bureaus
Institutions
Information on:
personal matters
productivity
insurance legal matters
taxation advertising
market research
franchise association
71 5.3 Naming the business 5.3 name and describe the simple rules in
selecting a name for a business; select a
suitable name for their proposed business
72 5.4 Task: Students must complete the cover 5.4 obtain a mark for this task, which will
sheet and description of the business, contribute to the practical mark for the
as, well as the relevant sections of the semester
marketing, management and financial
plans from the information gathered on the
feasibility studies

ix
Page in Learning content Learning objectives
SB Students should be able to
Didactic directives
1. Enthusiasm for the implementation and creativity of the business plan must be inspired in the students.
2. Students must practically implement the elements of a business plan by completing sections of their
proposed business plan after each module, for final presentation to interested parties.
3. Students must be familiar with the assistance available in SA to entrepreneurs.
4. Students must be enabled to apply this knowledge to case studies of successful entrepreneurs.
Module 6: Marketing plan
74 6. Marketing mix 6. name, represent schematically and explain
Product, place, price, promotion the elements of the marketing mix
75 6.1 Product description 6.1 identify the nature of their product / service
and summarise its characteristics
75 6.1.1 Packaging 6.1.1 explain the importance of packaging and
packaging strategies; name and describe
types of packaging and labelling strategies;
choose packaging strategy for their own
products where applicable
77 6.2 Pricing for profit 6.2 describe the importance of pricing
77 (i) Pricing techniques (i) name and explain the pricing techniques
78 (ii) Pricing concepts (ii) explain and calculate with the aid of
Total costs = variable costs + expenses examples the different classifications of
+ fixed costs cost with reference to the behaviour of
Mark-up costs in relation to the quantities sold; apply
Rand mark-up = retail price cost of the relevant pricing technique for retail, service
merchandise or manufacturing business to their own
business; explain and calculate a mark-up for
their business
80 6.3 Promotion 6.3 explain the concept promotion
80 6.3.1 Goals of advertising 6.3.1 name and describe promotional advertising
for an immediate sale, as opposed to
advertising for goodwill and to improve
image
81 6.3.2 Selecting advertising media 6.3.2 name and explain how the advertising
media can be utilised, and their advantages
and disadvantages by using examples
82 6.3.3 Developing an advertising plan 6.3.3 name and explain the principles in creating
Creating an advertising message advertising messages, the characteristics
Effective advertising of effective advertisements, how to
Measure results measure the results, how to construct an
advertisement; develop an advertising plan
for their proposed business; practically
apply these concepts in the classroom as
well as developing an advertisement for
their proposed business
84 6.3.4 Preparing an advertising budget 6.3.4 name and describe the factors to bear in
mind when establishing how much to invest
in advertising; name and describe the use of
public relations
87 6.3.5 Sales promotion 6.3.5 name and describe promotional efforts to
hook customers

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Page in Learning content Learning objectives
SB Students should be able to
87 6.3.6 Personal selling 6.3.6 describe the concept personal selling
Obtain the necessary knowledge and explain what knowledge is essential;
Develop a selling system describe how sales skills can be developed
Sales letter and explain the different steps in a personal
Customer relations and service sales transaction; name and describe the
contents of a sales letter with examples;
name and describe dealing with customer
complaints; list ideas and advice about
customer service
90 6.3.7 Turning slow moving inventory into cash 6.3.7 describe the techniques to increase
turnover of slow-moving goods
90 6.3.8 After-sales service 6.3.8 name and explain the various forms of
guarantees / warranties
91 6.4 Place 6.4 explain the concept place
91 6.4.1 Locality 6.4.1 explain the concept of locality; describe the
Criteria for locating a retail and service factors having a bearing on the locality of a
business business with reference to the market and
Criteria for locating a small the availability of suitable premises
manufacturer
Describe how the type of
manufacturing business influences the
choice of a locality
92 6.4.2 Layout 6.4.2 describe and illustrate the layout of a small
business with reference to directives
92 6.5 Prepare the marketing plan of your 6.5 complete the marketing plan for the
proposed business plan proposed business plan
Didactic directives
1. Students must practically implement the four principles of the marketing mix in the business plan of their
proposed business, whether it is retail, service or manufacturing.
2. Students must complete the marketing plan of their proposed business plan according to the elements of
marketing plan as in 5.1.4, for presentation to interested parties.
3. Students must be able to apply this knowledge to case studies of successful entrepreneurs and marketing
strategies.
4. Less emphasis should be placed on price calculations.
Module 7: Management plan
94 7.1 Types of business 7.1 differentiate between the types of
One-man business businesses; select the form of ownership
Partnership most suitable to their proposed business
Private company
Close corporation
96 7.2 Which form of ownership? 7.2 discuss criteria that need to be kept in
Size of business mind in the process of selecting the form of
Nature of product/service ownership for their proposed business
Liabilities
Capital required

xi
Page in Learning content Learning objectives
SB Students should be able to
97 7.3 Legal formalities in establishing a business 7.3 name and describe the procedure, as well as
How to get a trading license the documents involved in the formation of
Sole trade the business; refer to the role of the registrar
Partnership of companies, registrar of close corporations
Articles of partnership and attorneys; name and explain the
Private company procedure, the authorities and departments
Companies Act involved; complete legal formalities as
Registrar of companies applicable to their proposed business
Close corporations
Registrar of close corporations
99 7.4 Own involvement 7.4 describe their role as the owner of the
business in terms of responsibilities and
management
100 7.5 Personnel and responsibilities 7.5 describe the role of other employees in
the running of their proposed business
and describe shortly the duties and
responsibilities of each
101 7.6 Operating plan 7.6 give a detailed description of the process
that will be followed in the production of
the proposed product, or delivery of the
service, or functioning of retail concern for
their proposed business
102 7.7 Equipment /machinery analysis 7.7 list equipment / machinery required in the
operation of their business
103 7.8 Supplier analysis 7.8 describe the supplier analysis in respect of
reliability, proximity, service and number of
suppliers
104 7.9 Office administration 7.9 describe the requirements for efficient
administration of their proposed business
106 7.10 Prepare the management plan of your 7.10 complete the management plan of their
proposed business plan proposed business plan for presentation
Didactic directives
1. Students must complete the management plan of their proposed business plan according to the elements
of the management plan as in 5.1.5 for presentation to interested parties.
2. Students must be able to apply this knowledge to case studies of successful entrepreneurs and
management strategies.
Module 8: Financial plan
107 8.1 Sources of financing 8.1 describe the sources of long-term and short-
term capital
107 8.1.1 Capital 8.1.1 describe the employment of fixed and
Fixed capital working capital with examples; describe the
Working capital factors determining capital requirements
Growth capital
107 8.1.2 Equity financing 8.1.2 name and describe the methods of
obtaining equity capital
107 8.1.3 Borrowed capital 8.1.3 name and describe the facilities and
instruments for borrowed capital
109 8.2 Financial management 8.2 name and explain the functions of the
prescribed financial statements
110 8.3 Creating projected financial statements 8.3 complete the projected financial statements
for their proposed business and do the
calculations practically

xii
Page in Learning content Learning objectives
SB Students should be able to
112 8.3.1 Projected cash flow statement 8.3.1 complete the projected cash flow
Forecasting, sales, cash receipts, cash statement for 12 months
disbursements
110 8.3.2 Projected income statement 8.3.2 complete the projected income
Develop sales forecast statement for 12 months
Develop estimated monthly expenses
113 8.4 Determine loan requirement 8.4 determine the amount of the loan required,
if any, from the projected financial
statements
114 8.5 Prepare the financial plan of your proposed 8.5 complete the financial plan of their
business plan proposed business plan for presentation
Didactic directives
1. Students must use the principles underlying the financial statements of a business.
2. Students must complete the financial plan of their proposed business plan for presentation (refer to 5.1.6).
3. Students must be able to apply this knowledge in a practical application of the projected financial
statements of a new business and analyse case studies of successful entrepreneurs.
Module 9: Presentation and evaluation of business plan
115 9.1 Presentation of the business plan 9.1 present their proposed business plan to
interested parties for which a practical mark
can be accumulated
116 9.2 Evaluation of business plan 9.2 have the proposed business plan evaluated
according to the attached evaluation form
for practical work and presentation
Didactic directives
1. When awarding marks in evaluating the business plan lecturers may use the attached evaluation form.

xiii
Assessment forms
Evaluation: Assignments
Name of student:
Theme:
Assessment criteria Mark allocation Mark obtained
1. Table of contents 10
2. Contents
2.1 Introduction 10
2.2 Correct information 10
2.3 Logical exposition 10
2.4 Complete coverage of theme 20
3. Initiative
3.1 Originality 10
3.2 Presentation 10
4. General
4.1 Impression 10
4.2 List of references 10
Total 100
Remarks:

Signature (lecturer): Date:

xiv
Evaluation: Practical work
Name of student:
Theme:
Assessment criteria Mark allocation Mark obtained
Presentation 10
Introduction 10
Preparation 10
Skill and technique 10
Correlation of information and activity 20
Organisation of working place (area) 10
Orderly procedure 10
Handling of aids 10
Summary and conclusion 10
Total 100
Remarks:

Signature (lecturer): Date:

xv
Evaluation: Business plan
Name of student:
Assessment criteria Mark allocation Mark obtained
1. Front page and contents page 5
Name of business, address, logo
2. Summary 10
Highlights of key materials in the plan
3. Description of proposed business 25
Product / service, type of market, competition, SWOT
analysis, own involvement, location, type of ownership
4. Marketing plan 40
Market segmentation, market potential, product / service,
promotion strategy, competition, pricing, location / layout
5. Financial plan 55
Fixed assets, monthly profit and loss account, monthly cash
flow, balance sheet, finance required, own contribution
6. Operational plan 15
Purchasing, supplier analysis, inventory control, security,
office administration, insurance, legal documentation,
human resource plan
7. Conclusion 10
Why the business will succeed
Motivation for loan
8. General 40
Appearance, neatness, evidence of research, logical
approach
Total mark allocated for business plan 200
Remarks:

Signature (lecturer): Date:

xvi
 Module 1
The challenges of entrepreneurship

Overview
When you have completed this module, you should be able to:
Unit 1.1: Define the concept of entrepreneurship and distinguish between the
roles of entrepreneurs and intrapreneurs
Unit 1.2: Name and briefly describe the qualities of the entrepreneur and apply to
case studies of successful entrepreneurs
Unit 1.3: Name and describe personal resources; list strengths and weaknesses;
identify assistance to the business; and calculate net worth
Unit 1.4: Briefly discuss the economic importance of the entrepreneur with
reference to the South African situation
Unit 1.5: Name and explain the advantages and opportunities of entrepreneurship
Unit 1.6: Name and explain the reasons why businesses fail; discuss how
entrepreneurs can overcome these problems
Unit 1.7: Name and describe the reasons why businesses succeed
Unit 1.8: Complete a self-analysis, listing personal strengths and weaknesses,
possible contacts and personal investment capabilities.

Unit 1.1 The roles of when large entities start subsidiary

entrepreneurs and organisations.
intrapreneurs
An entrepreneur is a person who uses his
or her personal creativity and hard work to
start, finance and grow a new or existing
business, usually with considerable
initiative and risk. The entrepreneurial
process can include starting a business
franchise, either as the franchisor or a
franchisee.

franchise: a licence granted by a company, called

the franchisor, to an individual, called the franchisee,
to conduct a specific type of business

An intrapreneur is a person employed

by a large organisation who takes direct
responsibility for turning an idea into
a profitable finished product through
assertive risk taking and innovation. This
Fig. 1.1 Entrepreneurs use creativity and hard
process may include corporate venturing work to start a business

1
Fig. 1.2 Intrapreneurs are employed by large organisations

The roles of both the entrepreneur and b) Thabo became an

intrapreneur are to use their creativity entrepreneur when he
to turn ideas into successful business obtained a bank loan to buy a
ventures. However, there is a significant taxi.
difference between the two. This is the c) Ayanda said she was an
impact of finance for the venture an intrapreneur when her
entrepreneur takes the risk of raising, employer placed her in charge
and possibly losing, his or her own of a community project it was
finance, while an intrapreneur uses the financing.
corporations finance and does not face any d) When Ben started a job with
personal financial risk. This is an important a brand new company and
difference because intrapreneurs can take was responsible for getting the
excessive risks, knowing that they will business up and running, he
not personally lose their own money. For was an entrepreneur.
example, during the early 2000s, hedge e) An entrepreneur can start
fund intrapreneurs took unacceptably a charity by asking for
high risks that directly contributed to the donations from the general
economic crisis of the times. public.
f) A person appointed by
Class test 1.1Class assessed the government to run a
state-owned business is an
1. Decide if the following statements
entrepreneur.
are true or false. If false, give the
g) When Zainab bought some
true answer.
equipment and started
a) When Beauty started selling
providing hairdressing
fruit from a stall near the
services to people in their
taxi rank, she became an
homes, she became an
intrapreneur.
entrepreneur.

2
 h) When Sonya opened a
Nandos restaurant in her
area, she became a franchise
entrepreneur.
2. Look around your community
and identify an entrepreneurial
enterprise. Write one sentence
saying why you think this
enterprise is successful.
We should not leave this subject without
mentioning tenderpreneurs. These are
people who start new businesses by
winning a government tender, often linked
to guaranteed payments. In some ways,
these individuals are entrepreneurial
although they would probably not start
the business without the tender and they
take little financial risk because payment
is already agreed, in some cases with pre-
delivery payments to allow the business
to do its work. Therefore, tenderpreneurs
do not generally exhibit the creative,
innovative and financial risk factors that
determine a true entrepreneur.
Fig. 1.3 A tenderpreneur may be awarded a
government tender to pave the streets
3
Unit 1.2 Personal qualities
of the entrepreneur
As mentioned above, entrepreneurs are
focused on creativity and ideas. Additional
characteristics of entrepreneurs include
the following:
 Confidence in their ability to succeed:
This is usually linked to confidence in
the idea or venture in which they are
involved. Entrepreneurs have an inner
certainty that this is the right thing
to do and that their venture will be
successful.
 Preference for moderate risk:
Entrepreneurs recognise the risks
involved in the venture and decide on
the level of risk they are willing to take.
 Desire for responsibility: This is
usually linked with wanting to be your
own boss, but it is also a willingness to
take responsibility for employees and
for paying debts.
 Energetic: Entrepreneurs are people
who are not willing to sit and wait for
something to happen, but rather want to
make things happen. They have energy
that they need to use by doing things.
Ability to identify opportunities:
Most people are involved in events that
generate ideas for a new business, but
entrepreneurs are able to recognise
those opportunities and build their
ideas around those opportunities.
 Organising skills: An entrepreneur
needs to be able to organise business
resources to achieve the business
objectives.
 Urge to achieve: Entrepreneurs always
aim to be special they are driven to
achieve their goals.
 Ability to welcome feedback:
Entrepreneurs continually listen to
what people are saying and are willing
to accept advice to improve their
business.
 town, he says. With this success under
their belts, Fats and the two Georges
decided to make their winner of an idea
available to more people so they opened
another Ocean Basket in Pretorias
Kolonnade shopping mall.
Source: Business Report, 31 March 2010. Da brothers
had a dream. Special projects, Business success stories.

Fig. 1.4 Entrepreneurs are confident, energetic

Class test 1.2Class assessed
and organised people 1. In the following table, choose
As an example of the origination process, the entrepreneur in Column A
we can use the well-known Ocean Basket that matches the description in
chain: Column B:
Column A Column B
It all started when brothers Fats and a) Robbie Brozin i) started Fry Group Foods
George Lazarides hooked up with started Nandos to supply vegetarian
George Nichas to open their first Ocean meals
Basket restaurant. Da brothers (as they b) Ocean Basket, ii) started by selling
started by records over the
prefer to be called using their unique
the Lazarides telephone and went on
marketing lingo) had always dreamed brothers, to own Virgin Airlines
of opening a quality, yet affordable, c) Springbok Wally iii) was a teacher who
seafood restaurant most especially Fry wanted to design
since they were of Mediterranean and produce good
tableware
descent. Being in Pretoria far from
d) Carrol Boyes iv) is an entrepreneurial
the coast the market was ready for fish restaurant that
an affordable, yet quality, seafood now enables other
restaurant. Since George Nichas had entrepreneurs to start
franchise businesses
boatloads of know-how selling fresh
e) Richard Branson v) after buying a recipe for
seafood, the three carefully planned how cooked chicken
they could start a seafood restaurant
where people could afford a simple, but 2. Choose any well-known
really good, meal. We wanted to make entrepreneur and, in one sentence,
people aware of good seafood, Fats says. say what you think is the most
We wanted to create a simple place exciting and creative characteristic
where people could enjoy a great meal of this entrepreneur.
and great value; a homely place where
theyd get together with friends and
feel like theyre part of our family. Fats Unit 1.3 Personal resources
and the two Georges opened the first
of the successful
Ocean Basket in Menlyn Park where
entrepreneur
they could squeeze in just 60 people.
The place soon became so popular that In addition to the personal characteristics
customers would queue from early listed above, entrepreneurs also call on
morning to secure a table for lunch or personal resources that they may have
dinner. Ocean Basket was da talk of da available. The personal resources to which

4
entrepreneurs have access vary in quantity
and quality, but are generally identified
under the following headings:
knowledge and skills
contacts and friends
finance in the form of personal assets.
Lets consider these resources in more
detail.
Knowledge and skills
This is an extremely important resource
to have at your disposal because it enables
you to start your entrepreneurial enterprise
with the confidence that you know what
you are doing. Knowledge and skills should
relate to the entrepreneurial business in
which you are involved and may comprise:
experience gained from working in the
industry sector for your business
skills gained through skills training
on-the-job skills gained when working
for another business
educational qualifications, such
as matric passes in mathematics,
economics, accounting, and technical
subjects associated with your business
professional qualifications, such as
management and accountancy, or a
technical qualification associated with
your business.
Fig. 1.5 Entrepreneurs must be knowledgeable
about their business
Contacts and friends
Most entrepreneurs have the ability to
network with other people. In other
5
words, they have the ability to talk easily
with people, ask questions, obtain other
peoples views and discover what people
are doing in the industry in which they are
interested. This ability gives them a broad
range of knowledge they can use in their
businesses.
In addition, successful entrepreneurs
keep records of people they meet who
might become useful contacts in terms of
customers, potential suppliers and sources
of business and professional advice. The
saying is that if entrepreneurs do not know
how to do or obtain something directly,
they know someone who can.
Fig. 1.6 Successful entrepreneurs keep a record of
useful contacts
These contacts may be friends and friends
may be potential customers. However,
the saying that it is best to keep business
separate from pleasure suggests that you
have to take care that you do not invite
a friend to become too involved in your
business unless that is what you intend.
This advice becomes even more true when
money is involved.
Finance in the form of personal assets
As mentioned above, entrepreneurs
usually take on the financial risks of the
business, often by investing all or most of
their money in the business. Entrepreneurs
can use finance from:
 personal savings Net worth
lump-sum retrenchment payments When you want to determine the financial
insurance payments. assets that you have available to use in
an entrepreneurial business, you can
They can also use personal assets, such as
calculate your net worth. Net worth is the
a house, as security for a bank loan. This
total value of the assets you own less the
means that they agree that if they are
total value of your liabilities or debts. Table
unable to repay the loan, the lender can sell
1.1 shows how to calculate your net worth.
the asset to recover its money.
Entrepreneurs may also borrow money Item Liabilities Assets
from friends and family members who Assets
want to encourage and support them in Current value of house 800 000
their new business. An advantage of this Current value of car 9 000
source of finance is that friends and family Furniture and appliances 4 000
investors are more patient while waiting Jewellery 450
for their money to be repaid and may Other personal possessions 1 500
accept a low, or even nil, interest rate on Liabilities
their investment. However, disadvantages
Mortgage bond 580 000
are that friends and family can become
Car loan 3 500
more demanding when a business becomes
Owing on credit card 1 300
successful and they feel they should have
Unpaid bills 700
a share of it, or when a business fails and
they want their money back. The advice Total 585 500 814 950

of keeping business and pleasure separate Net worth (assets minus 229 450
liabilities)
may be something you need to apply to
friends and family investments. Table 1.1 Net worth

Fig. 1.7 Entrepreneurs can use their homes as security for a bank loan

6
Class test 1.3Class assessed
Everyone has strengths and weaknesses in all parts of their life. Think about yourself
as an entrepreneur. Copy and complete the following table by listing your strengths
that you could contribute to a new business of your choice, as well as your weaknesses
that you would have to take into account.
Name the type of business you would like to start
Personal factor Personal strengths Personal weaknesses
Confidence in ability to succeed
Willingness to take risks
Desire for responsibility
Willingness to apply high energy
Ability to identify business opportunities
Organising skills
Desire to achieve
Willingness to listen to feedback
Knowledge of the business sector
Technical skills related to the business
Range of useful contacts
Personal savings
Personal assets
Access to finance from friends and family

Note that you list assets at their actual entrepreneurs and small businesses create
current value and then list loan amounts employment, drive growth and transform
owing under liabilities. You do not include communities with the wealth they bring
items that you rent. In Table 1.1, the person back and the example that they set.
has a net worth of R229 450. This is not
cash but worth against which he or she
might be able to borrow money to start a
small entrepreneurial business.

Unit 1.4 Economic importance

of the entrepreneur
Most entrepreneurs start their own
businesses as a personal challenge. They
want to be independent rather than in a
job where a manager tells them what to
do. Starting a business is important to
them personally, but it is also extremely
important to the economy of the country.
In the magazine, The Big Issue, Sir
Richard Branson said, Entrepreneurism Fig. 1.8 Entrepreneurs create employment for
is a vital building block of any economy themselves and others

7
 In an interview with the newspaper,
Business Report, he went on to say, It is
incredibly inspiring to see the passion and
drive among this group of South African
entrepreneurs at Branson Centre for
Entrepreneurship in Johannesburg.
The importance of entrepreneurism has
also been reinforced by President Jacob
Zuma who has pledged support for small
start-up businesses because of the benefits
they bring to the economy. Entrepreneurs:
create new ideas for new products and
new production methods that help to
grow the economy of South Africa
create employment for themselves and
others
help to develop the natural resources
of South Africa by creating businesses
that use these resources
encourage others to become
entrepreneurs
improve local communities by
spending money, creating employment
and providing income
reinforce South Africas free market
economy by creating demand for
labour and materials and supplying the
needs of South Africas citizens.
Class test 1.4Class assessed
1. Choose one of the words from the
brackets to complete each sentence
correctly.
a) President Zuma would like
to encourage more people to
become (ministers/pastors/
entrepreneurs/clerks).
b) Entrepreneurs are vital to
the (government/economy/
church).
c) Entrepreneurs are role models
for other (learners/teachers/
entrepreneurs/children).
8
d) Entrepreneurs help their
communities by providing
(electricity/jobs/schoolbooks/
sports fields).
e) The Branson Centre for
Entrepreneurship is located in
(Cape Town/Port Elizabeth/
Johannesburg/Durban).
2. Write points on the benefits
that the entrepreneur who owns
the entrepreneurial enterprise
you identified in Class test 1.1
Question 2 brings to the local
economy.
Unit 1.5 The merits of
entrepreneurship
Entrepreneurs are important to the
economy and local community, but why
should you consider this as a possible
future career? Entrepreneurs have different
reasons for starting their own businesses.
The merits of entrepreneurship can be
broadly summarised as follows:
In the absence of a job, starting a
business is the only option to generate
an income.
They may have an idea for a product or
service that is not available locally.
They may not want to be ordered about
by another person.
They want to be independent and in
charge of their own future.
They achieve the total financial benefit
of hard work.
They achieve something special for
themselves.
They push themselves to their absolute
potential.
They want the opportunity to achieve
unlimited income in the future.
They want to contribute to society and
the local community by providing jobs.
potential: the best you can achieve

Fig. 1.9 Entrepreneurs contribute to their local
communities
For most entrepreneurs, the major merits
are being independent, reaping all the
rewards from the hard work involved, and
building something meaningful for the
future.
Class test 1.5Class assessed
1. Decide if the following statements
are true or false. If false, give the
true answer.
a) An entrepreneur usually
wants to work for someone
else.
b) A person who has an idea for a
new product often becomes an
entrepreneur.
c) A person might become an
entrepreneur if he or she does
not want to be bossed around
by someone else.
d) Entrepreneurs achieve the
total benefit of their hard
work.
e) If you want to have a chance
at unlimited income in future,
you should not become an
entrepreneur.
2. Write one sentence explaining
why you would like to be an
entrepreneur.
9
Unit 1.6 Why entrepreneurs
fail
While all entrepreneurs set out with
confidence and good intentions, it is an
unfortunate fact that many of them will
fail:
Of the at least 2,5 million small
businesses in SA, more than 50% could
be at risk, translating into over 1 million
Africans without income. most small
businesses fail in the first three years and
hence this period is known as the valley
of death.
Source: Business Day, 27 February 2009. Enrichment
programme aims to help struggling small businesses.
Thami Mazwai, Talking small.
In April 2009, the newspaper, Business
Day, reported that business failures had
climbed at a rate of 70% over the past three
months compared with the same months
in the previous year. (Source: Mariam Isa,
Economics Editor, Business Day, 3 April
2009.)
There are four main reasons why a
business fails. They are as follows:
 poor preparation of a business plan or
trying to start a business without first
identifying all the factors you will have
to deal with
lack of experience, which might be due
to:
not having the opportunity to have
a job
working in a different industry
sector
working in one business function,
such as administration, and having
no experience of other functions
such as technical production skills
 management incompetence, which
usually means an inability to manage
all the different business functions
(marketing, administration, finance,
production, people) at the same time
and within the hours available
 poor financial control, which is usually
 Unit 1.7 How to avoid the
due to:
not having enough money to start
the business properly
a lack of basic financial skills
not spending enough time on
financial matters to maintain
control over the business finances.
Fig. 1.10 Many small businesses fail in the first
three years
Before we deal with how to address these
issues and perhaps avoid the pitfalls, we
need to define what we mean by the term
product. Throughout this book, we will
use the term product for any goods or
services that are produced by a business
for sale in order to make a profit. Products
therefore include:
goods manufactured by the business
for sale
goods bought from suppliers for sale in
a retail outlet
personally produced goods such as
paintings, sculptures or other artwork
intended for sale to customers
services provided by business owners
and their employees for sale to
customers.
10
pitfalls
You can avoid the pitfalls mentioned
above by paying attention to the following
aspects of your business:
Prepare a sound business plan.
Understand your business.
Understand financial statements.
Manage people effectively.
Plan for transition.
Preparing a sound business plan
There is a saying in business, Failing to
plan is planning to fail. To minimise the
chance of failure, it is absolutely vital that
any entrepreneurial business starts with
an effective business plan. Throughout this
book you may get tired with the number
of times we mention this advice, but we
do so because it is the rock on which your
business will stand or fall.
A good business plan includes the
following:
the business concept: a full description
of your idea for the business
 motivation: why you think your idea
will succeed
personal resources: the skills and
experience you bring to the business
personally
a competitor plan: a list of major
competitors and how you intend to
address the threat they pose to your
new business
 a marketing plan:
who your customers are
why your product meets customers
needs
what price you intend to charge in
relation to competitor prices
how you will distribute your
product to the place where
customers will buy it
how you intend to promote your
product and how much you aim to
spend on advertising
Fig. 1.11 It is vital to prepare a sound business plan
the total value of sales you intend
to achieve in your first year of
operation
people plan:
the skilled people you need to help
you manage the business properly
including intended salary levels and
benefits
the number of production workers
you intend to employ with details of
wages and benefits
fi
 nancial resource plan: where you
intend to raise the money to start your
business, including the purchase of
initial assets and stock, as well as the
cash you will need for materials and
wages to keep the business going until
you start to generate a regular income
financial plan:
list of resources, such as tools and
equipment, you need to start the
business with costs
total income you intend to achieve
in your first year
11
total cost of materials you will use
in the first year
total cost of salaries, wages and
benefits for the first year
other costs for the first year, such
as rents, leases, insurance, bank
charges and other professional fees
calculation of total income, total
expenditure and projected profit for
the first year.
e xecutive summary: this is a summary
of the main facts that you specifically
want someone to read because they are
vital to your business
t imeline: here you will give an idea of
when you plan to implement each step
in setting up your business.
We will refine this list in future modules
but, as you can see, the process of
business planning makes you think about,
understand and prepare for every aspect
of your business so that you do not face
unpleasant surprises when you begin to
operate.
Understanding your business
An understanding of your business concept
is often built up through experience and
training. Potential entrepreneurs usually
spend a few months or years working for
a competing business to gain experience
before starting their own business. This
enables them to understand how the
business operates in the marketplace and
the way in which things are done. It also
enables them to recognise ways in which
to improve the business operation to save
time or money and to help them compete
with other businesses.
However, if these opportunities are not
available to you, you can still start an
entrepreneurial business by harnessing the
skills of other people to supplement your
personal skills. You can do this by:
starting the business with a partner or
partners who have different skills to
ensure you cover all the skills required
by your business
employing people with the skills you
need
finding a mentor who can advise you
generally about your business and
specifically about areas where you do
not have the necessary skills
buying help from relevant
professionals, such as an accountant for
financial skills.
mentor: an experienced and trusted adviser
Fig. 1.12 It is essential to understand your own business
12
Remember that this is your business and
the more you know and understand about
it, the better your chance of success is.
There is no shame in making a mistake
this is how we learn although we try to
plan to avoid mistakes. There is great shame
in knowing you have made a mistake and
failing to do something about it.
Financial control through
understanding financial statements
More good businesses fail through poor
financial control than for any other reason.
Good financial control means that you
must do the following:
Keep a close watch on the delivery,
storage and use of all materials to
minimise loss through damage and
theft.
Keep a close watch on employee
attendance and production output
performance.
Send out customer invoices on the
same day you deliver your products
customers will not pay if they do not
have an invoice.
Chase non-paying customers quickly
and firmly questionable customers
always pay their most persistent
suppliers first.
Check supplier invoices to ensure they
are charging for the correct quantity
delivered and the correct price agreed,
and that the overall calculation is
 correct deal with any problems
immediately.
Enter all invoices and other documents
into your accounts books every day if
possible, or every week at the latest.
Entering a few documents is easy, while
entering a mass becomes a problem.
Identify errors and problems at the
earliest possible moment so that you
can deal with them quickly.
Check your bank statement as soon as
it arrives and, at the very least, every
month deal with any problems or
differences immediately.
Pay your suppliers on due dates this
not only ensures they will continue to
deliver your orders in future, but also
saves you time taking telephone calls
from them chasing their payments.
If you cannot do it yourself, find
someone else to work out your profit or
loss every month.
persistent: take continual action firmly
Fig. 1.13 Take control of the finances of your
business
Financial control is about watching the
money that flows into and out of your
business. Imagine being given R1 000 and
leaving it on a table in a caf, expecting it
to still be there when you return a couple
of hours later. Sounds silly, doesnt it? Yet
it is surprising the number of business
owners who fail to look after their business
finances.
13
By following the financial guidelines given
above, you will be able to understand and
prepare financial statements for given
periods, such as the following:
 e income and expenditure account
Th
records the money you generate for
your business and the money you
spend.
The balance sheet records the long-
term assets you buy, the origin of your
business finance, the money people owe
you and the money that you owe your
suppliers.
The cash flow statement shows the
money you expect to receive and when
you will receive it, as well as the money
you expect to spend at different times.
The annual budget statement predicts
the financial health of your business
in the next trading period, usually the
next year.
We will show you how to prepare these
financial statements later in this book.
Managing people effectively
Management incompetence, excluding
poor financial management dealt with
above, usually means failing to manage
your employees effectively. When you have
an effective business plan, you can identify
the objectives that you and every other
employee must achieve for your business
to be successful. Then you can:
ensure that you employ the best person
with the best skills for every job in your
business
explain to each employee exactly what
you expect him or her to do; do this
face-to-face so that you know that he or
she understands what you mean
be prepared to train an employee in
skills that he or she does not have,
especially for new machines or systems
delegate work tasks according to the
persons ability to complete a task
successfully