UNIT 1: DEVELOPING A BUSINESS PLAN

Many of us Filipinos see education as a means of becoming successfully. You often

hear your parents reminding you of being a diligent student in school and working hard so
you can land a reputable position in a company or in the government, as these equate to
“success”. Some even view living abroad as measure of success. Living abroad has been a
traditional notion for all of us. Nowadays, however there are some Filipinos who see another
path to success-entrepreneurship.
How did entrepreneurship become a path to success? There have been many cases in
the Philippines where entrepreneurship has helped transform ordinary Filipinos into
millionaires because of running their own business. Some of the biggest corporations were
initially established as small startup companies. This course is a helpful tool to help you
become financially successful as a manager of your own business.
This course will provide you with the conceptual and practical entrepreneurship
techniques on how to establish your own future business, whether you will sell product, offer
a service, or do both in your town or locality. This course will be divided into two units. Until I
will deal with developing a business plan whereas Unit II will be the application and
implementation of the business plan. The conceptual and theoretical framework of building
a comprehensive business plan will be tackled and prepared in this course because this is
mandatory in setting up a business. The real success of your future business will depend on
your compliance with the set business plan. Therefore, this course also aims to teach you
how to effectively and sustainably run your future business base on the business plan
prepared.
Owning and running a business have its own challenges. You are in charge of all the
operations in your business; therefore, you need to know all of the risks involved, including
the operations, human resources, and problems in the economic market. You need to have a
sound business plan. Most of the failures are caused by the owner’s inability to see the
details of the internal and external affairs of the business. Running a business entails
research, testing, proper execution, and monitoring. This course will give you tools strategies
on how to make your business profitable.
 MODULE 1: Overview of Entrepreneurship
At the end of this module, I can;
1. Discuss the relevance of entrepreneurship in general, including its economic importance.
2. Define who is an entrepreneur
3. Explain the key concepts of common and core competencies in entrepreneurship
4. Delineate clearly between entrepreneurship and employment
5. Explore opportunities for entrepreneurship as a career.
____________________________________________________________________________
Before you prepare a business plan, you need to understand first the macro view of
entrepreneurship. This module will teach you the basics of the entrepreneurship beginning
with role it plays in society and economy. You will also key concepts of common and core
competencies which are required skills to become a successful entrepreneur. You will be able
to understand the pros and cons of being an entrepreneur as compared to being an employee.
A total persona of entrepreneur will be inculcated to you, including the chatecteristics,
behaviour, activities, values, and mindset. Last, you will be exposed to the various exciting
career opportunities in line with being entrepreneur.
What is Entrepreneurship?
Entrepreneurship is a proactive process of developing a business venture to make a profit. It
involves seeking opportunities for a market, establishing and operating a business out of the
opportunity, and assessing its risks and rewards through close monitoring of the operations. With this
definition, being an entrepreneur may seem difficult, but it can be rewarding if the enterprise
flourishes. Creating a sound business plan, along with efficient and effective operation of the business,
will not only benefit the entrepreneur but also the entire society and the economy.
An entrepreneur is successful if the business that he or she envisioned has materialized into a
thriving industry with regular customer and financial gain. He or she either decides to maintain his or
her business or expand. This eventually reflects on the society and the economy as a whole. Here are
the societal and economic benefits of entrepreneurship.
1. Entrepreneurship produces more jobs that equate to an increase in national income. Millions
of unemployed people will have the opportunities to have a decent occupation. Small businesses
produce jobs and wealth.
2. Entrepreneurship amplifies economic activities of different sectors of society. A simple eatery
in a rural area and a coffee shop in an urban area both ignite economic activity regardless of their
business scale.
3. Entrepreneurship introduces new and innovative products and services. New products and
services are always available in the market because of the ingenuity of entrepreneurs to seek
opportunities and improve on them.
 4. Entrepreneurship improves people’s living standards. How can you look good if not
for the services of your nearby salon or barber shop? How can your day be complete without
the food that a nearby eatery cooks? How can you live without the sari-sari store near your
house where you buy your basic needs?
5. Entrepreneurship disperses the economic power and creates equality. It balances the
economy by disturbing national income to more businesses rather than to only few
monopolies.
6. Entrepreneurship controls the local wealth and balances regional development. It
makes sure local resources are used properly and that every area has an appropriate
allocation of resources.EXTEND
7. Entrepreneurship reduces social conflicts and political unrest. Imagine if there are no
or only few sari-sari or supermarket stores in your area. All of you will then fight for the good
supplies because the store cannot supply all your needs.
8. Entrepreneurship elicits economic independence and capital information. A country
with more entrepreneurs is highly likely to become financially independent and will less likely
need the help of other countries. This also applies to family, barangays, cities.
Entrepreneurship creates wealth instead of barrowing wealth.
Who is an Entrepreneur?
The word “entrepreneur” has a French origin and was coined from the words entre, which
means “between,” and prendre , which means “to take.”
An Entrepreneur is a unique individual who has the innate ability and extraordinary dedication
to establish and manage a business , acknowledging all the risks and reaping its rewards. Like other
vocations, being an entrepreneur is also a calling. It is not a career that one can just jump into when he
or she decides so. It entails a holistic business talent to be considered one , ranging from product and
marketing expertise to operations agility , and to financial proficiency.
An entrepreneur will only expect returns once he or she already added or created value out of
an opportunity. An entrepreneur’s natural talent is being perceptive for opportunities in his or her
surroundings that normal people don’t give importance to or often neglect. He or she sees existing
problems about a certain product or service as prospects rather than threats. Leadership is the core of
every entrepreneur . He or she is always excited about his or her business and bravely takes risks. He or
she innovates, executes his or her big ideas, and rarely procrastinates.
The definition of an entrepreneur only provides you with a general description or shows you
want is expected from an entrepreneur. However, entrepreneurship is composed of varying degrees or
levels of intensity. According to action coach, there are five levels of intrepreneurial development.
1.The self-employed. Self-employed persons are, simply put, not comfortable with routines of a
desk job. They do not want to conform to a fixed working schedule . They want to do things in their
own way and start to feel agitated when controlled by the powers-that-be. While they can be self-
sufficient, their tendency is to become too reliant on themselves , which leads to exhaustion. They will
eventually realize that a successful business should work for them , not the other way around. If they
realize this, they can move on the next level.
 2.The manager. In this level, entrepreneurs feel the need to step up and ask some
help from the people around them. They delegate and hire potential employees to do the
work. However, they may have the tendency to get more people who do not know the exact
needs and requirements of the job, because entrepreneurs think that the battle is in the
scale and not the profitability. As a result, entrepreneurs may get frustrated because the
business does not go as planned, and some potential problems arise from how employees
operate. When they begin to realize this, entrepreneurs will start knowing their employees
better, assessing their strengths and their areas for improvement. They will begin to create
positions that match the requirements of the business and the employees’ expertise.
Entrepreneurs can now move on to the next level.
3. The leader. Entrepreneurs in this level already enjoy seeing their people flourish ,
stepping up and producing great results with minimal supervision. Unlike before where they
are in charge of virtually everything, they can now sleep peacefully at night and have more
freedom and time for themselves. They already recognized key leaders in their organizations.
In effect, these key leaders also enjoy the entrepreneurs’ trust and are satisfied with the
outcome of their careers . Entrepreneurs at this stage now focus on the big picture and
strategic direction of their business rather than in generating sales and operating the
business. At this point, entrepreneurs can now move on to the next level.
4.The investor. Investors look for more opportunities for their business to grow. They
may either purchase one or two business that can potentially add value to the company, or
sell their established business(as a franchise ) to potential entrepreneurs. They will
delegate a suitable manager for such operations and will act as directors. When this
becomes successful, they will now become true entrepreneurs.
5. The true entrepreneur. True entrepreneurs, based on their experience, now aim
for quality and excellence in their work. They have fully learned, and to continue practice, a
four-step process of thinking; starting with idealization, visualization, verbalization, and
materialization, entrepreneurs start to create plans to make the dream a reality.
Verbalization involves sharing their ideas with other people, knowing that their vision is
already occurring. Materialization happens when the vision becomes a reality. In this stage,
true entrepreneurs now have an income that keeps on multiplying even if they do not put
much effort.
The world of entrepreneurship these days has already evolved, and new terms are
coined to suit an entrepreneur’s field or expertise. Here are some of them.
1. A technopreneur is an entrepreneur who puts technology at then core of his or
her business model.
2. A social entrepreneur is one who takes advantage of the country’s social
problems and turn them to profitable institutions with the intention of helping the
disadvantaged community rather than making a profit.
 3. an intrapreneur is an entrepreneur on a large company corporation who is tasked to
think, establish, and run a new big idea or project. Intrapreneurs are usually the product
managers or the business development managers of a company.
4. An extrapreneur is an entrepreneur who hops from one company to another to act
as the innovation champion, providing creative and efficient solutions.
Common and core competencies in Entrepreneurship
Entrepreneurship is a career that requires a plethora of common and core
competencies. Therefore, to be considered a successful entrepreneur, he or she must possess
common entrepreneurial competencies that are needed all throughout the entrepreneurship
career. At the same time, he or she should also possess core competencies that are needed
for business sustainability and management.
Here are the common traits that entrepreneurs should always have.
1. Proactive. Entrepreneurs are reactive rather than passive. They address issues,
problems, and challenges before they come rather than when they already happened. They
ensure that proper research is done, the risk factors are assessed, and plans are executed on
a timely and most efficient way.
 2. Agents of changed. Entrepreneurs are innovation champions. They see opportunities
in hopeless and complex situations. They are always enthused to improve and develop new
products and services and introduce them to the market. They don’t settle for mediocrity and
the status qou.
3. Risk takers. Entrepreneurs will not be successful if they do not take risks. By taking
risks, entrepreneurs do not just grab opportunities left and right; they have to take into
consideration and potential various threats they may encounter. Entrepreneurs calculate risks;
if they think that there is a big chance of succeeding, they push through with the venture and
don’t let the opportunity pass.
4. Have a sharp eye for opportunities. Entrepreneurs have a talent for recognizing an
opportunity even by using the macrolevel data only. They know how to assess the net cause
and effect of an opportunity and decide intelligently if a venture should be considered or not.
5. Sociable. Soft skills are one of the most important competencies of entrepreneurs as
these establish the relationship with the most important assets of the company──its people
and its customers. Relationship management is the key for employee and customer retention,
which can be achieved by a sociable entrepreneur.
6. Networkers. A networker knows the key people to connect with. Networking can be
a very intimidating task, for it takes a lot of guts to pull it off. Successful entrepreneurs gain
trust of their valuable network and maintain a long-lasting relationship with them.
 7. Decisive. Entrepreneurs always have a decision about their business. They do not
settle for gray areas or unclear solutions. They do not leave an issue unsolved without a
disposition. They make sure that all aspects of their business have clear objectives and
strategies. Last, they base their decisions on scientific calculations backed up by their
experience and strategies and technical knowledge.
8. Balanced. The minds of entrepreneurs should have a balance between the
analytical and the creative side. Their brains are always playing with “unique ideas” that
no one has ever thought of yet. Entrepreneurs always have “Eureka!” moments and
enjoy them.
9. Innovative. The minds of entrepreneurs are rich with big ideas that can add value
to their existing business or could become a game changer in the industry or business
where they belong. They do not stop improving and thinking of new and worthwhile
ideas for their business.
Here are the core traits entrepreneurs should develop in managing in running the
business
1. Leaders. Successful entrepreneurs always have the heart of the leader. To be
successful leader they must be a source of inspiration of their employees. They must be
very humble, approachable, friendly, and also know how to listen to people’s concerns.
Leaders act on their responsibilities that were given to them. They use their strengths
and limitations to make the best of a situation. They must also be decisive and know how to
own up to their decisions. They know how to unite the team and bring out the best in every
employee.
2. Communicators. Entrepreneurs know how to use all forms of communication to effectively
share ideas and address certain concerns with their costumers or employees. Effective
communication not only provides people with a clear view of what business offers, they
also help prevent mishaps in an organization. Communication channels between
entrepreneurs and their employees or customers should always be open to ensure the
smooth flow of operations in their business.
3. Specialists. Entrepreneurs are expert in their chosen business. They are tactical and are very
keen with details. When asked about the specifics of their products or service, they can
easily answer without heavily relying on their people. They understand the totality and
specificity of their business. As a result, they can easily think of innovating and improving
the product or service offerings because they know their intricacies. They enjoy being in
action instead of being behind the scenes.
4. Problem Solvers. Entrepreneurs possess critical thinking skills and look at problems as
challenges or puzzles that they need to solve. They know how to handle issues in any area
of the business, be it finance, operations, or marketing. They listen to the plight of their
employees on certain problems involving their units, and come up with strategic solutions.
Entrepreneurs are able to solve problems by immersing themselves in day-to-day activities,
knowing what is happening in and out of their business. Entrepreneur should also be aware of
their employees’ personalities; they must know how and when to use them to help solve
problems. Entrepreneurs have faith that every problem has a solution no matter how hard it is.
They must also be courageous and know how to face consequences of their decisions.

Entrepreneurship or Employment?
Entrepreneurship and employment are two different career paths that a person can
choose depending on his/her personal aspirations and work characteristics. It is really up to the
person at the end of the day on what career trail he/she will follow, considering all compelling
career factors that are important to him/her. Table 1.1 shows a comprehensive list of the perks
and the downsides of being an entrepreneur as compared to being employed.
 Important Entrepreneur Employee
career factors
1. Income • Income generated passively even when the entrepreneur is • Income generated actively (i.e., on working hours only); no work= no
resting. pay
• Opportunity income unlimited, depending on the success of • Income usually fixed per month and increases every year depending
the business on the employer and employee’s performance
• Income only earned when the business is successful • Income earned whether the business is successful or unsuccessful

2. Hiring and • Provides job; is the owner of the business and conducts the
Firing, talent selection • Seeks for a job; is the one applying for a job and is interviewed by
Organizationa • Fully responsible for serving customers, making the the company’s hiring officers
l Setup, and business profitable/sustainable, and providing employee • Has the goal of satisfying only the employer or the direct supervisor
Major Key satisfaction • Fully dependent on the employer’s performance; is at risk of losing
Result Areas • Has the power to disengaged nonperforming employees his/her job if the company does not perform well; may find it
applying the due process policy of the disengaging difficult to just leave their below par employer if this only source of
personnel. income
• Can venture into expansion of business such as franchising • Can only work for the current employer exlusively
and buying other similar businesses.
3. Daily Tasks • Performs all necessary variable tasks to establish and • Has routine tasks and works on regular or normal hours
manage a startup business, which usually takes most of the • Follow policies, procedures, and memoranda from the employer
entrepreneur’s time; spend more hours on work than a
regular employee and sometimes gets no sleep
• Prepares policies, procedures, and memoranda for the
business.
4. Leisure • Has a flexible schedule and can take unlimited number of • Has unlimited number of vacation days imposed by the employer
Time and vacation days (applicable only if the business has stabilized
Vacations already)
5. Taxation • Taxed on the net income ; can claim
taxable income deductions for allowable
expenses incurred by the business
6. Comfort level at work • Is comfortable in doing multiple and
challenging task and takes accountability
with the risks and profits of the business;
does not want to be confined in a box;
thinks outside the box or sometimes thinks
there is no box
• Taxed on the gross income ; cannot
use expenses incurred related to
the job such as food and
transportation expenses to claim
for deductions from taxable income
• May be comfortable with routines
and minimal risks; may also be
comfortable in working for the
company itself.
 Careers in entrepreneurship
Entrepreneurship consists of vast career options depending on the passion and field of
interest of the entrepreneur. The saying “When you love what you do, it’s as if you are not working” is
very much applicable to entrepreneurs who considers managing their business as enjoyment rather
than working exhaustively.
Here is a list of the most common small businesses in the Philippines.
1. Sari-sari store. There are approximately more than one million sari-sari stores in the
Philippines. Situated in almost all neighbourhoods , these convenience stores provide affordable basic
retail products to nearby communities. A sari-sari store is one of the easiest businesses to set up due
to the minimal capital required and because it can be managed at home, where the business owner
lives.
2. Rice retailing. Because rice is the staple food of Filipinos and other Asian countries, rice
retailing business is very common in the country. According to the infographic presented by rappler
(2012), Filipinos spend 20% or 20 centavos per every peso for rice. An average Filipino consumed an
average of 92 kilograms (kg) of rice from the 1980s to 1990s, 111 kg from 2008 to 2009, and 119 kg
from 2009 to 2010.
3. Food cart business. This business is also very popular in the Philippines. The number of food
cart businesses is not as big as number of sari-sari stores, but food carts are present in almost every
populous location. They are usually located inside or outside the malls, schools, parks, train stations,
and offices. Popular food items sold in food carts are dumplings (siomai), boiled fertilized duck eggs
and quail eggs deep fried in batter (tokneneng and kwek-kwek), fish balls amd squid balls, burgers,
fried noodles, shawarma, hotdogs, sandwiches, pizza, donuts, and pastries. Popular beverages sold by
food carts are sago’t gulaman (tapioca pearls and jelly), soft drinks, mineral water, milk tea, coconut
juice, and other juices. Food cart businesses are usually usually under franchising arrangements.
 4. Printing business. This business is also lucrative in the Philippines because the
demand is very high. Usually situated near schools and offices, printing businesses cater to
needs of students for their projects and also to offices for their advertising and business
requirements (Flyers, billboards, magazines, newspapers, journals, and calendars). Printing
businesses also cater to the printing demands of occasions such as weddings, anniversaries,
birthdays, funerals, and graduations.
5. Buy and sell business. This business is one of the emerging businesses in the
Philippines, and it is not just done traditionally in brick-and-mortar stores but also over the
Internet. The influx of buy-and-sell web site has changed the behaviour of how Filipinos
exchange goods in the most efficient and practical way. Every one can technically be a seller
even without an actual business.
6. Street food business. Just like the food cart business, this kind of business is
widespread in the Philippines. Street foods businesses are literally located in streets, selling
almost the same food products being sold by the food cart business. Majority of the street
food business owners are selling grilled food items such as barbecue. Some unusually popular
street foods isaw (chicken intestines), Betamax (chicken blood), and adidas (chicken feet). The
famous balut (developing duck embryo) is also sold in the streets. These street food
businesses have been successful and are timeless.
 7. Flea market business or tiangge. In this type of business, entrepreneurs set up a small space
and sell any type of goods in a palengke steup that is normally in an open space. Customers are more
interested to buy from this flea markets because they can bargain for the price. Products being sold
range from clothes, to foods, items, to souvenirs, and to household effects.
8. Online selling business. This business deals with adding the Internet as marketing and
transaction channel for selling. This very similar with the buy-and-sell business, except that the focus is
on selling existing and established products online. The Internet has the revolutionized the way
Filipinos transact business.
9. Cellphone loading business. More than 95% of Filipinos are prepaid mobile phone users,
according to an article published by the Philippine daily inquirer (2012). Moreover, 80% of Filipinos
households have assess to mobile phones. This is the reason why there are so many cellphone loading
stations in the country. Some entrepreneurs link he cellphone loading business to their existing
businesses such as the sari-sari store, food cart, or online business.
10. Laundry and dry cleaning business. This type of business is often located at central business
districts and areas with several condominiums and townhouses. Furthermore these business
establishments also have a significance presents near schools, dormitories, and apartments. One thing
common about the residents of these places is that they do not have enough time to wash and dry
they clothes and just give the job to the laundry and dry cleaning business. The business owner should
follow hygiene requirements before starting this business.
 11. Hair styling and make up business. One of the successful businesses in the
Philippines is the hairstyling business., which includes parlors, and barber shops. Aside from
the core service of giving haircuts, this business also offers auxiliary services such as hair
treatments (perm, straightening, highlighting), massage, and nail styling. Filipinos are generally
conscious about proper grooming and hygiene, so that’s why this business is profitable.
12. Spa, gym, and nail care business. Related to the hair styling and make up business
in the spa, gym, and nail care business. One of the ways Filipinos cope with stress is by going to
a spa. This business offers a range of massage treatments such as facial and body scrubs.
Filipinos now also go the gym because Filipinos are becoming health-conscious. Nail care is
very much enjoyed by Filipino women who avail of manicure, a pedicure, or both. Filipino men
are also focusing on their overall appearance these days.
13. Video and photography business. This business requires talent in capturing precious
moments of celebrators in weddings, birthdays, anniversaries, graduation and other important
events. This business is gaining popularity because of the presence of social media, were
videos and photographs supposed to be shared to other people.
14. Tutorial business. This business caters to students who are not able to catch up with
their lessons, or those who just want to be ahead in class. A tutorial business is composed of
experts in a particular field who transfer their knowledge to another for a fee. In the
Philippines, the tutorial business has become an important aid in reinforcing and enriching the
students’ basic education knowledge.
 15. Baking business. A lot of bakeries are present in almost all neighborhoods in the
Philipinnes because bread is the second staple foods of Filipinos. Pan de sal is the most
common bread being offered by this business.
16. web site development and design/blogging. The popularity of the Internet brought
so many opportunities to Internet-savvy budding entrepreneurs. In this business, the web site
developer conceptualizes and implements a web site for another business whose objective on
to inform, persuade, and remind its customer. Blogging, although initially made as a site to
write your personal thoughts, has a become source of income by online writers, depending on
the writer’s agenda. A blog may become famous or successful if the site has a number of
followers or readers. Some people may earn cash by allowing companies to place ads in their
blogs.
17. Direct selling business. This business is also very common in the Philippines. It is
face-to-face selling of products by sales agent. The products include fashion accessories,
health and wellness items, clothing, food supplements, and homecare items.
18. Car wash and car care business. You often see this business in large cities of the
proliferation of cars. In fact, the demand for car care increases every year.
 19. Bar, cafè, restaurant. The number of foodies (food enthusiasts) has increased
because of the Filipino plate became globalized. Filipino customers’ demand for variety and
quality taste has evolved as well; thus, these businesses are continuously thriving.
20. Water station and LPG (liquified petroleum gas) station. These businesses can
never go wrong as they continuously serve households, supplying them with their purified
water and gas needs. The products that they sell are used for daily consumption, which is why
a lot of these are almost every corner in the Philippines, especially in the urban areas.
No successful business started huge right away. A business starts with an idea. Once the
business is established, the business owner, the entrepreneur, can choose to expand and
explore franchising, intrapreneurship (managing a startup business is an established business),
and acquisition (buying another similar business or a new business). Franchising is a business
arrangement wherin the franchisor, who is the owner of the business, aquires distribution
centers through the franchisees or the affiliated dealers.
 Listed below are Entrepreneur Philippines’ franchise business options in the Philippines,
which a potential entrepreneur can pursue after college or even after finishing K to 12
program.
Franchise or Startup Businesses
. Bakeries, bakeshops, and bread products . Food and snacks carts
. Bars, cafè, and coffee shops . Gas stations / petroleum products
. Beverage and confectionary .General merchandise and retail
. Car care . Health and wellness (salon, massage, spa
and gym)
. Clothing and accessories . Schools
. Covenience stores . Services (personal and business)
. Drug stores and pharmacies . Water stations
. Fast food establishments and retaurants
 Other Additional Business Opportunities
. Dealerships
. Direct selling
. Distributorship

Again , the entrepreneur is limited to the business cited. An entrepreneur can actually
choose any business that may be embraced by the potential target market. Therefore, career
options for entrepreneurs are limitless and boundless. In light of the 2015 ASEAN integration,
which includes the opening of free trade (high-quality products can be exported around the
Southeast Asian region), as an entrepreneur, you should also think of the global scale in
creating your products and providing excellent services to your customers. You should also be
given easier access to financial resources to help your business.
Module 2: Recognizing the Potential Market
At the end of this module, I can:
1. Identify the market problem to be solved or the market to be met.
2. Propose solutions in terms of product and services that will meet the need using techniques on
seeking, screening, and seizing opportunities.
a. Analyse the market need.
b. Determine the possible products or services that will meet the need.
c. Screen the proposed solutions based on viability, profitability, and costumer
requirements.
d. Select the best product or service that will meet the market need.
__________________________________________________________________________
As the saying goes, the most difficult part of every task is where and how you start.. The
same is true with entrepreneurship. You may have all the resources needed to operate a new
venture, but it will never be easy to start one. This module will discuss the proper and efficient ways
of starting a business. You will be introduced to the entreprenuerial process, which starts with
identifying and evaluating the opportunity. The heart of this module is the scanning of the
marketing environment where you can formulate a product or a service solution applying the
techniques of seeking, screening, and seizing opportunities . As a result, you will deal with analyzing
the need of the market, think of the potential set of products or services that will meet the
need, assess the feasibility of the solution, and select the best product or service that will
address the need.
The Entrepreneurial Process
The entrepreneurial process is a step-by-step procedure in establishing any kind of
business that an entrepreneur has to undergo. It is composed of four aspects.
1. Opportunity spotting and assessment . This is the beginning of the process and is
considered the most difficult. Entrepreneurs at this point take note of interesting trends in
their environment. Consumers are reliable sources of opportunity information because
market needs originate from them. Other major sources of opportunity are the glaring
problems in the environment, problems encountered by co-entrepreneurs, new trends,
processes, and developments in the environment. Other minor sources are feedback from
distribution or business partners such as retailers, wholesalers, manufacturers, and
technical people that the entrepreneur is working with. The entrepreneur’s toughest job is
to carefully assess the opportunity through estimation of opportunity length, capitalization
required, threats, profitability, and calculation of real and perceived value. Entrepreneurs
should also assess if the opportunity is aligned with their personal goals and attributes.
Last, entrepreneurs should already think in advance how they will position the product
Or service in the market and showcase its unique selling proposition. This module will focus mainly
on opportunity spotting and assessment, which represent the entrepreneur’s stimulus in starting a
new venture.
2.Developing a business plan. Entrepreneurs should formulate a business plan when they
have already spotted and assessed the opportunities for a market. A business plan is a
comprehensive paper that details the marketing, operational, human resource, financial, strategic
direction, and tactics of the business. The business plan will be the core guide and direction of the
entrepreneur in calculating the resources needed, assessing how to obtain these resources
efficiently, and running the business sustainably.
3. Determining the capital needed. A big idea can never be translated into reality if the
entrepreneur’s resources are limited. Therefore, it is mandatory in the entrepreneurial process to
calculate the resources needed to establish the business and compare this against the
entrepreneur’s current resources. Caution must be applied in computing the complete set of
resources needed and include only those items that are considered as the real needs in venture
creation. Allowance must be considered as well because there will be times that resources will be
inadequate or unsuitable.
4. Running the business. This is the part where the entrepreneur should use the resources
allocated for the new venture. The business plan prepared in step 2 should already have been
implemented. All aspects of the business plan should be critically observed from operations,
marketing and sales, human resources, finance, and strategy implementation. The
entrepreneur should have a control and monitoring system to serve as a check and balance
of the formulated plans.
Table 2.1 summarizes the components and steps in the entrepreneurial
process(hisrich,2010)
Table 2.1. Components and steps in the entrepreneurial process
Opportunity Spotting and Developing a business plan Determining the capital Running the business
Assessment needed
• Evaluate the identified • Come up with a business • Calculate the intrinsic • Practice leadership as a
opportunity description and analysis and extrinsic capital way of life
needed
• Conceptualize and • Perform industry analysis • Calculate the existing • Recognized critical
measure the opportunity capital success factors

• Identify the perceived • Come up with the • Calculate the difference • Identify existing and
value of the opportunity marketing plan between the needed foreseeable problems
to the company and the capital and existing and issues
costumers capital. Choose the most
cost-efficient suppliers
or service providers
• Do cost-benefit • Prepare the operations plan including the • Develop contact • Employ risk-
analysis of the organizational plan and relationship mitigating controls
opportunity with suppliers and and monitoring
including risk service provides system
analysis
• Match the • Come up with the financial plan • Devise an
opportunity with expansion/sustaina
the entrepreneur’s bility strategy
skills and
objectives
• Scan the strengths • Identify strategies and tactics
and weaknesses of
competitors

• Perform monitoring and control

 Scanning the Marketing Environment
Scanning the marketing environment is the starting point of any new venture that
involves understanding and knowing the intricacies of the macroenvironment,
microenvironment, and internal environment. With this process of scanning the general
environment, an entrepreneur can recognize various opportunities and at the same time
understand thoroughly the arena where the future business will operate. The process of
seeking, screening, and seizing is adapted to create the most suited product or service for
an opportunity. The general rule is to find the opportunity first before coming up with a
new product or service, not the other way around. This is one of the mistakes that budding
entrepreneurs commit in starting a new venture
Seeking, Screening, and Seizing
The 3S opportunity spotting and assessment is the framework that most of the
promising entrepreneurs use to finally come up with the ultimate product or service suited
for a specific opportunity. An opportunity is an entrepreneur’s business idea that can
potentially become a commercial product or service in the future. The entrepreneur serves
as the catalyst of creating a value for the costumers through the new or innovated product
or service. As a reward, the entrepreneur earns profits when the costumers are satisfied
and delighted
S1: Seeking the Opportunity
Opportunity seeking is the first step and is the most difficult process of all due to the number
of options that the entrepreneur will have to choose from. It involves the development of
new ideas from various sources as follows:
1. Macroenvironmental Sources
a. STEEPLED. This is a mnemonic for sociocultural, technological, economic,
environmental, political, legal, ethical, and demographic factors. This represents the general
environment where the entrepreneur can identify business opportunities from and where
the future business is about to operate. Any external factor or a combination of external
factors from these eight environmental forces can have a direct effect in opportunity
generation and business sustainability. These will be discussed further later sections.
b. Industry. This is the source of current trend on what is happening in the industry
where the future business will belong to. For example, the entrepreneur should be fully
acclimated on what is happening with the rice industry if he/she wants to establish a rice
retailing business.
c. New Discovery or Knowledge. This are new trends that can be the core business
model of new venture. For example, the influx of model applications necessitates businesses
to have this platform as one of their transaction channels.
d. Futuristic opportunities. These are projected new opportunities that can
possibly affect to the new business while it running. For example, Sari sari
stores in the future will be able to incorporate financial transactions such as
accepting bills payment and process remittance.
2. Micromarket
a. Consumer preferences, interests, and perception. These are the current
needs and wants of potential costumer that should be discover right
away by budding intrepreneur. This way, he/she will be able to take a
chance of the opportunity. A need is recognized when a costumer
believes that there is a difference between his/her current situation
versus his/her desired condition. A want, on the other hand, is
recognized when a costumer believes that there is a specific product or
service that can perfectly suit the need.
b. Competitors. Recognizing and understanding potential competitors will
aid the entrepreneur to develop a product or service that is unique and
will surely stand out from the competition. The 4Ps of marketing
(product,place,price and promotion) will be competitively position if the
entrepreneur is familiar with his or her competitors.
• B. Competitors. Recognizing and understanding potential competitors will
aid the entrepreneur to develop a product or service that is unique and will
surely stand out from the competition. The 4Ps of marketing
(product,place,price and promotion) will be competitively position if the
entrepreneur is familiar with his or her competitors.

• c. Unexpected opportunities from customers. Oftentimes, the most brilliant

ventures comes from the most unexpected opportunities. It may happen in
unlikely situation, unlikely places, and unlikely with people. Existing
problems and bottlenecks often give rise to an unexpected opportunity.
What entrepreneur usually do is be on of the situation and change the
market’s perception of a product or service or build a new market. In the
Philippines, there are a number of budding social entrepreneurs who
turned unnoticed products into superstar products that carry also the value
of social responsibility.
 d. Talent, hobbies, skills, and expertise. Business opportunities do not just come from
outside forces, but also from within the entrepreneur. The entrepreneur’s talents, hobbies,
skills, and expertise can be a source of business opportunity. For example, if the entrepreneur
is an artist, why not sell his or her paintings? If he or she is a musician, why not put up a bar
and perform there? If he or she is an expert in home design, why not make it a business?
e. Irritants in the marketplace such as deterrents, problems, complains, and delays.
Generally, entrepreneurs see opportunities in situations where there is recurring problems or
sometimes when there is no more hope in solving the problem. When customers are already
sick and tired of the same old issue or problem, that is when the opportunistic entrepreneur
should come in and make a difference.
f. Location. Often, entrepreneurs just have to look at their ecosystem and they will be
able to spot a business opportunity right away. For example, if the entrepreneur’s location has
many schools, than a restaurant, an eatery, or probably a computer shop might be a good
business to establish. If the entrepreneurs. If the entrepreneurs is in an island with awesome
beachfront, why not put up a hotel?
Methods of Generating Ideas
Recognizing and understanding a vast sources of opportunities is one difficult activity to
do. Also, the methods of generating ideas may be overwhelming to undergo through. Either
one or a combination of the methods given can be employed by the entrepreneur by
generating new ideas.
1. Focused group discussion (FGD). In this method, a moderator handles a very open,
free-flowing, and in-depth discussion with a group of people who can provide insightful ideas
about a new product or service that will fill a market need.
2. Brainstorming. Similar to an FGD, brainstorming is an activity that allows the
participants to share creative ideas using the following rules: (a) no destructive criticism or
judgement is allowed, (b) wilder ideas are accepted, (c) more ideas are preferred, and (d)
improvement of others’ ideas is allowed. In short, brainstorming is a fun discussion with lenient
rules.
3. Brainwriting or internet brainstorming. This is exactly the same as brainstorming,
except that the channel used is not face-to-face, but in writing or online. The results of
brainwriting or internet brainstorming usually take longer, as the answers depend on the
availability of the participants in answering the questionnaires online.
4. Problem Inventory Analysis. This method is similar to he FGD except that the
participants are already given an inventory of product or service problems. The participants
will just identify from the list given the compelling problem (s) of a potential product or service
instead of generating the ideas from them.
Macroenvironmental Sources: Example of Findings
STEEPLED Analysis
The result of the STEEPLED scan will aid the entrepreneur in deciding what product or
service to set up and whether this new venture will succeed or not. The focus of this scan is
only on the microenvironment. Again, not all factors can have an effect on the new venture.
The important thing is for the entrepreneur to fully scan these factors so he/she can decide if
there is compelling business opportunity or an impending threat.
1. socio-cultural factors. These factors represent a general view of a locality’s
traditions, customs, beliefs, norms, and perceptions. These factors affect how a person of the
locality behaves and reacts to marketing and selling activities.
The entrepreneur should take note of the following sociocultural factors:
• Health consciousness
• Educational level
• Attitudes toward imported goods and services
• Attitudes toward the person’s lifestyle
• Attitudes toward product quality and costumer service
• Attitudes toward saving and investing
• Emphasis on safety
• Buying habits
• Religion and beliefs
2. Technological factors. These are composed of innovations of an existing technology
or an invention of a new one mostly on applied science and engineering research areas.
Entrepreneurs should always up-to-date with the technological changes, as these are
catalysts in improving a product or service or replacing them entirely. The entrepreneur
should take note of the following technological factors:
• Basic infrastructure level
• Rate of technological change
• Spending on research and development
• Technology incentives
• Legislation regarding technology
• Communication infrastructure
• Access to newest technology
• Internet infrastructure and penetration
3. Economic factors. These factors play a vital role in the scanning of marketing environment
because economic factors directly affect any business venture. These factors include income, expenses,
and resources that cost of doing business and generating income.
The entrepreneur should take note of the following economic factors:
• Fiscal polices
• Price fluctuations
• Stock market trends
• Growth rates
• Inflation rates
• Interest rates
• Exchange rates
• Unemployment trends
• Labor costs
• Stages of business cycle
• Trade flows and patterns
• Level of customers’ disposable income
• Monetary polices
 4. Environmental or ecological factors. These factors should be given much importance
in conducting a business especially when the world has already suffered severely from human-
induced calamities. The scan of these factors will help the entrepreneur determine if the
business he or she is entering into will comply with the environmental standards or will just be
a hazard to people, animals, and nature. Moreover, the entrepreneur will know if the business
venture will be suited with the weather conditions in his/her locality.
The entrepreneur should take note of the following environmental factors:
• Weather
• Climate change
• Laws regulating environment pollution
• Air and water pollution
• Recycling
• Waste management
• Attitudes toward “green” or ecological products
• Endangered species
• Attitudes toward and support for renewable energy
 5.Political factors. These factors are mostly induced by government policies and
administrations, which can have a strong effect in the entrepreneur’s business.
The entrepreneur should take note of the following political factors and examples:
• Government stability and likely changes
• Bureaucracy
• Corruption level
• Tax policy (rates and incentive)
• Freedom of press
• Rule of law
• Government effectiveness
• Political rights
6. Legal factors. Related with political factors, legal factors are government laws and
regulations that can restrict or allow business activities.
The entrepreneur should take note of the following legal factors and examples:
• Anti-trust law
• Discrimination law
• Copyright, patents/ intellectual property rights
• Consumer protection
• Employment law
• Health and safety law
• Data protection law
7.Ethical factors. These are the factors that will serve as an entrepreneur’s guide on
how to be ethical in running the business.
The entrepreneur should take note of the following ethical factors:
• Ethical advertising and sales practices
• Accepted accounting, management, and marketing standards
• Attitudes toward counterfeiting and breaking patents
• Attitudes toward development and well-being of employees
 8. Demographic Factors. These are the characteristics of the people in the target
market.
The entrepreneur should take note of the following demographic factors:
• Population growth rate
• Age distribution and life expectancy rates
• Gender distribution
• Social distribution
• Family size and structure
• Minorities

S2- Screening the Opportunity

By now you ready feel overwhelmed with how vast S1 (opportunity seeking) is, but
you don’t have to worry that much. This concept has been inculcated to you to see the
universe of opportunities an entrepreneur can derive from the macroenvironmental and
microenvironmental sources. The key here is in the effective choosing or careful diligence.
Entrepreneurs should start with the big picture. This is the best way in ensuring that the
entrepreneur has scanned the best potential business to venture into. Once the compelling
opportunities are identified, S2 will be next crucial step.
Opportunity screening is the process of cautiously selecting the best opportunity. The
selection will depend on the entrepreneur’s internal intent, i.e., the main objective that the
business will accomplish in the entrepreneur’s life, and the external intent, which will address
the compelling needs of the target market. The entrepreneur should apply due diligence and
independent judgement in selecting the opportunities that have a potential and eliminate
those that are not within the scope of the entrepreneur’s risk appetite. Risk appetite refers to
the entrepreneur’s tolerance of business risks.
Time must be considered by the entrepreneur in screening the opportunities at hand,
as it is considered one of the most critical resources of an entrepreneur. Time should only be
devoted to worthwhile opportunities. Therefore, entrepreneurs must always be sharp-eyed
for real opportunities. They must be able to intelligently say no to low-compelling
opportunities and proceed with sensible ones. The crafting of a business plan starts only
when entrepreneurs already said no to many opportunities and said yes to one forceful
opportunity, to which they will devote their time and resources.
Detailed here are the important elements that are always present in a compelling
opportunity. The entrepreneur should say no to an opportunity if it does not contain any of
these business opportunity elements:
1. Has superior value to customers
2. Solves a compelling problem, issue, a need, or a want
3. Is a potential cash cow
4. Matches with the entrepreneur’s skills, resources, and risk appetite
The Opportunity Attractiveness Test
The Opportunity Attractiveness Test (OAT) (Youngleson, 2009) aims to assist
entrepreneurs in ensuring that the opportunity that they will venture into is an attractive and
feasible prospect. This is not the “be all” in the road to entrepreneurial success but a
framework to measure how compelling an opportunity is. This test is designed to detail each
entrepreneurial aspect into small chunks to come up with a sound entrepreneurial decision.
The entrepreneur must answer this test realistically avoid overestimation or underestimation.
All the risks must be accounted and assessed first.
These can come from different aspects of the business such as operations, market,
economy, and finance. These risks must be estimated and measured to determine the impact
to the potential business.
 The answers in this test will be the guiding principles of the entrepreneur in writing the
business plan. The components of the OAT will be used to channel the entrepreneur’s direction in
data gathering. It is vital that this test must be carefully reviewed over and over again before finally
going to the last step of seizing the opportunity. At the of this test, the entrepreneur should be able
to at least decipher the relative attractiveness of the business opportunity. Ultimately, the decision
lies in the risk appetite of the entrepreneur.
Because each venture is unique, some components of this test might not be applicable to all
businesses. It is the job of the entrepreneur to discern which among these components can put an
equitable weight to components that are relevant to the potential venture. The entrepreneur can also
customize this test to better suit the screening requirements of new venture. In summary, with the
four business opportunity elements and this OAT, the entrepreneur can’t go wrong in his or her new
venture. The key is effective diligence.
1. The “concept” and the “strategy”. The entrepreneur should think of the business’
existence. He or she can do this through crafting a brief vision statement. A vision statement is simply
defined as what the business should do in the future. The entrepreneur should also devise a value
creation proposition, i.e., the value that the product or service will offer to the target customers or
the satisfaction of the needs or wants of the target customers. The proposition should be compelling
enough to influence the behaviour of the target customers. Influencing the behaviour means enticing
the target customers to pay an above average or a premium price on the product or service. The
entrepreneur should also understand the importance of the timing of the business. He or she should
ask: is it really necessary to establish the business now? Last, the entrepreneur needs to devise a
differentiator or a positioning strategy──what difference will the new business inculcate to the target
customers as compared with the rest? Is this compelling enough to influence the behaviour of
potential customers?
 2. Opportunity metrics. These are considered as the opportunity’s critical success
factors. The factors will approximately determine the attractiveness of the new venture
depending on the total scores that it will generate and the risk appetite of the entrepreneur.
Table 2.2a-g consists of the basic metrics necessary in starting up the business. The answers,
however, require extensive research, so the entrepreneur must be careful in answering this
metrics table. Moreover, the entrepreneur can extend scoring system depending on the
complexity of the industry and the venture itself. In this example, the entrepreneur can put 5
as the highest score and 1 as the lowest score. Again, the weight of each factor should be
determined by the entrepreneur.
Table 2.2a Opportunity metrics for market potential
Industry or market Highest potential Lowest potential Attractiveness score
potential Description

1. Market need • Easily identifiable market • Unclear market

• Potential recurring • Revenue just one time or
revenue from the market seasonal
• Market-driven • Market unstable
a. customers accessible Already stuck with competitors
b. Payback time Within one year or less Three years or more
c. Value to Significant Insignificant
costumers
d. Product • Durable or long shelf-life • Perishable
• New or innovative • “me too”
• Value of money • Unreasonably priced
e. Service Highly demanded seasonal
2.Market structure Emerging Declining or stagnant
3. Market size • Established and clear • Unknown; undetermined
• Big enough for the entrepreneur • small
4. Growth rate Faster and acceptable growth rate Slow and unacceptable growth rate
5. Market capacity Fully capacitated Under capacitated
6. Market share • Easter and faster market penetration • Difficult and slow market penetration
• High potential in maximization of • Low potential in maximization or
market share percentage (e.g., 20% or market share percentage (e.g., 5% or
more) less)
7. Cost leadership Cost efficient Too costly
Total (weight):
Table 2.2b. Opportunity metrics for financial feasibility
Financial feasibility Highest potential description Lowest potential description Attractiveness score

1.Net income Robust Fragile; inconsistent

2.Return on investment High and faster returns Low returns(e.g., 20% or less
(e.g.,20%or more in 1 year) in 5 years)
3.Capitalization Reasonable capitalization Unreasonable capitalization
required required

4.Internal rate of return(IRR)- High and consistent IRR (e.g., Low and consistent IRR (e.g.,
annual return that makes the 20% or more) 20% or less)
initial investment turn into
future cash flows
5.Free cash flow-represents Highly positive(e.g., 30% of • Low or not enough to
the liquidity of a business gross sales/revenue or more) cover capital expenditures
after allocation of capital • Low in liquidity
expenditures
A. Sales growth high low
B. Asset Low High
intensity(assets/sales)
 C. Working capital Low High
D. Research and Low High
development and other
capital expenditures
E. Gross income High(e.g., 30% or more) Low(e.g., 30% or less)

6. Capital recovery period Fast(e.g., 2 years or less) Too slow(e.g., 5 years)

Total (weight):

Table 2.2c opportunity metrics for exit strategies or harvest option

Exit strategy or harvest Highest potential description Lowest potential description Attractiveness
options score
1. Value added potential High strategic value Low strategic value
2. Exit strategies Many envisioned option, e.g., Limited or no exit strategies
merger, acquisition, or strategic
alliance
3. Capital valuation • Reasonable capital valuation • Unfavorable capital
• Realizable capital valuation
• Credit crisis

Total (weight):
Table 2.2d Opportunity metrics for competitive advantage
Competitive advantage
1. Fixed and variable costs
2. Control over prices,
distribution and costs
3. Barriers to entry
a. Legal and proprietary
protection
b. Response and lead time
c. Networks
Total (weight):
Highest potential description No potential description Attrativeness score
Cost-efficient Costly
Strong weak
Difficult to entry No barrier (s) at all or easy to
enter
Exclusivity Non or unsecured
Competition is not yet • Tough competition
aggressive • Unable to a gain
competitive advantage
Accessible and close Limited access and requires
relationship intensive relationship
building
Table 2.2e Opportunity metrics for management team
Management team Highest potential description lowest potential description Attractiveness score

1. Entrepreneurial lineup Fully dedicated, driven, and Undecided and just testing
united the waters

2. Industry and technical Highly skilled and Quick background and

experience experienced in the industry experience in the industry
chosen chosen

3. Integrity and concern to Highly degree of integrity and Questionable and unsure
the new venture concern

4. Intellectual honesty Willing to understand what Unwilling to understand what

they don’t know they don’t know

Total (weight):
Table 2.2f Opportunity metrics for strategic differentiation
Strategic differentiation Highest potential description
1. Degree of fit High
2. Entrepreneurial description Excellent and innovative
entrepreneurial team
3. Service management Excellent customer intimacy
4. Timing Perfect timing- strengths and
opportunities conspiring
5. Fatal flaw Almost none or almost risks-free
6. Technology “I first”
7. Flexibility Adaptability to changes
8. Opportunity orientation Opportunity is treated as
continuum
9. Pricing Price leadership
10. Place of distribution Accessible in many tradition and
alternative channels
11. Margin for mistakes and Forgiving and believes in second
errors chances
Total (weight):
Lowest potential description Attractiveness score
low
Mediocre and less-skilled
entrepreneurial team
mediocre and unimportant
customer servicing
Bad timing- weaknesses and
threats all over the place
Few to many
“me too”
Traditional and slow
Opportunity is treated as vacuum
Lower than competitors
Inaccessible or limited channels
available to the customers
Unforgiving and stiff
Table 2.2g Opportunity metrics for assessment of personal resources
Assessment of personal Highest potential description Lowest potential description Attractiveness score
resources

1. Personal goals and fit Has clear objectives and matches Goals unclear and disconnected
with the entrepreneur’s capacity to entrepreneur’s capacity and
and resources resources

2. Success and failure Propensity to succeed high Propensity to fail high

3. Opportunity costs Willing to sacrifice first for a Contented with status quo
better opportunity

4. Desirability Matches with the lifestyle and Ultimate desire is only big
preference of the entrepreneur returns

5. Risk appetite Calculated risks Undefined and unknown risks

6. Stress management Can live comfortably with stress Inability to manage stress

Total (weight):
Total attractiveness score
at the end of this test, the entrepreneur should first compute for the total scores per
factor. Then, a corresponding weight or percentage should be given as to the importance of
the factor to the venture’s overall standing. This weight must be multiplied to the total score
accumulated per test. The entrepreneur should also establish at tiered scale of description on
the total attractiveness score.
sample tiered scale:
4.00-5.00 – very attractive
3.00-3.99 – attractive
2.00-2.99 – tolerable but must take caution and due diligence of the risk
1.00-1.99 – not attractive or too risky.
S3-Seizing the opportunity
Opportunity seizing is the last step in opportunity spotting and assessment. This is the “pushing
through” with the chosen opportunity. Entrepreneurs should make the best out of this opportunity,
they should exert effort and full dedication for the success of the new venture. The entrepreneur’s
idea can be any type of innovations listed here.
Innovation is the process of positively improving an existing product of service. It is a key driver
for economic growth. Innovation is inevitable as the world constantly changes. Therefore, products and
services must also adapt to these changes. There are three types of innovations according to the
degree of distinctiveness.
1. Breakthrough innovation. These innovations, which may also include inventions, occur infrequently
as these establish the platform on which future innovations in an area are developed.
Breakthrough innovations must be protected by a patent, a trade secret, or a copyright. Examples
of breakthrough innovations include the internet, the computer, or the airplane.
2. Technological innovation. These innovations occur more frequently than breakthrough innovations.
These innovations are technological advancements of an existing product or service. These
innovations need to be protected, too. In relation to the examples given, technological innovations
include the wireless fidelity or Wi-Fi, the laptop, and the jet airplane.
3. Ordinary innovation. These innovations occur ordinarily as the name implies. They are commonly
originating from market analysis and technology pull instead of a technology push.
This means that the market has a strong influence in the implementation of an innovation.
Relating again to the given examples, examples of ordinary innovations are unlimited internet
plans of telecommunications companies, a wireless mouse, and an airbus for economical
Entrepreneurs often encounter a problem in defining a “new” product or service, or
identifying its components or features. Examples of these include drastically improving the
packaging and not the product itself, adding one extra step in the service delivery process, or
simply augmenting a product or service. The “newness” is also independent on the eyes of the
market and the company. The entrepreneur must then establish that the new product or
service offered will provide true value to the customers and influence their behaviour. Further,
the new product or service should increase the profitability potential of the enterprise.
Product or service planning and development process
In the seeking process, one opportunity stood out from a number of sources. This
opportunity was tested according to its attractiveness and feasibility in the screening process.
The last process, hold the seizing process, involve refining and developing this opportunity. The
refining process is called product or service planning and development process. It has five key
stages
1.Idea stage. In this stage, the entrepreneur determines what are the feasible products and/or
services that will perfectly suit the opportunity. Usually , a market evaluation is conducted by
the entrepreneur to assess whether the new product or service ideas will be accepted by the
market using values and benefits to consumers as metrics. On the other hand, the value of the
new products and/or services should also be assessed if these will benefit the entrepreneur.
Product and services that are unappealing to the market should be eliminated should be
eliminated at this stage.
2. Concept stage. Once the acceptable product or service has already been identified, it will go
through the concept stage. In the concept, the developed idea undergo a costumer
acceptance test. This test includes getting the initial reactions of the primary target market
and the distribution channel. Conversational interviews are conducted to understand
costumer preference on physical characteristics and attributes of a product or the physical
evidence and characteristics of a service. Both favorable and unfavorable results will be used
to devise and acceptable product or service. These will also be used to compare the new idea
with the competition with regard to superiority or inferiority. Once all of the necessary pieces
of information are gathered, the entrepreneur can already proceed with the next stage.
3.Product development stage. In this stage, the entrepreneur leverages on the information
generated from prospective costumers via the concept stage. Actual reactions from
prospective costumers are determined. The entrepreneur will conduct a costumer panel
where the actual product samples or actual service samples will be given or rendered to panel
of potential costumers. The participants’ task is to critique the actual product or service and
record the good qualities and inferiors attributes. They are also given sample of competitors’
product of services for comparative purposes. Consumer preference will largely be based on
methods such as multiple brand comparisons, risk analysis, level of repeat purchases, or
intensity of preference analysis (Hisrich, 2010)
4. Test marketing stage. This stage validates the work done from the first three stages to
measure success in the commercialization of the product or service. Actual sales results will
be the foundation of the consumers’ acceptance level and will be the basis in
commercializing the product or service.
Module 3. The Marketing Plan
At the end of this module, I can:
1. Describe the unique selling proposition and value proposition that differentiates one’s
product/service from existing products/services.
2. Determine who the costumers are I terms of the following:
a. Target Market
b. Customers requirements
c. Market Size
3. Validate customer-related concerns through the following:
a. interview c. observation
b. focus group discussion d. survey
4. Describe the marketing mix (7Ps) in relation to the business opportunity and vice versa:
a. product e. people
 b. place f. packaging
c. price g. process
d. promotion
5. Develop a brand name.
_____________________________________________________________________________
After the comprehensive processes of seeking, screening, and seizing the opportunity,
it is now time for the entrepreneur to focus on the chosen business and dig deep.
Entrepreneurs must write a business plan. A business plan is a comprehensive paper that
details the situation analysis, objectives , strategies and tactics, and how to monitor and
control the enterprise. This module will familiarize you on how to prepare a strategic marketing
plan as a first component of the business plan. Some entrepreneurs fail to give importance to
the voice of a business venture-the market. If ignored or given small attention, this becomes a
major source of the entrepreneur’s failure.
This module will also let you understand and identify what makes a product or service
stand out fro the competitors through defining the unique selling proposition and value
proposition of the product or service. You will understand the behavior, attitude, and
psychology of the entrepreneur’s customers through various ways of customer validation. You
will understand in detail and apply the 7Ps of marketing mix in instigating awareness and
driving sales of the business venture. Last, you will understand the fundamentals in brand
management and how branding gives a specific business an overall appeal and credibility.
Value proposition and Unique selling proposition
Before focusing on the topics of value proposition and unique selling proposition, you
must first know the marketing process. In a nutshell, marketing is all about knowing the
customers. Therefore, the marketing process starts with identifying the customers’ needs
where you are tasked to create a meaningful value proposition. Next, you study what the
customers want or desire for you to build a unique selling proposition. From there, it is
imperative to identify the most strategic market or group to tap.
A value proposition (VP) simply states why customer should buy a certain product or
service. Customers are very specific when it comes to their needs and their desired benefits,
so the value proposition should cater to those particular needs. Thus, the value proposition is
the major diver in customer per chase or service availment. The stratup entrepreneur will
surely have a hard time thinking of a value proposition for his or her business. The
entrepreneur should bear in mind that a value proposition has to be direct in addressing the
problems of the customer, should have quantifiable benefits, and should differentiate itself
from the competitors.
The following are some tips for the entrepreneur on how to create an effective value
proposition to the target customers:
1. Prepare a situation analysis that details the problem (s) of the customers.
2. Make your value proposition straight to the point, simple, and specific; in short, there
should be know complications. Your value proposition has to target your major objective.
3. Highlight the value of your product or service so that customers will easily get what
benefits you can provide.
4. Adapt to the language of your market. Ensure that your target market understands clearly
what you are trying to say and avoid putting unnecessary in explicable places.
5. Add credibility-enhancing elements such as actual testimonials from customers, partners,
and other stakeholders, putting specific assurance elements and social acceptability metrics
from in social media and press materials. Several quality management certification, such as
the ISO seal, add more credibility to the product or service that you are trying to sell.
6. Differentiate your value proposition with your competitors. Examples of value proposition
differentiators are the originality of the product or service, its functionalities, or if the
product or service can be tailor-fitted to the customer’s preference, among others.
To illustrate, here is a sample potential value proposition from the most common small
businesses in the Philippines.
Aling Tere’s sari-sari Store
Situation analysis:
Prior the establishment of a sari-sari store, aling tere notices that there is a
convenience store in her vicinity, where many call center agents, nurses, and construction
workers buy food, beverages, and other products during odd hours (from 10 pm to 6 am). She
discovers that the customers either ride a tricycle or a jeepney just to reach the convenience
store. There are two sari-sari stores nearby, but they close at 9 pm. Aling tere believes this an
opportunity for a sari-sari store business with a twist. Aling tere realizes she needs to address
the needs the needs of the customers to differentiate her business from the competition. She
decides to establish a 24/7 sari-sari store. As an initial investment, aling tere hires three
employees who will help her run the sari-sari store in three shifts. During their break, aling
tere mans the sari-sari store herself. She designs her sari-sari store like a semi convenience
store, where customer can freely go and choose the product they want. It is also air-
conditioned. For security purposes, she also installs a CCTV camera. He task now is to craft a
worthwhile value proposition for the potential customers.
 Proposed value proposition: “Tindahang maasahan, bukas kahit anong oras!”
Why should be this considered an effective value proposition? It is specific and straight
to the point. It describes what the business is by referring to tindahan──a Filipino term for a
basic retail store. It highlights the value to the customers that they can buy their basic
necessities from this value proposition because the phrase “bukas kahit anong oras” signifies a
guarantee that customers will be served anytime of the day. And last, aling tere’s store is the
only sari-sari store that is open 24/7, which makes her store different from competitors.
On the other hand, a unique selling proposition (USP) refers to how you will sellthe
product or service to your customers. It addresses the customers’ wants and desires. After you
create your value proposition, you have to figure out to how to advertise or promote certain
unique features of the product or service that you’re trying to sell. You can do this in the form
of product or service characteristics, promotion strategies and tactics, distribution centers and
supply chains, pricing, physical attributes or physical evidence, human resources or human
capital, and market positioning strategies. The ability to crafts an effective USP is gauge on how
well an entrepreneur knows his or her product or service.
The following are some tips for the entrepreneur on how to create an effective unique selling
proposition to the target customers:
1. Identify and rank the uniqueness of the product or service attribute. This is the most
difficult part because you only need to choose on or two at the most. That attribute will be
your key to success, as this will compel customers to purchase from you and not from your
competitors. The unique selling proposition, while it presents the best features of your product
or service, should also avoid competition. Put your self in the customers’ shoes and ask
yourself, “why should I choose you over the others? Or, “why should I deal you at all?”
identifying the unique selling point is a tough job and requires marketing research. The best
way to identify it is to identify the marketing mix (7Ps) and distinguish which among those
displays the product’s unique features. The 7ps will be discussed later in this module.
2. Be very specific. Out details that emphasize the differentiators against the
competitors. This differentiators should be very compelling and should make the customers
think that they are really getting more value from you than the others. By being a specific,
make sure that the USP does not rely on heavy, extravagant promotion. The customers do not
want to feel that they are being fooled.
3. KISS (keep it short and simple). One challenge that marketers always face is that the
customers’ attentions pan is limited and very easy to switch. Therefore, think of a very catchy
unique selling proposition in the simplest and shortest way possible. You can compare it with a
headline of a newspaper or a website. That’s the first item that the customer will see.
 To illustrate, use the sample from the previous discussion to build a potential unique
selling proposition for aling tere’s sari-sari store.
The first step is the identification an ranking of the uniqueness of the product or
service attribute using the 7ps of marketing. Make sure that there peace at through
explanation and analysis about the ranking.
7ps Product or Place Price Promotion People Packaging process
service
USP Retail Near a call Competitive Signage Three shifts Semi- The only sari-
description products center, a of Aling tere’s convenience sari store that
public assistants(6 store operates
hospital, and AM-2PM, 24hours,
a 2PM-10PM, 7days a week.
construction 10PM-6AM)
site
Unique? No No No No Yes Yes Yes
USP s 3 2 1
 The process was ranked first as the most unique because aling tere wants to solve a
compelling problem of the customers, i.e., the availability of a retail store near there where
place odd hours. This was based on her marketing research about her environment. Packaging
convenience store and a sari-sari store. People ranked because it is the sari-sari store that has
three persons to work in shifts. It is common that the owner or an assistant attends to the
store with a determine schedule, and not the entire day.
Proposed unique selling proposition: “tindahang maasahan, bukas kahit anong oras!”
You will notice that proposed value proposition and unique selling proposition are the
same. Why? Because the most compelling differentiating factor is positioning, the value
proposition is also the perfect unique selling proposition, considering all the factors numerated
were all met (defined unique attribute, specific and short/simple). It is catchy, too. However,
this may not be the best unique selling proposition for aling tere. The entrepreneur,s creativity
and inventiveness will always come into play.
Both the value proposition and unique selling proposition should be clearly
communicated to the target customers in the catchiest way possible. Common communication
channels include signage. Web sites, social media, print ads, television and radio commercials,
and mobile advertisements.
Know your costumers
After the general scan and research performed during the course of the preparation
for the value proposition and the unique selling proposition, it is now time to dig deep and
understand the target customers through marketing research. Marketing research is a
comprehensive process of understanding the customers’ intricacies and the industry they
revolve in. Marketing research is one of the most critical tasks of an entrepreneur. Therefore,
no budding entrepreneur should establish a business without undergoing the marketing
research process or else the business will surely fail. The result of marketing research is the
entrepreneur’s major investment in a business, as it will lead him/her to most effective
strategies to employ. Marketing research aims to scrutinize the target market, their specific
requirements, and the market size where the business operates.
Market Size
Market size is simply the size the arena where the entrepreneur’s business will play. It
is the approximation of the number of buyers and sellers in a particular market. The
entrepreneur is required to determine the market size first to gauge the vastness or tininess
of the market where he/she intends to join. The only way to do this is to conduct a strategic
marketing research from reliable sources using dependable methods.
The first step is to estimate the potential market-the approximate number of
customers that will buy the product or avail the service. Usually, this is what you call the
market space or the market universe because this is the total market. For example, rice, the staple
food of Filipinos, virtually covers the whole country in terms of market size because majority of
Filipinos eat rice.
The second step is to eliminate the customers who are probably unlikely to buy the product or
avail the service. Using the rice retailing business again, the entrepreneur can already eliminate
socioeconomic classes A, B, and C because most of these customers buy rice in bulk (sacks) or are
given freely by some employers. They are also not the major consumers of rice.
The last step is for entrepreneur to estimate the market share, which is the plotting and
calculation of the competitors’ market share to determine the remaining portion for the new venture.
The entrepreneur should first assess the market situation via surveys, customer reviews, or any other
data-gathering methods. From there, he/she will be able to calculate the number of potential
customers that will buy the product or service offered. This will be the basis to decide whether the
business is worth the capital that will be used. Continuing with the rice retail business, because the
entrepreneur already identified socioeconomic classes D and E to be the market size, he/she should
plot the number of rice retail businesses within the vicinity and calculate the market share of each.
The remaining portion can be the potential market share of the rice retailer and can also be increased
by those who will switch depending on the effects of the entrepreneur’s marketing strategies.
Market share computation illustration: Mr. Alvin Antonio, a budding entrepreneur, wants to
establish a rice retailing business in his area in Barangay San Isidro. He wants to know if this business is
worth his capital and effort. He dug deep and found out that there are approximately 500 families in
Barangay San Isidro with an average of five members per family. He did a survey and found out that
only 475 families eat rice; they consume an average of 1 kilo of rice per day. There are four other rice
retailers in the area that have been there for 10 years already, and they have equal market shares of
20% each. The other 20% of the market is buying in bulk (per sack) from groceries or convenience
stores. The average net profit per kilo of rice is P10.
How big is the market size and what could be the potential market share of Alvin’s rice retail
business?
Market size of rice business in San Isidro= Number of families who eat rice x average
consumption per annum
Market size = 475 families x 1 kilo per day x 365 days
= 173 375 kilos of rice
Market size profit = 173 375 kilos x ₱10
=₱1 733 750 per annum
The objective of Mr. Antonio in the first year is to capture the 20% of the market by
implementing marketing strategies in pricing (reduced markup of ₱2) and promotion (free
delivery of rice for 5 kilos up ) through text message or phone call. None of the competitors
have thought of or done these strategies yet. In the example, the four rice retailers are
considered direct competitors because they offer exactly the same product and are structured
similarly with Mr. Antonio’s proposed business. On the other hand, the groceries and
convenience stores are considered indirect competitors because they don’t offer exactly the
same product type ( i.e., rice sold in sacks instead of by kilo ) and are not similarly structured
but still compete with Mr. Antonio’s business indirectly.
Potential market share = market size x estimated market share
= ₱1 733 750 x 20%
= ₱346 750
However, because Mr. Antonio will reduce the markup by ₱2, the net profit per kilo will only
become ₱8.
Potential market share = 173 375 kilos x 20% x ₱8
Potential market share = ₱277 400
This market share for startup business is an attractive venture. Mr. Antonio also has a
bigger chance of capturing the market share of competitors if he implements relevant and
enticing marketing strategies.
Customer Requirements
Customer are said to be the lifeblood of the business. These are the people who buy
the products or avail the services of the entrepreneur. Their thoughts, feelings, and
experiences shape the decisions of the business. Thus, the phrase “the customer is always
right” is a mantra that most successful entrepreneur follow. Customer requirements are
specific features and characteristics that the customers need from a product or a service. It is
in these customer requirements that business opportunities originate. Entrepreneurs must be
aware of all these requirements for them to come up with features with best suit their needs.
They must know who buys, and what, when, where, how, and most importantly, why they buy. These
requirements can be used to formulate the value proposition and the unique selling proposition, as
addressing the requirements would increase the competitive edge of the business. Entrepreneurs
should also be vigilant with the constant change in customers will prefer cheaper prices or a bundled
menu; some will prefer a cozy ambiance; some will prefer a place with relaxing music; some will prefer
to have food served fast; and some will prefer to pay using their credit card and not cash. In short,
customer requirements vary from person to person. Thus, the entrepreneur must group them
together, calculate their size, and come up with products and services that suit them. The customer is
the voice of every business that every entrepreneur should listen to.
Primary and Secondary Target Market
Most entrepreneurs believe in the misconception that they can serve all types of customers or,
if not, a wide range of customers. Little do they know that this thinking may lead to failure.
Entrepreneurs must focus only on customers whom they can serve beneficially because they will be
wasting resources if they will target all, or worse, target none.
The entrepreneur can tap a primary target market and a secondary target market as resources
are limited during the startup stage. With this, the probability of success is higher as the entrepreneur
can focus to sell to the identified customers groups. Market intelligence, which includes customer
profiling, drives the entrepreneur on what correct strategies and tactics to employ. This can only be
obtained through a meticulous market segmentation process. Market segmentation is the process of
grouping similar homegeneous customer according to demographic, psychographic, geographic,
(location), and behaviour. It is a necessary activity in marketing because it gives the entrepreneur a
holistic and general view of the market group that he or she is serving. Therefore, there will be
efficiency and proper logic in implementing marketing strategies and tactics to this chosen market
group.
 It is best to create persona(s) of the target customer to represent the general
characteristics and behaviour of the target market. A secondary target market is also necessary
to spread out the capital expenditure and risks as well. They the customers who don’t have
enough purchasing power or have fewer demands. They may not be your primary target market,
but they can be converted once effective marketing strategies are implemented.
Demographic
Demographic segmentation, also called socioeconomic segmentation, is the process of
grouping customers according to relevant socioeconomic variables for the business venture. The
socioeconomic variables include income range and social class, occupation, gender, and age,
religion, and ethnicity. These data help the entrepreneur target customers accurately and classify
their respective needs, wants, and desires. Demographic data can usually be derived from public
documents or the internet, thereby giving the entrepreneur an easier task of collecting data. To
further validate the information gathered from the public sources, it is still best to do a random
sampling just to check if the data are accurate. The risk in confusing solely on demographic data
is that these data change with society. Therefore, the entrepreneur must be alert with these
changes.
 Income range and the social class of the customers are very important factors for the
entrepreneur to consider because theses represent the purchasing power of the market. From
here, the entrepreneur will be able to determine the extent to which the customers can buy or
avail of the service; therefore, he or she will have an idea on how the profitability will look. The
socioeconomic class of the Philippines according to the 2011 report of SWS (Social weather
Stations) is dominated by the socioeconomic class D with 60% of the families earning an
approximate of ₱191 000 per year. This followed by class E with 30% percent of the families
earning only ₱62 000 per year, and then by class C with 9% of the population earning ₱603 000
per year. Last on the list is class AB with only 1% of the families earning ₱1 857 000 per annum.
Occupation should also be considered not just to determine the customer’s income but
also their daily routine where goods and services can be properly positioned. In the previous
example above of Aling Tere’s sari-sari store, she based her decision of putting up the store
because she has knowledge of customer’s occupations (i,e., call center agents and night shift
nurses).
Gender and age group are data that must be mined because the life cycle of customers and
their gender influence their buying behavior. Here are some practical examples.

Sex and age group Potential product or service demand

Male teenagers (13-19)
Single females ( 20-30 )
Married couples with kids (30-50)
Senior citizens (60 onwards)
Product: trendy clothes, rubber shoes, soft drinks, chips,
prepaid cellphone load, sport apparel
Services: cool hangout places, gyms, barber shops.
Product: beauty products, bags, clothes, perfumes,
magazines, shoes
Services: spa, beauty clinics, gyms, beauty salons, coffee
shops, movie houses
Product: food and grocery items, diapers, milk products,
baby clothes
Services: theaters, babysitter, theme parks, travel packages
Product: fruit and vegetable, hair dye, medicines
Services: travel packages, health services
 Religion and ethnicity also should be taken to account because these affect the way
they buy products or avail of services. Examples are food choices, events and holidays,
traditions and belief, spending habits, and conservativeness.
The entrepreneur should be include demographic items that he/she thinks are
relevant to the chosen business so that he can accurately align worthwhile products or
services to the customers.
Psychographic
Psychographic segmentation is a process of grouping customers according to their
perceptions, way of life, motivations, and inclinations. Perception is a process wherein an
individual receives external stimuli using the five senses of hearing, touching, smelling,
seeing, and tasting. A product or service can be perceived differently by different people. The
customers’ way of life will give an entrepreneur an overview of what products or services can
best suit the problems of the customers that happening on a daily basis. A person’s
motivation can be either physiological or psychological. Physiological motivations involve the
needs of the person ( e.g., food, clothing, shelter); they seek to avoid pain and give pleasure.
Psychological motivations involve customer’s preferences (what the customer likes or dislikes)
Motivations are also affected by their aspirations and deprivation. Aspirations are
what the customer wants to achieve ( e.g., inner peace, financial stability, work-life balance).
Deprivation involves the customer’s recognition of certain voids to fill (e.g., lack of financial
security, lack of love, lack of knowledge). For example, let’s look at Jacob, who comes from a
low-income background. He wants to become one of the best accountants, and so he aspires
to go to one of the premier universities in Manila to study accountancy. With this, he is
motivated to uplift his reputation and his value, as well as his status on the society or his
appreciation of other people.
Customers’ inclinations involve preferring one product over another as a result of
gaining a refreshing experience when using the product, possibly due to the product’s unique
features or due to it giving more value than other products. Inclinations also encompass the
customer’s personal preferences. The entrepreneur must be aware of what makes the
customers buy the products, so he or she will know how to segregate the customers based on
their way of life.
Geographic
Geographic segmentation is simply grouping customers according to their location.
This is critical in the analysis of the target market as this encompasses the cultures, beliefs,
preferences, politics, and lifestyle of a certain geography. Geographic segmentation can be as
small as street, a village, or a barangay. It can also be based on municipality, city, province, or
region. It can be as big as a country or continent depending on the entrepreneur’s business
objectives.
 This segmentation matters more if the locations targeted have different sets of qualities
mentioned previously. For example, meat products such as pork can easily be sold in Region 3
(Central Luzon) and region 4 (Cavite, laguna, batangas, rizal and quezon, or calabarzon), but it
will be difficult to sell in the Autonomous Region in muslim Mindanao (ARMM) and region 12 or
SOCCKSARGEN (South cotabato, cotabato, sultan kudarat, sarangani, and general santos city)
because these regions differ in region. (Remember that muslims do not eat pork). Another
example is the establishment of a taxi business, which is more feasible in metro cebu than in
Tawi-tawi because of the lifestyle of the people. Therefore, the entrepreneur should be able to
analyse the intricacies of the locations being targeted and group places that have similar
profiles depending on what is relevant to the product or service to be offered.
Behavioral
Behavioral segmentation is the process of grouping the customers according to their
actions. These behaviors are instigated by occasions, desired benefits, loyalty, and usage of
products or availment of services.
Occasions drastically affect the customers’ buying behaviour. The Christmas season
entices the people to buy gifts. The valentine season encourages people to buy flowers and
chocolates for their special someone. The summer season elicits customers to go to the gym to
be fit, to the beaches and resorts to beat the heat, to book a trip for a summer getaway, or to
buy summer outfits. Birthdays and graduation induce customers to go to buffets restaurants or
hotels and resorts to celebrate.
 Using customers’ desired benefits in behavioural segmentation is efficient because the
entrepreneur determines the exact needs of the customers and offer the most suited product or service
for them. Examples include offering wash, dry, and press services for busy office workers in the city
because they don’t have to do this chore, or offering 3-in-1 coffee for budget conscious customers and
those who prefer instant coffee.
Loyalty is the result of maintaining satisfied customers. The goal of every entrepreneur is to
inform, persuade, and remind customers to buy the product or avail of the service consistently.
Therefore, behavioural segmentation through loyalty is a major key result area of the entrepreneur as it
is more expensive to sell to new customers than to maintain customers. Loyalty programs and rewards
separate loyal customers from the new ones.
Usage of the products or avail of service is also a behaviour segmentation factor that describes to
the entrepreneur how often a product is being used or the service is being availed. Therefore, he or she
can group customers as light users, medium users, or heavy users. For example, there are women who
are occasional users for makeup, and there are girls who wear makeup every day. There are men who are
occasional a term in users of hair products, and there are men who apply wax or gel on a daily basis.
Although segmentation is a strategic and an efficient way classifying and grouping customers,
there is also a term in marketing called market aggregation. Market aggregation happens when an
entrepreneur wants to target a broader market as possible because the product or service that the
business offers suited for an undifferentiated market such as fruits, vegetables, rice, water, and bread as
well as services such as haircut, plumbing, or transportation.
 Talking to your customers
Marketing research will not be complete without talking directly to the target
customers. It is good to estimate numbers such as market size, market share, and other general
market assumptions, but the best way to fully understand the customers is to ask them about
their specific thoughts and desires. Conducting marketing research in a methodical way will
bring the entrepreneur a substantial bunch of relevant ideas that can be used to effectively run
the business. A marketing research should first have a solid objective, which states the
research’s purpose. From this objective, you will identify the appropriate research activities,
tools, and samples that will set the scope and the limitation of the research project. When
relevant research methodologies are already defined, you should now identify the target
market segment for the research project, which should be dissected into key samples that
represent the target market segment.
Next is to analyze proper timing for research execution. This is important because the
entrepreneur will be able to get maximum results when he/she identifies the respondent’s
answering pace. Geography is also important to determine the behavior of the target market as
well as the foot traffic. Last is to establish a market research design that will effectively
implement the steps mentioned. Depending on the objective, responses are either qualitative
or quantitative. Qualitative research includes identifying the written or spoken opinions of
customers, whereas quantitative research involves analyzing the customers’ preferences by
using relevant statistics ( such as those in surveys )
In the succeeding discussion, you will be familiarized with the four most common methods of
collecting data from the target customers: interview, focus group discussion, observation, and survey.
The Interview
The Interview is one of the most reliable and credible ways of getting relevant information
from the target customers. It is a face-to-face contact between the researcher/entrepreneur and a
respondent where the researcher asks pertinent questions that will give him significant pieces of
information about the problem the he will solve. It is a credible way of getting information because
the researcher will be able to capture not just verbal but also the nonverbal answers such as facial
expressions, character of words used, or body language. The interview is also helpful even when the
business has already started because customers’ feedback provide the intrepreneur a glimpse of what
the customers think about the business. The drawback though is that interviews are often
expnensive, especially if the number of the respondents is large. The solution is to apply sampling
which is the selection of respondents that statistically represent the total population.
The two main types of interviews being conducted by the researcher are unstructured and
structured interviews. An unstructured interviews is an informal type of interview and does not follow
specific set questions. The researcher has a checklist of high–level issues the he /she wants to clarify
with the respondent. It is a preparatory interview to gather ideas about the problem(s) that will be
solved, so that these issues will be considered in the formal survey questionnaire to be presented to
the respondents later.
In this type of interview, the respondent can answer freely including everything that he/she
feels about the issues raised, so long as these are related to the question being asked by the
researcher. The researcher will ask all the possible questions until he/she is satisfied that all
necessary issues in his/her checklist have been answered. The researcher usually records the
conversation, reviews it, and summarizes the findings. The unstructured interview produces
qualitative data.
Structured interview, on the other hand, employs a specific set of questions and
produces quantitative data. A prearranged questionnaire with specific questions usually
answerable by yes or no (closed-ended), forced ranking, multiple choice, or choose-the-best
will be answered by the respondents. Unlike the unstructured interview, a structured the
interview does not allow the interviewer and the respondent to omit or add questions, nor
change the sequence or how the question are worded. For both methods, the researcher has
to be very objective and avoid biases to come up with impartial answers. He/she should be
able to raise relevant questions that can directly give appropriate answer to the research
objective (s).
There are many challenges in an interview. The first challenge involves setting an
appointment with an interviewee, which includes asking the respondent’s permission. Some
respondents can be sceptical and need to know the reputation of the one conducting the
interview before allowing themselves to be interviewed. Therefore, the researcher needs to
set a friendly tone and must explain the rationale and the objectives in a clear and
nonintimidating way.
 The second challenge involves the respondent’s indifference to how they share their
opinions. Introducing the interview is very important as this will set the tone of the discussion.
The entrepreneur, therefore, must establish a relaxed ambiance and must first explain clearly
why the interview is conducted and how it will benefit the interviewee. The language must be
the one that the interviewees use ( usually informal, due to most interviewees being common
folk); the length of the interview must be brief so as not to occupy much of their time; and the
interviewees should be assured that the results be kept confidential and be presented
summatively.
The third challenge involves getting unbiased answers from the respondents. There are
factors for such a challenge. The first factor is the limited memory or forgetfulness of the
respondents. The second factor is the difficulty of the questions, giving the respondents a
hard time to answer relatively. The third factor is the environment they are in. Some
respondents in an interview may be influenced by relatives or peers who overhear the
interview. Many Filipinos tend to be courteous, telling you what you want to hear instead of
what you need to hear. They may also be influenced by the interviewer himself/herself by
injecting his/her own biases or ideas, by being too compassionate, or by being surprised or
disagreeing. The researcher therefore must have an objective approach to the interview so as
not to affect the results.
The Focus Group Discussion
The focus group discussion or FGD is commonly used by market researches to capture
qualitative results from target customers. It is a process of mining customer and noncustomer
experience and insights about a specific product or service. Through an FGD, the researcher will able to
generate relevant concerns and issues of customer such as their views and inclinations toward a
product or service, perceptions or impressions or new product or service models, innovations of the
older product or service, inventive concepts or promotions, price elasticity, and initial feedback of
customers on marketing tactics and advertisements.
What’s unique about FGD is that is led by a moderator who keeps the discussion spontaneous
and on the right track. The moderator’s task is not that of an interviewer who is asking a set of
questions. Instead, his or her role is to encourage a group of participant is to talk about a list of topics
prepared prior to the FGD. The moderator will direct the discussion in the right path, ensuring all
angles are covered and the discussion doesn’t go too far from the topic. This is the reason that it is
called FGD, because the discussion will be specifically focused on finding relevant answers (e.g., strong
branding or service preferences). The moderator must also be objective at all times, avoiding biases
and unnecessary reactions.
The participants, on the other hand, are selected based on the objective of the entrepreneur
and should be homogenous as much as possible. For example, if the entrepreneur wants to know if
there is an opportunity for a beauty salon business in his or her area, then he or she will choose to
have female salon experts. If his or her objective is to test an existing product such as carinderia viands,
then he or she will invite a group of students or a group of employees who are food enthusiasts as
participants.
 The focus group session usually lasts from one to two hours. It will be more credible if the
actual product or a potential product/service is showcased in the FGD to elicit realistic reaction from the
participants. The FGD session must be recorded by either audio or video, so that the researcher can
digest the session and the most relevant insights from the participants.
In the case of starting entrepreneurs, they don’t necessarily have to follow a formal FGD
session, but the ultimate objective of getting row and fresh responses of the participants must be
elicited (e.g., casual conversations with a group of homogeneous individual such as students,
employees, and the factory workers). The FGD is also a preparatory step in quantitative survey because
this method generates background information or hypotheses for a new product or service. As
compared to the interview, the FGD has some advantages as follows:
1. The researcher can get combined insights from the participants.
2. The participants are more spontaneous and enthusiastic because of the interaction with
coparticipants, thereby sharing more insights to the researcher.
3. It can be observed by various spectators.
It also has some disadvantages as follows:
1. It obtains only qualitative data
2. Examination of the focus group session is difficult and requires more time
3. There are potentially biased answers from the participants because they will encounter peer
pressure. There may also be instances that one or two among the eight participants will dominate
the discussion, resulting in biased responses.
FGD illustration for food cart business
Vicky velasquez just retired from her job as a banker for 35years. She is thinking of ways
on how to preserved the retirement benefits she receive from the bank. One day, she notice
that while commuting, a lot of passengers are stopping buy to eat or drink in convenience store
or in food carts. They are buying pasalubong for their loved ones, be it in the form of donuts,
ensaymada, siomai, waffles, or siopao. She is interested to put up food cart business in the
terminal, but she is unsure what particular product or combination of products will be liked
sustainably by the passengers. Vicky decides to employ a focus group discussion in knowing the
pulse of the target market─the passengers.
FGD objectives
• to determine the top products that passengers buy for themselves or pasalubong for their
families and loved ones
• To understand the buying behavior of the passengers
• To know if the passengers want new or enhanced merienda or pasalubong products
Participants
• Vicky will invite six passengers who are waiting in line from the bus. All of this passenger have
been buying merienda for themselves pasalubong for their loved ones
 Venue and logistics
• An FGD will be held at Vicky’s residence in Santa Rosa City, Laguna, where most of the participants
live. She will set up her dining area as a mini-conference room. As a sign of gratitude, Vicky will
provide the participants with free snack and pasalubong.
Moderator
• Vicky will act as the moderator and will use her smartphone to record the session. As both the
moderator and researcher, Vicky must be able to elicit transparency, objectivity, and kindness, but
she should also be firm, flexible, and sensitive.
Moderator’s discussion guide
A. Introduction (10-15 minutes)- Vicky should be able to explain to the participants the purpose of
the FDG and the ground rules before starting. She should disclose to the participants that she’ll be
using her smartphone to record the session and that responses will be treated with
confidentiality. The participants can freely voice their opinions regarding the topics to be raised
and must be speak one at a time with a clear tone.
B. Product usage, attitude, and image discussion (30 minutes)- Vicky will be asking the following
questions during the discussion proper to validate the first two objective:
a. What images are connected with pasalubong products?
b. How were these images derived? Was it trough packaging, price, location, signage, or the
service personnel?
 c. What are the words that first come to mind when merienda or pasalubong is
mentioned?
d. What are the top three food cart businesses that you frequently patronize? What products
do you buy from them, and how of these products do you buy (i.e., quantity and amount)? How many
times do you buy in a week?
e. Why do you prefer to buy snacks and pasalubong from these food carts?
C. New or enhanced products (15 minutes)- Vicky will be asking the following questions to validate the
third objective:
a. What new products excite you to be part of the food cart business? Why is this so?
b. What enhancements or improvements would you like to see in the existing food cart
products that you patronize? Price? Location? Product features? Signage? Service Personnel?
D. Conclusion (5 minutes)
Analysis of FGD results
Because the FGD is a qualitative method of generating ideas because the researcher documents
the behavioural patterns of people or of objects or events without necessarily requiring them to
participate in the research process. One method is to simply watch and examine the customers’
behaviour in their raw estate without biases and pretentions, thereby providing more accurate results
and faster process.
Observation is reliable because it allows the researcher to see the real and actual behavior of
customers rather than hearing what they need to say (which may sometimes to biased, incomplete,
sugarcoated, or exaggerated). Therefore, it is not as pushy as the interview and the FDG.
The key to observation is that the researcher must be keen and accurate on what he/she really
wants to observe-he/she must have a very clear objective. Observation can be performed by either a
human or a machine observer. The human observer records information as it occurs or as it happens
using his/her five senses. The machine observer employs an equipment (e.g., video camera or
computer) to record the information needed.
Examples of human observation:
1. Customer purchase patterns. This humans observation technique uses the researcher to
understand the buying behavior of the customers such as determining their pain points, buying
patterns (i.e., how many times and how often do they buy or their inclinations toward a product
or service), location, price, or promotion.
Application to a printing business: The human observer will count and rank the type of printing
jobs requested by the customers such as determining their pain points, buying patterns (i.e., how
many times and how often do they but or their inclinations toward a product or service), location,
price, or promotion.
2. Mystery of shopping. This is a common practice or service businesses today where the researcher
pretends he or she is a customer of his or her own business or the competitor’s. this is a test to
determine the quality of the customer service or if the service provider is doing the right job.
Application to a laundry business: the human observer will bring his or her laundry bag to a
competitor and validate if the service provider piece counts the clothes and if the same will be
delivered completely.
Examples of machine observation:
1. Video camera or closed-circuit television or (CCTV). Theses are positioned within the
business premises. They record the customers in their organic shopping or service
behaviour(e.g., How they examine the products, how they interact with the service
personnel).
Application to a gym business: the machine observer (the video camera) will record the
behaviour of gym members as to which the gym equipment is used more often. The objective
is to understand if there is queuing for a specific kind of equipment and what time does the
queuing happen. This will help the gym owner o decide if there is a need to more gym
equipment or remove the equipment not being used often.
2. Traffic counters: these are very common machine observers used by researchers to
determine foot traffic or vehicular traffic in a particular location. On the marketing side, the
researcher will be able to determine where to sensibly install a tarpaulin, signage, or billboard,
as these customer give a glimpse of how many people or vehicles pass the area. Theses also
provide the researcher an idea where to find a strategic location for the business.
Application to a convenience store business: the traffic counter needs to determine how many
people pass by the area to determine if the entrepreneur can meet sales targets.
3. Web analytic. This is an online tool that tracks the performance of a website as to the
number of its visitors, the contents they usually access, and other information relevant to the
Web site owner such as geographical locations of the visitors and statistics on how long they
stayed in the web site. This gives the online entrepreneur a report on how his or her web sites
performs and how this drives awareness and sales for the business.
Application to online buy-and-sell business: the researcher will use web analytics to track how
many visitors click on the features of the web site, the content they usually access, to improve
on, and analyse the factors that lead them to buy the products.
4. Barcode scanners. These machines help researchers understand the purchase behaviour of
the customer by reading the product codes and generate relevant sales information.
Application to a supermarket business: a barcode scanner is usually being used by groceries or
convenience stores and supermarkets to analyse the customers’ purchase behaviour and
inclinations. Through the information gathered by barcode scanners, business owners will be
able to understand what customers buy, how many times they buy, and how much do they
buy.
5. GPS technology. This technology allows tracking of vehicles and pedestrians exposed to out-
of-home advertisements.
Applications to a fast food restaurant: owners of fast food restaurants will be able to
determine where to strategically position their tall signage so that it will be seen by more
passing vehicles and pedestrians.
 Despite the advantages of observation, it only provides the researcher a façade of what he or she
sees or watches and does not let the researcher necessarily know the feelings of customers. It is only
limited to extrinsic behaviors, thereby not capturing the intrintics ones such as beliefs, inclinations, and
stimuli of customers. In a sense, it also becomes unethical at times, because the researcher directly
observes the subject(s) without asking for their permission.
Observation only becomes a relevant research tool if it meets the following conditions:
1. If the person, object, or event is indeed observable. There are instances when observation is not
applicable or not practical to use. For example, a cellphone load entrepreneur will not be able to
observe how many times in a day a customer calls or sends text messages because that customer for
sure does not want to be disturbed.
2. If the person does the activity regularly or the event happens on a regular basis. Observation is useful
for a street food business if the entrepreneur notes that his or her customers always buy his/her
products every 4pm and in groups. From here, he or she can already start cooking these street food
items before 4pm
3. If doing an interview or FDG is becoming intrusive of the privacy of the person. Instead of asking
customers how many times in a day they brush their teeth, it may be better if the entrepreneur just
observes how many times in a week do they buy toothpaste and in what variant (e.g., per sachet, per
box)
4. If the subject of observation does not take too long to produce relevant information. It would be
practical to observe how a customer decides and orders a beverage rather than a customer buying a
car because the former requires little time because he will drink anyway, whereas the latter requires
prepurchase tasks such as researching on the features and price, looking for a bank to finance the
loan, and so on.
 Traditional and online surveys
When it comes to quantitative research, taking surveys is essential. It is the process of
getting answers from a sample of respondents derived from a particular population. ( you
can also survey the whole population if needed. ) Depending on the objective of the survey,
the respondents will be given a questionnaire asking about their awareness level (e.g., no
idea, has little idea, or familiar), their profile, preferences, and behaviors. These
questionnaire can be distributed and answered verbally, by writing , or through the internet
A survey is a very simple and practical to run because it requires preparation of
predetermined questions answerable by definite responses using equitable scales. This is
advantageous to the researcher because not only is it systematized and easier to analyze, but
their also a definitive quantitative result to be interpreted.
Some of the traditional ways to conduct a survey are via telephone, face-to-face
interaction, or snail mail. The emerging and more efficient way of conducting a survey is
through the internet-through e-mails, Web sites, or social media sites. It is more efficient
because the results can be derived in real-time depending on the availability of the
respondents. Also, it will not require the researcher to travel physically or spend on
telephone calls or mails.
 In preparation for the survey, the researcher must identify what sampling technique to follow,
the number of respondents to be surveyed, and the blueprint of the questionnaire.
1. Sampling techniques. A sample is a percentage of a specific population carefully chosen by the
researcher to generally represent the whole population. When the entire population is relatively
small, the researcher may choose to include the whole population in the research project. This
method is called census. However, most of the time, the entire population is too large for the
researcher to cover. Thus, there is a need for sampling process.
Sampling techniques include probability and nonprobability sampling. Probability sampling
is a technique wherein samples are given equitable chances or nonzero chances of being selected from
a population. The researcher needs to apply randomization, wherein he/she needs to assure that every
sample has an equal representation for the selection process to be unbiased. The advantage of
probability sampling is that sample error can be quantified. Sampling error is a range of inaccuracy to
which a sample might vary from the particular population. Sampling error is always reflected in the
research results inferred from the population.
Nonprobability sampling, on the other hand, does not give the samples equal chances of being
selected, because samples are instead selected according to their accessibility or personal choices of
the researcher. Therefore, the scale of error where the sample deviates from the population for
nonprobability sampling is unidentified. In short, results of nonprobability sampling do not generalize
the population chosen.
2. Sample size. The researcher must be able to calculate first the appropriate sample size in conducting
the survey; otherwise, if the sample size that is too large, he/she will waste his/her capital and time,
whereas a sample size that is too small will lead to imprecise results. Therefore, the sample size must
be the right size.
3. Questionnaire blueprint. Here re some tips on how to create a blueprint for the questionnaire.
a. Be specific and direct with the question and the answer required.
b. Be flexible with the respondents’ convenient way of answering the questionnaires ( mail,
telephone, face-to-face, or online). Therefore, the researcher must be ready with any of these four
formats.
c. Ensure that each question is necessary and not repetitive.
d. Always put yourself in the shoes of your respondents. The questionnaire should be simple but
should also meet the objectives. The composition and type of questions (multiple choice,
dichotomous, open-ended) should also be geared toward their convenience.
e. Make sure that questions are arranged in a coherent order that will lead to answers required. At
the onset, qualifying questions are positioned, followed by general questions, and then specific
questions.
f. The questionnaire should look professional, be divided into strategic parts, and be properly
numbered.
 The marketing mix: the 7Ps of marketing
The marketing mix is a widely accepted strategic marketing tool that combines the original 4Ps
(product, place, price, promotion) with the additional 3Ps – people, packaging, and process – in
formulating marketing tactics for a product or service. These 7Ps are employed until the entrepreneur
finds the right combination that will most effectively serve the customer’s needs and wants and at the
same time achieve the profitability objective.
The 7Ps are controllable by the entrepreneur and therefore must be well thought of to be
successful. Prior the 7Ps, the 4Ps were used in the marketing products or physical goods only. However,
these are not completely applicable to marketing services; thus, the other 3Ps, which are also
applicable in marketing products, were introduced. Only very few products are pure products and only
few services are pure services. Therefore, the marketing mix will be able to address marketing
components of both goods and services or even the hybrids.
Entrepreneurs must use the 7Ps model to do following: conduct a situation analysis; set
objectives; conduct a strength, weakness, opportunity, and threat (SWOT) or competitive analysis; and
ultimately come up with marketing strategies and tactics. A challenge to a budding entrepreneur is to
ask the following key questions at the onset:
• Product – What product or service is the most appropriate for the opportunity, and why will
customers buy or avail them?
• Place – What location is best suited for business where there are more potential customers? Can
they conveniently transact on-site or online? How is the process of distribution of products or
performance of services?
• Price- What is the most appropriate price, and what pricing strategies will be used for the target
customers?
• Promotion – What is the most effective advertisement or combination of advertisements, and which
advertising tool should be used to drive awareness and increase sales?
• People – What type of people needed to be hired? What are the basic skills needed for the job?
What leadership style will be applied by the entrepreneur?
• Packaging – What is the best packaging for product that is attractive enough to customers and cost-
efficient at the same time? What physical evidence does the entrepreneur need to set up so as to
sell the service?
• Processing – What is the most compelling feature of the product or the business that will make a
difference in the lives of the customers? What sets the product or service from the rest?
Product
A product is any physical good, service, or idea that is created by an entrepreneur or na
innovator in serving the needs of the customers and addressing their existing problems. As discussed in
module 2,an entrepreneur must first scan the environment, find a compelling problem, and creative a
persuasive product or service out of the opportunity . The product or service should not be created
before finding the right customers, because this is very risky and the resources and time might be put
to waste. The three-level concept of product or services summarizes the reasons that a customer
decides to buy a product or avail of a service.
Level 1: core benefits of the product or service
The core benefits of a product or service are the major factors why a customers buys a product
or avails of a service. For example, a customer buys coffee because he/she wants to feel energetic and
alert the whole day.
Level 2: Physical characteristics of the product or service
Once the core benefit has been satisfied and options are available to the customers, the
tendency is to look for the second layer of selection, i.e., which has a better packaging for products or
a better physical evidence or customer experience for services. In the previous example, the customer
can choose a coffee with a more appealing packaging or a more aromatic smell.
Level 3: Augmented benefits of a product or service
Augmented benefits are only additional benefits. However, in case of common products and
services where there are a number of competitors, the differentiator comes from the physical
characteristics or physical evidence, the customer experience, or the augmented benefits. Therefore,
the entrepreneurs must provide customers with augmented benefits that distinguish them from the
competitors. In the previous, the customers can choose a coffee product that comes with a loyalty
card, so that when he/she accumulates, say, 10 coffee drinks, he/she will be able t get a free coffee
drink.
Place
The place refers to a location or the medium of transaction. A strategic location depends on
the nature of the business and the primary target market. In a physical location, the entrepreneur
must research about the area’s population, the traffic, the people’s common paths, their buying
behaviour, and their preferences for the location( e.g., Wi-Fi access, spacious area for parking). In a
cyber location, the entrepreneur must use Web analytics data to understand Web site performance (
e.g., number of visitors, duration of their stay on the Web site, or the frequently visited contents).
Place
The place refers to a location or the medium transaction. A strategic location depends
on the nature of the business and the primary target market. In a physical location, the
entrepreneur must research about the area’s population, the traffic, the people’s common
paths, their buying behaviour, and their preferences for the location (e.g., Wi-Fi access,
spacious area for parking). In a cyber location, the entrepreneur must use Web analytics data
to understand web site performance (e.g., number of visitors, duration of their stay on the
web site, or the frequently visited contents).
Place also covers the product distribution and the whole product logistics. The
logistics side for products should cover production, ordering and receiving raw materials or
finished goods from the suppliers, storage, reorder points, and transportation systems. The
logistics side for services covers the physical evidence or servicescape, service providers, and
service delivery process, as well as policies and procedures of the business.
One of the major objectives of the entrepreneur for place is to provide customers
with pleasant experience in buying the product or availing of the service so that they will
keep on coming back whether on-site or online. The entrepreneur should place the product
or service depending on the needs of the customers and on where the profits will be
maximized. The entrepreneur should also have a reliable supplier for the distributions of
products or services. The place, whether on-site or online, should also be presentable,
appealing and catchy.
The entrepreneur must devise a set of criteria of choosing the right location aligned with
certain objectives, such as suitability to the target market, condition of the neighbourhood,
potential of the area for future developments, laws and regulations in the area, direct and
indirect competitors, foot traffic, and cost of doing business.
Price
Price is the peso value that the entrepreneur assigns to a certain product or service
after considering its costs, competitions, objectives, positioning, and target market. It is only P
in the 7ps that generates revenue for the business. Here are the most common pricing
strategies.
1. Bundling- this refers to two or more products or services in one reduced price (e.g., 3-in-1
coffee for ₱8.00, manicure and pedicure for only ₱150).
2. Penetration pricing- this refers to setting low prices to increase the price once the desired
market share is achieved (e.g., mobile app-based transportation service offering reduced
booking fee of ₱15 as its introductory price).
3. Skimming- this is the opposite of penetration pricing where prices are initially high and then
they are lowered to offer the product or service to a winder market (e.g., a real estate
company offering top-tier projects is now offering low cost housing of same quality to serve
the middle market segment).
4. Competitive pricing- this refers to brenchmarking prices with the competitors (e.g., milk tea
prices are competitively price)
5. Product line pricing- this refers to pricing different products or services within a parallel
product array using varying price points (e.g., LED TV is more expensive than the LCD TV even if
under the same brand).
6. Psychological pricing- this considers the psychology and positioning of the price in the market
(e.g., price of haircut service is at ₱199 because consumers tend to think that odd prices are
considerably lower than what they are; in this example, they tend to round off the price ₱100
instead of ₱200).
7. Premium pricing- this refers to setting a very high price to reflect elitism and superiority (e.g.,
prices of signature clothes, bags, perfume).
8. Optional pricing- this refers to adding an extra product or service on the top of the original to
generate more revenue (e.g., meals on top of the air fare).
9. Cost-based pricing- the basis of markup is the cost of sales. For example, the entrepreneur
will compute the cost of coconut juice by adding the cost of the coconut juice (₱10) and the
plastic container (₱4). He or she can set the price at ₱20 to earn ₱6 per coconut juice,
10. Cost plus pricing- the markup is based on a certain percentage of cost (e.g., the
entrepreneur wants to set a 50% markup on the coconut juice cost which is ₱14 x 50% = ₱7; the
new price is ₱14+₱7=₱21).
 The profit of n entrepreneur can be determined only if there is a proper computation of costs
associated with the product or service. There are two classification of costs.
1. Variable costs or controllable cost- these cost are directly proportional to number of products
manufactured or the number or services performed. For example, one of the variable costs involved
in a car wash business is the cost of cleaning materials. The business will incur lower costs where
there are few customers.
2. Fixed costs or uncontrollable cost- theses are costs not directly proportional to the manufacturing of
a product or to the performance of the service. Theses are usually the cost of equipment, employee
remuneration, rental cost, and utilities. Theses are considered fixed cost because the business will
still incur these costs whether or not they provide less or more. Therefore, if the entrepreneur
produces more products and performs more services, his or her fixed costs per unit will be lower
because the fixed cost will be allocated to the number of units produced or number of services
performed (Sim, 2009)
The entrepreneur must follow these general pricing guidelines to make the business sustainable
and thriving:
1. Do not price the product or service below its cost.
2. Monitor competitors’ prices, and ensure that your prices are at par with them unless the product or
service is really way superior for the competitors.
3. Align prices with the other 6ps (product, place, promotion, people, packaging, and processing)
4. Implement price strategies that are relevant to your market segment. For example, tingi (sachet)
pricing is more appropriate in the grassroots locality or barangay.
5. Align prices with your business objectives.
Promotion
Promotion involves presenting the products or services to the public and how this can address
the publics’ needs, wants, problems, or desires. In promotion, the primary target market should be
identified because it will become the main audience. The main goal of promotion is to gain attention.
A strong integrated marketing communication plan (IMC) should be devise to deliver the
compelling messages effectively. Key marketing messages for promotion can be the following: (1) value
proposition or unique selling proposition of the product or service; (2) product or service image; (3)
business image; (4) business values and philosophy. Once the key marketing message is established,
the entrepreneur must choose the right promotion tools to deliver theses message to the target
market. The entrepreneur can choose one or combination of the following promotional tools:
1. Advertising – this is a type of communication that influences the behaviour of a customer to
choose the product or service of the entrepreneur over the competitors. The objectives of
advertising include the following: (1) informing, educating, and familiarizing the public with the
product and service offerings; (2) building a trustworthy image; and (3) increasing sales. There are
so many ways to advertise, but the challenge for the entrepreneur is to choose which is the most
cost-effective and targeted channel to relay the key marketing message to the target market. The
entrepreneur can choose to advertise through the following:
• Television- regular channels, cable TV
• Radio- AM and FM radio
• Internet- e-mails, web sites, blogs, social media, search engines, podcasts
• Mobile phones- text messages, mobile application, mobile internet
• Print- newspapers, magazines, flyers, directories, signages, posters
• Out-of-home- billboards, buses, bus stops, trains, train station, taxis, street advertisement
2. selling- this is the act of trading a product or service of a price or a fee. The entrepreneur must identify the target
customers who were likely but the product or service. Once identified, he or she must do further research on the
target customers to know their profile and behaviour to come up with a convincing way to sell the product or
service. He or she must know how to handle objections through highlighting the product benefits and directing the
customers to their compelling needs or wants. The entrepreneur must know how to close a sale by leaving a
convincing conclusion that will trigger the customer purchase. After such, he/she must monitor the customer’s
satisfaction, which is called the after sales. Depending on the size of the business, the entrepreneur must decide
whether to hire personnel or not. If so, he/she needs to plan for the recruitment and selection, training, salaries,
scope of work, and communication system.
3. Sales promotions- these are short-term promotional gimnicks wherin practical incentives and appealing activities
are incorporated to entice the customers to buy the product or avail of the service. These are called “below-the-
line” promotions. These are normally implemented when an entrepreneur needs to reach a certain sales quota to
either recover investment or achieve better profitability. Successful sales promotions involve time limit and sense
of urgency, as this strategy enables customers to act immediately to avail of the promo. Longer sales promotions
usually result in customers not taking advantage and not acting immediately. Here are common examples of sales
promotions in the Philippines
• Sales discounts or discount coupons
• Raffles
• Contests and games
• Promo items
• Product or service bundles
• Trade fairs or exhibits (e.g., wedding expo)
• Sample distribution or free taste/free trials
• Premiums (e.g., free toys for fast food meals)
• Point-of-purchase promotions (e.g., display stands in grocery stores)
• Advertising specialties (e.g., pens, notebook, umbrellas, bags, calendars)
• Rewards (e.g., reward cards)
4.Public relation- these are image-building initiatives of the entrepreneur to make the name of the
business reputable to stakeholders, such as the target customers, governments agencies, business
partners, media, and the public. Unlike advertisements, public relations (PR) do not directly promote
products or services. These PR strategies affect customers indirectly, but they do influence the
stakeholders to build more trust to the business. This stimulates the stakeholders to write or shape
positive news, resulting in more effective marketing campaigns than regular advertisements. Positive
writeups from journals, newspaper, Web sites or social media, and even word-of-mouth are more
credible than traditional advertisements. Examples of PR strategies are as follows:
• Press conferences
• Launching events
• Strong media relations through press kits
• Social responsibility events (e.g., charitable or community events)
• Lobbying (e.g., good relations with government officials)
• Web public relations (e.g., blogs, social media, e-mails, word-of-mouth)
People
People is one of the three additional Ps in the marketing mix. In today’s marketing arena,
people play a vital role in servicing customers even through the entrepreneur sells only physical
goods. With the influx of various competing products and services, one of the major differentiators is
how people or employees make a difference in the lives of the customers. It is not just about the
quality of products anymore, but how employees serve customers. Employees have become a major
influence in the customer’s buying behavior.
Most of the legwork at the beginning is done by either the entrepreneur or some of his/her
family relatives. Most entrepreneurs only hire people when the business starts to expand. The core
job of the business owner is more of strategy implementation. When the need arises to hire people,
he/she must identify the specific, necessary job roles of employees and their description, so they will
be able to know their purpose clearly and serve customers well. These potential employees also need
to be well-compensated and provided with benefits. The entrepreneur must list the criteria of the
following job offers, as well as the requirements such as academic background, job experience, skills
or expertise, attitude, and other documents( e.g., police and NBI clearance)
Packaging
Another addition in the 7Ps is packaging. Packaging is how the product or service is presented
to customers. It is the overall identification (look and feel) of the product or service. This will
determine the uniqueness of the product from competitors. This is the first element that customers
see because they don’t know what’s inside yet. Aside from this, packaging preserves the self life of
the product or service. Because of the clamor in ensuring environmental protection and preservation,
many businesses begin to make packages out of environment-friendly materials, not just in products
but also in services.
Packaging’s ultimate goal is to entice customers to purchase the product or services. Thus,
the entrepreneur should focus on pleasing the customers’ eyes. It is not just limited on the
product or service alone, but on its totality, including its accessories, after sales service, and
warranty.
Packaging is very important in selling physical products or goods, as it establishes the
brand’s identity, as well as its unique selling proposition. Therefore, elements such as color
(which has different meanings on the customer segment and culture), shape, size, materials,
font and text, and graphics must be considered. After establishing the final packaging, the
product must be put into several tests, such as packaging and graphics tests, to ensure that
the packaging is attractive and of high quality.
In selling services, the term servicescape was used to refer to the overall ambiance of
the place where the service is performed. For example, in a spa business, the sevicescape
should be cozy, service staff should be friendly, the massage bed should be comfortable and
clean, and relaxing music and the aromatic smell of nature should be evident. Packaging
services often involve bundling to make them look attractive. Examples are tour packages
offering hotel accommodation or a beauty salon having a rebond package with free hair
coloring or hot oil treatment.
As one of the additional Ps in the marketing mix, packaging plays a vital role in
persuading a customer to try a product or avail of a service based on what he or she has
seen. In fact, packaging sometimes matters more than the product or service itself. Indeed, it
must please the eye of the beholder.
Process
Process is the last addition in the marketing mix as marketers began to realize the
importance of the internal or external operations of the business to serve customer better.
Process is define as step-by-step procedure or activity workflow that the entrepreneur or
employees follow effectively and efficiently serve customers. Its components include input,
throughput, and output. The internal process includes the black coffee operations
(preprocessing, processing, postprocessing), wherein employees or machines process
customers’ request without necessarily being seen by the customer. The external process
includes the actual servicing where customers are part of the process.
Fundamental of brand management
A brand refers to the identify of a company, of a product, of a service, or of an
entrepreneur himself or herself. A brand is a symbol of promise or assurance from the
entrepreneur that what it purports to the customers will happen. A good brand not just entices
customers to try the product but makes them loyal to it. Moreover, the brand sets the image of
the business to the public. The challenge now for the budding entrepreneur is to understand
how to craft the brand, how to market this brand, and how to make this brand deliver. These
are the entire messege of the brand management.
Brand management is the supervproduct ision of the tangible and intangable elements of the
brand. The tangible elements include the itself, its packaging, its price, and its location. The
intangible elements, on the other hand, include the perception and relationship of the
customers with the brand.
Branding is the process of integrating the strategies formed from the marketing mix to
give an identity to product or service. The goals of branding include the following: (1)
establishing to target customers that the business is reliable and trustworthy and that the
product of service is the superior solution to their current problem; (2) differentiating with
competitors; and (3) driving customer loyalty and retention.
With strong branding, customers will feel that they are safer in using the products or
availing the service, and that the risks are minimal or low. If two products will be offered,the
customer will likely choose the one from reputable brand. Promoting the brand is also the
same as promoting the product or service. For budding entrepreneurs, choosing the cheapest
and most efficient channels of communication for the brand is the best choice.
One of the emerging but cheaper ways to promote a brand is through social media,
because these are platforms where conversations take place, resulting in “sticky” relationships.
The key for the entrepreneur is to manage the conversations. Handle both good or bad reviews
and feedback. Another technique is branding is to observe competitors’ brands (both the
successful and not so successful) and analyze their best practices and flaws. The brand should
be clear, simple, catchy, and consistent, so that the target market will have little or no efforts in
retaining the business brand to their minds.
 As an important element of a brand, the brand name is major differentiator of the
entrepreneur against the competitors. To be different and catchy, a brand name must possess
the following characteristics:
• Unique
• Extendable
• Easy to remember
• Can describe the benefits of the product or service
• Can be converted to other dialects or languages in case the entrepreneur expands to other
territories
• Can describe a product category
• Can describe concrete qualities
• Positive and inspiring

The brand is the marketing element that sticks to the mind of the target customers and
the public. Therefore, the entrepreneur must think critically on how to position the brand and
be able to sustain it.
Module 4: product Development, Operations, and Financial Plan
At the end of this module, I can:
1. understand the fundamentals of product development.
a. develop a product or service description
b. create a prototype of the product or service
c. test the product prototype
d. validate the service description of the product with potential customers to determine
its market acceptability.
2. describe the 4Ms (method, man power, machine, materials) of operations in relation
to the business opportunity.
a. select/pinpoint potential suppliers of raw materials as well as technology/ machine
requirements and other inputs necessary for the production of the product or service.
b. discuss the value/supply chain in relation to the business enterprise
c. recruit qualified people for one’s business enterprise
3.dvelop the business model
4. forecast the revenues of the business
5. forecast the cost to be incurred
6. compute the profits
7. create the company’s five-year projected financial statements.
 The business plan will not be complete if the operations and financial plan are not included.
These two play a crucial role in ensuring that the business is operationally feasible and financially
viable. Even if the marketing plan looks promising, the business will not be successful without a
detailed operations and financial plan. These two will tell if the big idea generated through product
development process is realistic.
This module will introduce you to the fundamentals of product development and the
operational requirements of a business represented by the 4Ms – manpower, method, machine, and
materials. You should learn the methods before commercializing a product or service. You will
understand how to identify and comply with the business requirements before running an enterprise .
You will also know the importance of crafting a business model as a blueprint of the business
operations. Last, you will be taught on how to account actual and future performance of a business
enterprise through reparation and analysis of financial statements.
Fundamental of Product Development
Before commercializing a new product or service, the entrepreneur must focus first on refining
the product or service and validate its market acceptability. This new product does not have to be a
totally new product. It can be a new product line from the existing business of the entrepreneur, a
product line expansion, an enhancement, or a repositioning of an existing product. Product
development is the process of developing, testing, and commercializing a product or service with the
ultimate objective of solving the problem of the primary target market. It is composed of four
sequential steps: (1) developing a product or service description, (2) creating a prototype, (3) testing
the prototype, and (4) validating the market.
Product or service Description
The product or service description simply describes how a product or service works and how
it benefits the customers. A clear product or service description is important because this will serve
as the blueprint of all business operations. Therefore, the entrepreneur has to take note of the
following regarding the product or service description:
1.It should directly address the primary target market in a personal manner using everyday
language. The entrepreneur should put himself/herself in the customer’s shoes, where the product
description will be addressed to.
2.It should highlight the features that will cater to the customer’s needs or address the customer’s
problem.
3.Realistic superlatives should be used for the product description. Motherhood statements such as
“world-class service or product excellence” may not matter to the customers at all.
Creating a Prototype of the Product or Service
After defining the product or service, you may now proceed with one of the most exciting
but also very challenging parts of product or service development: the creation of a prototype. A
prototype is a preliminary model or sample of a new product or service that is created to test a
product concept or service process. This is an exciting process for the entrepreneur because he/she
will be able to see that his/her ideas will soon become a tangible reality. The entrepreneur’s
creativity and ingenuity will be used in creating the prototype.
According to Entrepreneur (www.entrepreneur.com), creating a prototype lessens
implementation/commercialization risks and provides the entrepreneur a bunch of
advantages as follows:
1.Creating a prototype enables the entrepreneur to engage in trial-and-error, provides room
for improvements, and refines the functionality of the product design or service process. It is
very expensive and risk-intensive to commercialize a product without creating a prototype.
2.Creating a prototype provides the entrepreneur a window to test the performance and
specifications of various materials and service processes. Every detail of the product or service
should be scrutinized carefully, and all flaws be addressed right away before
commercialization.
3.A prototype helps the entrepreneur effectively describe the product or service to the product
team. Members of the product team include marketing, operations, engineers, suppliers,
business partners, and legal and human resources. It provides the product team the
information needed to create the right product or service as planned.
4.creating a prototype elicits respect from key stakeholders and customers. At the same time,
a prototype gives credibility to the entrepreneur. Some entrepreneur only present vague and
big ideas but no details as to its feasibility and implementation.
 Creating a prototype is stage where the entrepreneur can experiment, develop, and make some
improvements in the potential product or service. The objective of the entrepreneur as this stage is to
verify if the product or service concept will work as the simplest, fastest, and cheapest way.
One technique for creating the best prototype is by studying the competitor’s product or service.
The entrepreneur will try to scrutinize the parts and functions, as well as the design and other attributes
of that product, in hopes that he or she will be able to address some problems in the competitor’s
products and come up with the most efficient and effective prototype. As for the services, the
entrepreneur may try availing the competitor’s services and will take note of their operations, such as
service delivery, location, facilities, and ambiance. He or she will then take note of the pros and cons of
the service to create a prototype, simulate the service by trying it with his or her friends or relatives, and
then get their feedback.
Some entrepreneurs create a video presentation or a miniature prototype, so they will be able to
explain the details, if the product is to be viewed by a panel of specialists (e.g., engineers, developers,
scientists). The scope should be related to the entrepreneur’s budget. After creating the prototype, he or
she should be ready to test it.
Testing product prototype
All the efforts exerted in the creation of a prototype will be put to waste if the prototype will not be
tested. Testing the prototype is a vital process before an actual product or service is launched to the
market. Testing the prototype will uncover the final loopholes that need to be fixed before
commercialization. It gives the entrepreneur a leeway to examine and scrutinize the prototype and
Provide feedback as to what can be improved before the launch. These improvements and
changes must be completed first before moving forward to the next step. For a prototype that
has already been refined, testing is for the last time after the changes have been made ill
validate its readiness for commercialization. The following testing methods are applied by the
entrepreneur:
1. Focus group discussion- the participants will provide relevant insights about the new
product or service. The objective of the FGD is to identify errors, deficiencies, and issues
that may impede the success of the product. Participant also need to provide suggestions,
and pratical solutions on how to improve these deficiencies.
2. Legality and ethical test- prior for launching, the entrepreneur must ensure that the
product or service complies with all relevant laws and regulations and has a necessary
license or permit to operate a particular business. For example, food products must be
cleared first with the Bureau of food and drugs (BFAD) before manufacturing/production of
goods or offering of the service does not generate ethical issues such as being threats to
health, safety, and environment.
3. Safety test- The entrepreneur must ensure that the product is safe to use, safe to be
consume (food and beverages), and safe to be applied (cosmetics products). The product
should not in any way harm the customer or put the customer in peculiar situation. In
services the entrepreneur must ensure that the processes to performed by the service
provider must not be detrimental to the safety and health of the customer.
4. Product coasting test- The entrepreneur must examine every stage of the manufacturing
process or every process of the service blueprint to evaluate and finalize the costs involved.
This is the time when the entrepreneur can match the expected costs versus his/her budget.
Modification in the manufacturing process or service blueprint can still be made at this point to
align with the cost objective of the entrepreneur.
5. Component test- Each component of the product or service must be tested independently to
identify component failures for goods or service failures for services. Any failure identified
must be redesigned and tested again until it becomes fully operational and functional.
6. Competitors’ product/service test- The entrepreneur must test a similar line of products or
the competitors’ product or service itself to compare and get the best practices to be applied
to the new product or service.
Testing the product prototype is mandatory to ensure that the product or service will
not fail the customers and will deliver its definitive purpose. This will elicit customers
satisfaction and, eventually customer loyalty and retention. This is the time to approved that
the concept formulated by the entrepreneur will work and is feasible in real life. All the
mistakes accounted for and the improvements to be fixed should be performed first prior to
commercialization of the product or service.
Validation of Market Acceptability
Validation of market acceptability is the process of finding out if the intended primary target
market will be buying the product or availing the service. Market acceptability is a critical factor that the
entrepreneur must validate before launching the product or service, because this can strongly suggest if
the business will be successful or not. It either validates or disconfirms the perception of the
entrepreneur about the suitability of the chosen primary target market. It also test whether the value
proposition and unique selling proposition are appropriate there’s a need to improve on them. This is
also the time to deeply understand the value that the product or service brings to the customers and
their prospective purchase behavior, because it helps the entrepreneur build the relevant and
meaningful product or service. This process is the last step before the product or service can be
introduced to the market. The following objective questions are more likely to be answered in the
whole process of market acceptability validation:
1. Will the primary target market like the product or service?
2. Will the primary target market like the product or service when it is already in the market?
These questions can easily be answered if the entrepreneur will perform the following activities:
1. Use the most strategic marketing research too (FGD, survey, observation, interview, online survey,
e-mail, or a combination of these research tools), wherein the entrepreneur can get the most
relevant answer in the cheapest way possible.
2. Prepare relevant open-ended question that answer the objective above. Do not go around the
bush and be straight to the point. Keep the questions to a minimum because the target market got
get bored and the finish the whole questionnaire.
3. Find the market experts who also target the same market but are not directly competing with the
entrepreneur. For instance, a market expert sells cars to a specific market segment and it so happens
that an entrepreneur sells real estate. The entrepreneur can leverage on the knowledge of the
market expert regarding that market segment because they almost have the same demographic data
requirements. The entrepreneur can use these data to improve the product or service.
4. Collate all the data, analyse them, and prepare a summative report that answers the objective
questions that were mentioned earlier.
The 4ms of Operation
The operations plan in an important part of the business plan because it simply states the
detail in operating in business. Operations management, on the other hand, controls the
implementation of the business plan. A strong operations plan should have the four operational
aspects─called 4ms of operations; the methods, or the processes to be followed in effectively
manufacturing or delivering product or service; the manpower, or the right human resources who
will handle certain business operations; the machines, or the technology used in efficiently operating
the business, and the materials to be used in creating a product or performing a service, which
includes supply chain management.
Methods
The methods aspect represent the day-to-day operations of a business. It describes how an
entrepreneur will run the business from all facets of the business such as the manufacturing of goods,
service delivery process, distribution of goods and services, logistic for delivery of goods, and inventory
management, to name a few. The entrepreneur has to be very detailed in formulating these processes
and must ensure that the customer experience will be pleasant and seamless. Internally, the processes
must also abide with industry standards and policies where the business belongs (e.g., ISO certification)
The entrepreneur must also set standard operating procedures (SOPs) both in manufacturing
goods and rendering of services. These SOPs must be monitored to validate compliance. The
entrepreneur must also critically consider the effects of these processes to the environment and to the
public.
Manufacturing of goods (schaper and volery, 2004)
The entrepreneur who will engage in producing his or her own products will have to consider
the basic guidelines and principles in manufacturing. Manufacturing is the process of translating raw
materials onto finished goods that are acceptable to the customer’s standards. It consists of three
elements:
• Inputs- the materials or ingredients to be used in creating the product
• Process- the transformation phase where inputs are processed by manpower and machines to come
up with the final product
• Output- the final product of the process stage, which is intended to be sold to target customers
 The entrepreneur must also consider the most efficient manufacturing site in
which the manufacturing process will take place. Depending on the entrepreneur’s
objective and financial capacity, he/she can opt to have any of the following
manufacturing sites:
• Home-based – Most starups do not have financial capacity to establish a
manufacturing site. Thus, their only option is to manufacture goods at home. This
option is the cheapest and highly flexible. The entrepreneur can start with products
that are usually manageable to be processed at home such as food products and
customized clothes.
• Commercial space for rent – This is advisable if the business really requires a
commercial space for the processing of goods and if the home option is not viable
anymore. A commercial space gives the entrepreneur a more specialized and suited
manufacturing site than manufacturing at home. However, this is more expensive
than manufacturing at home and requires long-term commitment because the
entrepreneur will need to sign a lease agreement.
• Commercial space purchase – This option requires the biggest amount of capital
expenditure, but it also provides the entrepreneur substantial freedom and flexibility
to design and run the commercial space. Compared with renting, purchasing a
commercial space is considered more of an investment than an expose.
 Once the entrepreneur has chosen a manufacturing site, he/she should consider location,
where the delivery of raw materials and finished goods will be conducted. The transportation routes
from or to the manufacturing site should be efficient, so that the delivery of raw materials and
finished goods will be seamless. The location should also be accessible to major types of transport
vehicles. Last, the location must operate in an environment-friendly manner so as not to contribute
to various types of pollution in the environment.
The internal layout or the floor plan of the manufacturing site must also be critically done by
the entrepreneur because it affects the efficiency of the business operation. Each space should be
maximized to save on manufacturing costs( specifically overhead costs). An efficient floor plan
illustrates how raw materials and finished goods can efficiently be transferred, processed, and
released from one processing unit to another. There are two options for the floor plan: (1) the
product-based layout, where the facilities are prearranged according to the flow of the manufacturing
operations, and (2) the process-based layout, where the facilities are grouped according to their
function.
Last, the entrepreneur must prepare a manufacturing process flow, which serves as a step-by-
step guide of the employees and the manufacturing equipment. The objective of the process flow is
to ensure that the right inputs are properly used in production, that the process is performed
according to the set standards, and that acceptable outputs are produced . Not having a process flow
will result in inconsistencies in the process, high expenses, and disagreements among employees .
 The entrepreneur’s ultimate objective for all the operational processes is to ensure that
maximum efficiency are met – from the requisition of materials to processing them into finished
goods up to the distribution to customers.
Service Delivery Process
The entrepreneur who will engage in a service business must be more meticulous when it
comes to the service delivery process. This is because services are intangible, and the only way the
customer can appreciate the service is by remembering how pleasant his/her experience was.
Moreover, a seamless service saves the entrepreneur a huge chunk in operational costs.
Service entrepreneur must prepare a detailed flowchart of the service business, which is also
called a service blueprint. Every process in the blueprint must be relevant to the service business to
minimize wastage. The service bottlenecks must be addressed immediately to avoid customer
complaints. Bottlenecks is a part of the process where there is an apparently inefficiency and where
the customer waits longer. The service entrepreneur must develop script that the service provider
will follow to serve the customers better and to establish standard processes.
In terms of the floor plan, the service entrepreneur must design it according to the most
efficient way in performing the service, which can be based on the internal structure of the service
business, service delivery requirements, or customer requirements. For example, a barber shop
should place the receptionist in front so that customers can easily inquire of the service that they
will avail.
 Distribution Method
One of the basic processes to be considered thoroughly is the distribution process.
Distribution is the processes of bringing the products or services to customers. In selling physical
goods, the entrepreneur must plan the location, the processes, and the distribution of the products
to the customers. The entrepreneur mat also buy the finished goods from the manufacturers and
plan how to distribute them efficiently to target distribution centers or the customers. Distribution is
not a straight process from the entrepreneur to customers; thus, the term supply chain or
distribution channel was coined. The manufacturer will deliver the products to the distributors, to
the wholesalers, to the retailers, and then finally to customers. Each member in the supply chain will
have a fair share in the profits, which may be squeezed if the supply chain grows longer. This is why
there is a tendency to impose higher markups on the product price. It is now up to the entrepreneur
on what distribution channel strategies he/she will employ depending on the product or service
he/she will offer.
As mentioned, there are certain people involved in the supply chain. First is the
manufacturer. The manufacturer handles the invention, development, and production of the product
or service. Entrepreneurs can be manufactures of a product or a service. Most often, budding
entrepreneurs become manufacturers when they introduce a new product. Most established
products or services in the market are owned by top corporations. The great thing about being a
manufacturer is that entrepreneurs can manage the entire supply chain. Manufacturers take charge
of acquiring materials, production and delivery schedules, product quality, and inventory or safety
management. Manufacturers also handle product delivery, marketing, and selling. Because of this,
manufactures often seek the help of distributors or agents for the distribution of goods.
 Distributors are entrepreneurs who often buy products or services to the
manufacturers and sell them at a markup price to either wholesalers or retailers. Distributors
buy the products in bulk for discounted price. The bought products or services are now
owned by the distributors, so any damage, spoilage, or other liabilities to the product will be
their sole responsibility. Distributors become wholesalers when they sell the product to
another distributor.
Agents, on the other hand, don’t own the products or services because they do not
buy these from the manufacturer. Instead, they negotiate with buyers as to how much or
how many are to be sold, so the manufacturer will be able to deliver the goods directly to
the buyer. Agents get the commission for every product sold. Some agents to consignment,
wherein agents get the products in advance to demonstrate them live to the customers. If
unsold, agents just return the merchandise to the manufacturers. They are not held liable for
any damages or losses incurred.
Manufacturers turn to distributors when they have limited resources or they don’t
have people with expertise in selling the product. The distributor or agent can assist the
entrepreneur/manufacturer in the following: (1) sharing industry knowledge, behavior, and
activities of the primary target market, (2) pertinent rules and regulations imposed by the
government, (3) best practices in marketing and selling product, (4) best practices in
operating the business, and (5) their respective sticky relationship with business associates
such as suppliers, financial institutions, or retailers, to name a few.
Payment Process
The entrepreneur must also establish a seamless payment process. Generally, there
are no problems if the customers pay in cash. But there are instances when they do not want
to pay in cash and are usually attracted by flexible and payment terms such as credit cards,
instalment plans, or a simple accustomer-friendly counts payable or pautang. The
entrepreneur must ensure that credit payments are seamless and that the customers are
aware of terms and conditions of the credit.
Some entrepreneurs put point-of-sale (POS) machines in their shops to accommodate
those who will pay through their credit or debit cards. For traditional ones, they put the credit
purchase in a ledger and indicate the due dates. Ones the due arrived, the entrepreneur has to
collect payments from the customers. The objective for all entrepreneurs is to ensure efficient
collection of accounts receivables and avoid bad debts. He/she must conduct due diligence
first before allowing a customer to purchase via credit.
Manpower
At the beginning of the entrepreneur’s business, he/she usually maximizes
himself/herself , his/her partner, or his/her family members to handle all the aspects of the
business. But as it grows, the entrepreneur will need the expertise of qualified employees that
can handle operational functions, so that he/she will be free from daily activities and can thus
focus on the strategic and management functions of the business. The entrepreneur needs a
plot a table of organization based on his business objectives. Each position has to be relevant.
To verify if a position is really necessary, the entrepreneur must devise a detailed job
description and job qualifications of the future employee. This will be his/her basis in
deciding whether to hire an employee or not. The entrepreneur must be very keen in selecting
and hiring an employee. He/she must ensure that due diligence is performed to check the
background of the applicant. Manpower is one of the highest costs of operating a business but
is also the most instrumental to its success. Having the right people encompasses a myriad of
advantages.
Job Description
Job description enumerates the duties and responsibilities of the potential employee,
including the scope, limitations, and terms and conditions of employment. The heading of a
job description is the job title, which is the summary of what the employee will do. The
entrepreneur should devise a respectable and decent job title because the title boosts the self-
confidence of the employee.
After the job title is the compensation and benefit is the compensation and benefit
range, which details the potential salary and benefits that the employee will get. Next are the
duties, which clearly describe the job that the employee will assume with allowance for
flexibility. Duties are usually high-level descriptions only. Responsibilities and accountabilities
follow next, which must be communicated well to the employee so that he/she knows what to
expect with the job.
Work schedules, including work hours, must also be clearly indicated in the job description. The specific
days and working hours must be written so that the employee will be able to align the work schedule
with his/her personal schedule. Work schedules are highly driven by business requirements (e.g., a
security agency business will need to indicate the work schedules of the security guards it will hire).

Employee Qualification
In hiring suitable employees for the job needed, entrepreneurs will have to look for the
following criteria:
1. Educational background- This gives the entrepreneur an idea on the degree of the
candidate’s knowledge of basic things. However, it is not the sole factor in selecting candidate.
2. Work experience- This will tell him/her what to expect from the applicant and what he/she
can potentially contribute to the business based on his/her past positions and experiences. This will
also establish the training needs of the candidate.
3. Specific skill or knowledge- This one is important especially on technical jobs that require
high proficiency. It will be easy for entrepreneurs to place highly skilled people into specialized jobs
because they can help right away. This is also less expensive because entrepreneurs don’t have to train
them thoroughly to acquire such skills. Examples of potential candidates that have specific skills or
knowledge are engineers, architects, accountants, and information technology specialist.
4. Work attitude- This deals with the worker’s integrity and how he/she deals with his/her coworkers,
bosses, and customers. Entrepreneur also need people with relationship skills because communication
is important in applying their expertise. A good work attitude involves being punctual, having good
leadership and communication skills, being a team player, making ethical decisions, obeying superiors,
and being passionate and dedicated to the company. Entrepreneurs, however, will decide what they are
looking for in selecting the candidate.
Preparatory Selection of Job Applicants
Once the job description and employee qualifications are finalized by the entrepreneur, he/she
now preselects a set of candidates for the positions required. When the business is already sizeable,
entrepreneurs usually establish a human resource (HR) department that will handle the selection and
recruitment of candidates. The entrepreneur can initially choose from his/her personal list trustworthy
people whom he/she thinks can contribute to the business venture. If this list does not exist, he/she can
turn to employment agencies or manpower agencies that can do the job.
Headhunters help companies find a set of people suited for their requirements. They usually
charge a finder’s fee once the entrepreneur has decided to accept an applicant. Manpower agencies, on
other hand, recruit temporary employees under a short contract, usually on a six-month period. The
entrepreneur can also opt to advertise job vacancies via print such as general circulation newspaper or
other publications if the intention is to promptly get a candidate from the public. If the intention is to
hire candidates with specific knowledge or skills, the entrepreneur must turn to magazines or
publications of the specific industry where the prospect belongs (e.g., The magazine blueprint if the
entrepreneur wants to hire architects)
 One viable option is to consider recommendation and referrals from friends, relatives, or
business partners with an untainted reputation. Recommendations from those with doubtful
characters should of course not be considered by the entrepreneur. Another move is to look for
his or her business network, or the people whom the entrepreneur has worked with in the past.
This is a better way of preselecting the employee than the traditional way (interviews) because
the entrepreneur already knows the work ethics and qualifications of the potential employees.
Last, one of the revolutionary ways of preselecting potential employees is through digital
media. With the power of the internet, an entrepreneur can easily post job vacancies through his
or her web site, social media accounts, e-mails, online affiliates, search engines, podcasts, or
blogs. He or she can also choose the advertise via mobile through either short message service
(SMS) or mobile application, or simply mobile apps.
Selection of job applicants
Once the potential candidates are pooled, the entrepreneur must now do the difficult
task screening them and picking the most qualified and most suited for the job. Preliminary
screening can easily be done because the entrepreneur will just need to refer to the required
qualifications and eliminate those who did not qualify. The entrepreneur or the HR department
can now conduct a series of interviews for the shortlisted candidates with the objective of
getting the most qualified candidate for the job.
 Some established businesses even conduct qualifying examinations in math, English,
and logic before they hire an employee. Some may give qualitative examinations or
psychology tests that require the candidates to answer in essay form or in multiple choice.
Here are some common questions being asked in an interview. However, it will be up to the
entrepreneur or the HR personnel to ask relevant questions to the interviewee.
1. What are your strengths that you can contribute to our organization?
2. What are your weakness that can prevent you from working effectively in our
organization?
3. What exactly did you in your previous job(s)? How will these past experiences contribute
to our organization?
4. What were your significant milestones in your previous job(s), and why do you consider
them as such?
5. Can you discuss the things you now about our organization? Why are you interested to
join our organization?
6. What are your career plans for the next five years if given the chance to work with our
organization?
7. Can you describe your work ethic? How do you work with a team and with your superior?
 depending on the business requirements, the entrepreneur or the HR personnel will
ask more specific questions related to traveling out of town or overseas, working at night or
at odd hours, working on holidays and weekends, willingness to do other functions, and so
on. Both the entrepreneur promotes and the candidate must set realistic expectation for
both parties. In reality, the entrepreneur promotes the business to a candidate by starting
how good the company is and how great it is working for them. Conversely, the candidate
also sells himself/herself by citing his/her work experience or educational background. Both
parties should be aware of this in the interview process. Nevertheless, it will be up to the
entrepreneur or the hiring manager to decide based on the responses given by the candidate
and his/her credentials. Table 4.1 shows a list of basic requirements for a candidate to be
considered for specific positions.

Table 4.1. Educational background, specific skills or knowledge and work experience needed
in selected positions.
Position
Operations manager for a retail store
Educational background and specific Work experience
skills or knowledge
• Preferably has a degree in business ad Worked as a member of operations staff
major in operations management; having or as an operations manager in any
a master’s degree in business ad is plus industry
• Knowledgeable in MS office applications
and six sigma (a disciplined approach for
eliminating operational defects), and has
good leadership.

English teacher for foreigners • Has an education degree in English Worked as an English teacher in a
or languages university or worked in a call center as a
• Eloquent speaker and a good trainer
listener, patient with students,
adaptive to foreign cultures
Fast food crew • High school graduate Worked with a fast food chain or
• Physically fit, pleasing personality, restaurant; those without experience
customer-service oriented are still qualified because training will
be provided
Baker • At least a high school graduate and
win TESDA certification
• Physically fit, efficient, and fast
worker
Job offer
once the entrepreneur or the hiring manger has been convinced already of the
credentials and the interview answers of the candidate, the job contract is now prepared. A
job contract generally summarizes the candidate’s employment with the business. It usually
includes the following details : (1) rank or position of the candidate, (2) a list of
responsibilities or deliverables and its scope and limitations, (3) the salary and benefits
including vacation and sick leaves, (4) work schedule, (5) probationary period if any
qualifications to become a regular employee, (6) the duration of the contract, and (7)
resignation procedure (e.g., 30-day notice or leave immediately.)
Employee development
training people is one of the biggest investments of an entrepreneur or a
businessman. Therefore, he or she must devise strategies on how to keep employees
satisfied working in the company. Training starts with employee orientation. Employee
orientation is usually one-to-two-day sessions that summarizes the history of the business,
its vision and mission, policies and procedure, culture and norms of the business. This also
includes introduction to the employees and superiors, the tour of the work place, and the
discussion of daily responsibilities and accountabilities including key performance indicators
(KPI) and key result areas (KRA) of the employee. KPIs and KARs are the basis of the
entrepreneur for rating the performance od the employee- if the employee is exceeding
expectations, meeting expectations, or seldom meeting expectations.
 For startup entrepreneurs whose budget are really tight, they usually conduct on-the-job
training (OJT) as the most practical tool in training the employee under a supervision of a team
leader or manager. This will spare the entrepreneur the cost of further classroom training
because the employee is already productive and exposed to thee real job an what he or she
experiences from on-the-job training will serve as learning investment. The manager’s role is to
closely supervise, train, and monitor the initial performance of the new employee and provide
him or her constructive feedback on how to efficiently and effectively deliver the job. There
should be a check and balance especially during the first few days of the OJT. Constructive
feedback should be given by the supervisor to the employee, and all errors committed should
be rectified immediately to prevent recurrence.
other practical options that the entrepreneur can use as training tools are the buddy
system and mentor-mentee training programs. The buddy system is a training program wherein
an expert team member is assigned to assist a new employee until his or her function. The
objective of the expert employee is to train the new employee until he or she masters the job.
The mentor-mentee program, on the other hand, is a training program for supervisors, wherein
they will be mentored by a senior executive or senior officer of the business. The objective is to
train the supervisor to handle key decisions and strategic tasks that will eventually become part
of his or her job once he or she climbs the organizational ladder. Entrepreneurs must prepare a
succession plan to ensure business operations still continue even in their absence or the
absence of key employees, or when they decide to retire or resign.
 When the employees is already familiar on what he or she does on a daily basis and the supervisor
already noticed a substantial improvement in the employees’ performance, the entrepreneur or the
management should now take the employee to the next level. The entrepreneur can send the employee
for further training through extensive leadership training, part time or full-time bachelor’s or master’s
degree programs, or short-term technical/specialized courses.
One of the emerging and practical training development programs these days are enrolling in
online learning programs or webinars (seminar on the web). A webinar is a practical way of learning
because the entrepreneur or the employees does not need to go abroad or out town just to get the
necessary training. It is also very flexible because the entrepreneur can learn at his or her convenient time
or place. The employee can also expand his or her horizons and be rotated in different areas of the
business (e.g., form marketing to operations or vice versa).
The entrepreneur can also conduct internal training programs led by component subject matter
experts to discuss the intricacies of each department to the newly hired employees. To keep abreast with
the external factors, the entrepreneur can send himself or herself or the employees to attend international
or local symposia, workshops, conferences, and seminars. Internally, the entrepreneur must also conduct
annual strategic planning and include key employees to devise tactics and strategies for the business in the
next coming years.
Employee training and development is a major thrust of every entrepreneur because employees
are the best assets of a business enterprise. For one, this human resource aspect helps the business
reduce costs; remember that whenever employees commit errors as a result of lack training, the business
incurs unnecessary cost. As a result of employee training, productivity also increases because as the
employee learn his or job every day, he or she becomes more and more productive. Moreover, the full
potential of employees are optimized especially when their skills and talents are recognized. These will
result in the increase in value-added contribution of the employees. Employees will also feel important
and needed, therefore, they will continue to be motivated and committed the business. Indirectly, they
also become brand ambassadors of the business who promote their products or services to their circle.
 Another upside of training is that employees build camaraderie when put together in one
training session. This elicits smooth working relationships with one another, especially of the role of one
employee coincides with another employee. All of these result in a positive bottom line (net income),
because reduced costs and increase in productivity mean increase in revenues.
The greatest challenge for all entrepreneurs is constantly motivating and keeping high
performing employees. Because of their track record and achievements, they can easily transfer to other
competitors, which means all training investments to high-performing employees will be gone, higher
costs for training new employees, potential decrease in productivity, and customers transferring to
competitors as well. Therefore, the entrepreneurs and the HR department must devise an effective
talent management program to gain the employee’s loyalty. Here are several strategies for talent
management.
1. Providing employees with a very competitive salary package that includes guaranteed bonuses,
performance bonuses, commissions, and other monetary incentives.
2. Nonmonetary benefits such as medical coverage, different types of leaves (vacation leave, sick,
leave, emergency leave, birthday leave, maternity or paternity leave, study leave), decent and
notable job titles, flexibility in work schedule, awards and recognition for excellent performance,
inspirational leaders, transparency and fairness in employee performance evaluation, and channels
to which employees can provide constructive feedback without the risk of being fired.
3. Additional (optional) benefits such as annual trips (international or local), work-from-home
opportunities, scholarships, transportation and communication allowances, free meals and drinks,
fitness programs, sports programs, and other work-life balance programs.
 Entrepreneurs must be able to be objective when evaluating the performance of
employees. They must be confused on the business objectives and if the employees are the able
to meet these objectives. They must do all possible strategies to save high-performing
employees because losing them outweighs the salaries and benefits that you will spend on
them. On the other hand, nonperforming employees must be motivated by the entrepreneur to
make them more productive, unless replacing tem in necessary or when these employees find
better career options. Nonperforming employees are a liability to the company.
Machines
Most businesses would not be able to operate without the aid of machines. Machines
can be described as “best friend” of manpower in producing goods and offering services. They
go hand in hand. Sometimes, machine can even replace employees. Machines have become one
of the 4Ms because they are a very important aspect of goods and service production, and they
have changed the way entrepreneurs conduct business. Machines are not only limited to
physical equipment but can also pertain to new technologies that help business operations
become standardized and seamless. Without machines, business operations will be
cumbersome, and with low quality.
Equipment and other facilities
Depending on the product that the entrepreneur produces or the service that he or she
offers, the facilities must be strategically placed in the manufacturing site or in the service
delivery area. The entrepreneur must prepare a facility plan the details the most economical
way to manufacture the product or offer the service by placing the facilities where they can be
efficiently used.
The sizes and shapes of the facilities and equipment affect the entire operations
process, so the site must adapt to how big or small the pieces of equipment are. The site must
also be conductive, well-ventilated, and well-lit, so that the employees can manage the
machines efficiently. There should be fire exits and safety reminders on how to use the facilities
to ensure safety of the employees. The equipment to be used should all be compliant with
safety requirements to prevent accidents.
For pieces of manufacturing equipment that are complicated to operate (including
delivery vehicles) the entrepreneur must ensure that the employee went through rigorous
training or certification to operate them. The entrepreneur must also allocate space for the
storage of equipment, including the parking of delivery vehicles. He or she must also be aware
of the power consumption of each of the equipment to analyze the cost of producing the
goods. Ultimately, the goal of the entrepreneur is to maximize the pieces of equipment to their
full capacity to minimize manufacturing or service delivery costs.
Telecommunications and Information technology
Regardless of any business the entrepreneur will venture into, telecommunications and
information technology equipment is mandatory. These pieces of equipment include mobile phones or
smartphones, tablet computers, phablets (phone and tablet in one), landline phones, laptops or desktop
computers, POS machines, software programs, and business web sites. These tools aid the entrepreneur
in making business processes fast and convenient. Here are the advantages of have telecommunications
and information technology equipment in a business:
• Landline phones- order-taking, telemarketing, and teleconferencing with business partners and
customers
• Mobile phones (smartphones, tablet computers, phablets)- mobile application for order-taking, mobile
application for payments, mobile marketing, social media marketing, teleconferencing with business
partners and customers, marketing research, mobile banking, and internet promotions.
• Laptop and desktop computers- order-taking, internet marketing, making conference calls with business
partners and customers, marketing research, online banking, preparing reports such as financial
statements, business case, inventory reports, and legal and compliance reports.
• POS machines- charging customers’ debit or credit card, tracking sales, storing data, analysing purchases
• Accounting and inventory software- accounting all business transactions and profitability, monitoring
sales and inventory.
• Web site- order-taking, 24/7 marketing, having online conversations with customers, tracking customer
activities online, collecting customer information
 The responsibility of the entrepreneur is to protect this pieces of equipment physically and
against fraudsters who will be using these information to malign or steal from the business. These
machines carry confidential information. Therefore, they should be protected with strong passwords and
used only by authorize employees. Employees must be trained to keep every piece of important
information confidential, including passwords. Software programs must always be updated and checked
against viruses and hackers. POS machines must always be in working condition and must be referred to
be banks when not properly working.
There must be a business continuity plan (BCP) should machines not work properly. The
entrepreneur must select reliable suppliers for these machines so what when contingencies arise, they
may be able to provide immediate replacements or repair them quickly. The entrepreneur can also
negotiate with suppliers to provide discounted prices for bulk purchases.
On the information technology side, the entrepreneur must appoint two or more reliable
information technology experts whom they can call whenever there are issues encountered in the
software and computers. Both physical and non physical equipment should be covered in the event of loss
of property due to fortuitous events and accidents, machine breakdown, manual faults, or interruptions
of business.
Materials
whether the entrepreneur will offer products or cater services, he or she has pinpoint a number
of dependable suppliers of quality raw materials and supplies. The supplier must have a consistent and
sufficient amount of raw materials and supplies that can accommodate the demand of the entrepreneur.
In short, the selection of suppliers will not cause interruption in the production of goods or serving the
customer. From the onset, the entrepreneur should decide on what route to choose when it comes to
materials requisitioning. Options include the following: (1) manufacturing own products or offer services;
(2) outsourcing of manufacturing or service activities to a third party; and (3) purchasing own product or
service from service from present suppliers.
 In manufacturing the entrepreneur’s own products or offer services, a huge chunk of capital must
be prepared because all the expenses in manpower, machines feasibility thoroughly, as the risk is larger
with this option. A set of competent employees must be employed to handle the machines or service the
customers. But these challenges can be augmented because the entrepreneur can be very specific in the
details that he or she wants for the product or service. He or she can also closely monitor the quality of
products or services, strategically design the production or service blueprint, as well as its schedule, and
more flexible in deciding on the production quantity. On the marketing side, the entrepreneur will also
have the opportunity to build his or her own brand identity. Most importantly, the profits will all go to the
entrepreneur or the manufacturer.
Outsourcing is the process of appointing a third party manufacturer to do manufacturing
operations of the business. These third party companies already have an expertise in handling and
manufacturing these products, supplies, or inventories, and because they manufacture, they produce
goods in bulk. These drives the companies to create products or services tailored to the entrepreneur’s
needs at a lower cost. Some outsource companies offer to provide the services for the entrepreneur.
Outsourcing provides the entrepreneur a chance to provide the operation details to the third
party. No changes in the brand name in identity will be implemented because the entrepreneur still holds
the rights to such. Outsourcing saves the entrepreneur from buying expensive machines, renting
locations, or hiring manpower, as the operational aspect of the business will be transferred to the third
party. This scenario, however, poses risks, especially when the outsource party closes its business, when
it runs out of supplies, when it breaches the service-level agreement, when it produces substandard
products or services, or when the service stops. The profits are also shared with the third party, which
does not happen when the entrepreneur creates the product in his or her own. Also, because it knows
how the entrepreneur’s business work, and the third party can easily shift to other companies.
 The entrepreneur, therefore, must protect its product through a trademark or a patent,
and a noncompeting agreement or nondisclosure agreement. A patent is the right to protect the
entrepreneur regarding the product or service. A trademark, on the other hand, is a sign or
symbol that helps distinguish the product from others. A nondisclosure agreement (NDA) states
that the third party will be given full access to any confidential information provided that it
should not be disclosed to anyone else.
One option that an entrepreneur has is to make use of multiple outsource parties.
Having multiple outsource parties can be an advantage because of the following: (1) it helps
continue the operation even if one of the third party stops; (2) the entrepreneur will have
greater bargaining power on the price and scope of the product, and (3) the entrepreneur may
have a choice to switch to other parties if one of them does not perform well.
Purchasing finished products from a manufacturer or offering the services of another
company is another viable option for the entrepreneur. In this setup, the entrepreneur cannot
own the brand name of the product or service. Moreover, the manufacturer or the original
service is allowed to sell the entrepreneur’s competitors. In short, the entrepreneurs is just one
of the many distribution hubs of the manufacturer or the original service provider. This setup is
prevalent in distribution businesses, retailers, sari-sari stores, and franchises.
 Same with outsourcing, buying finished products or offering servicer to another company
spares the entrepreneur of the costs of machines and full-time manpower. Therefore, the
entrepreneur can use his or her funds for the purposes. This setup also allows the entrepreneur
to buy and sell a broad range of finished products and established services. They usually
compete on the indirect aspects of the business such as customer experience or physical
attributes of their business. Another disadvantage is that the manufacturer or original service
provider can just easily take the entrepreneur off its list when it wants to. The manufacturer or
service provider can also charge unreasonable prices to the entrepreneur or, worse, go directly
to end customers and give them lower prices to bypass its relationship with the entrepreneur.
Logistics
Entrepreneurs/manufacturers can also venture into distributing their products on their
own without the aid of a distributor or agent. This is where the entrepreneur must understand
and implement and efficient logistics management. As discussed earlier, the
entrepreneur/manufacturer is responsible for manufacturing, warehousing, transportation,
inventory management, marketing, and selling the product or service.
Warehousing is storing the finished goods manufactured in a facility until they are
distributed to end users. Warehousing cost is usually substantial. Therefore, the entrepreneur
should think of ways on how to reduce the cost of warehousing by either buying an economical
warehouse or renting an inexpensive space.
 Transportation will also be a major cost in logistics management. It is the process of efficiently
transferring the products to retailers or customers. The entrepreneur/manufacturer must purchase
energy-efficient vehicles that can carry a reasonable amount of merchandise to prevent inefficient trips.
The entrepreneur/manufacturer can also use the presence of distribution hubs. The distribution hub is
where the entrepreneur/manufacturer carries multiple products. Instead of delivering per product to
retail outlets, the entrepreneur/manufacturer can consolidate all the products needed by the retail outlet
and deliver just once.
Inventory should also be tracked religiously by the entrepreneur/manufacturer. Each of the
inventories in the warehouse, distribution hubs, and manufacturing sites should be monitored. The law of
supply and demand must always be taken into account. There should not be a surplus of inventory
especially if the entrepreneur is selling perishable goods. The entrepreneur must be knowledgeable about
the life span of the products that will be sold. The entrepreneur/manufacturer must also ensure that
there is enough space to store and stock inventory, depending on storage requirements (e.g., product is
required to be stored in cold temperature). To protect the products from fortuitous events, the
entrepreneur must insure them with a reliable insurance firm.
It can be surmised that the entrepreneur is not selling well if there are too many products left
after a long period of time in his/her inventory, or he/she is producing more than what is demanded by
the customers. The key with inventory management is understanding the historical and current demand
data as well as a future trends to avoid unnecessary costs in producing too many products. Bear in mind
that making too many products can incur manufacturing costs, storage costs, and costs of spoilage.
The business model
According to Don Deebelak in his article “Developing a Great Business Model” on the
entrepreneur Web site, the entrepreneur must adapt the dynamics of traffic lights in developing the
business model. These are the 3 “green lights” or the positive signals that can help entrepreneurs develop
ideal business models and eventually succeed. On the other end, there are 3 “red lights” or negative
signals that entrepreneurs should be wary of.
The green lights
1. Target high-value customers. These customers are often misinterpret as affluent or high-end
customers, but this is not always the case. A high-value customer is (1) someone who is easy to find,
(2) someone who is willing to pay a price that will reasonably profit the entrepreneur, (3) someone
who is easy to persuade with the least promotional effort, and (4) someone who can join the
bandwagon of customers that, when consolidated, can generate a substantial amount of revenues
aligned with the profit objectives of the entrepreneur. Customer do not only mean end customers or
retail customers; they can also be partner retailers, distributors or corporate customers. The
entrepreneur’s objective is to find these customers. If unable to do so, he or she can choose to tie up
with strategic partners who fit the profile of a high-value customers.
2. Offer products or services with the great value. As discussed in Module 3, the value proposition and
unique value proposition should always kick in as compelling reasons for customers to choose your
product or your service. He or she must also devise an efficient distribution system where the flow of
goods or service delivery is convenient, fast, and available when needed.
He or she can also collaborate and synergize with relevant partners to offer excellent customer
experience to customers. The entrepreneur should also offer products or services with great
value coupled with attractive and reasonable prices as a result of lean manufacturing. Aside from
the core product or service, he or she can also provide customers with other related product or
services and customization options to complete the overall value of the product or service being
offered. With the influx of technological advancements such as the internet, third party
outsourcing, and synergies between businesses, the arena of the entrepreneurs around the
world has become ultracompetitive. Therefore, the entrepreneur must always be in the lookout
on whether his or her product or service still provides value or is already outpaced by the
competition.
3. Offer products or services with reasonable profits. There are two ways of achieving reasonable
profits: (1) increasing markup (2) decreasing operational costs. The most practical way to achieve
reasonable profits though is to decrease operational costs. This is because increasing the
markup, as compared with the prices of competitors, will decrease the attractiveness and
competitiveness of the product or service. Therefore, profitability cannot be maximized.
Decreasing the operational cost is a controllable strategy in increasing profits of the business as
lower cost means higher profit margin. As discussed in the 4Ms of operations, the entrepreneur
should (1) devise an efficient distribution system, (2) lessen unnecessary manpower efforts as
much as possible (3) apply lean manufacturing processes, and (4) add support products or
auxiliary services that can increase revenue without adding substantial cost.
The Red Lights
1. Satisfying the customer becomes too costly and irrational. The entrepreneur must calculate
the cost and profit associated with serving the customer before pursuing the business. There
are times when entrepreneurs are blinded by how big the profit margin can be for a sale of a
particular product or service. But little do they know that there are numerous associated
after sales costs that can even exceed the profit margin derived from the actual sale. In
marketing, the term lifetime value of a customer was coined to understand the potential
value that a customer can bring to the business in the long run. But there are obvious red
flags, which are collectively called customer satisfaction costs, that can impede the success of
an entrepreneur. These are as follows.
a) Warranty- because some products are not sturdy as they should be, the business will incur
unnecessary warranty costs that can even surpass the cost and profit margin of the margin.
b) After sales costs- some products or services require extensive technical support, installation,
and customer service. These after sales costs might even surpass the actual sales price of the
product or service.
Once the costs are identified, the entrepreneur will rectify the situation by transferring
the cost to another party or through outsourcing to lessen the cost of servicing the customers.
He can also instruct his sales team to just focus on business aspects that do not require too much
customer satisfaction.
2. Being a market leader is difficult to sustain. One of the characteristics of an ideal business model is
capitalizing on the business’ strature as a market leader through improving the features and benefits of
its existing products or services, adding new product lines or services, or expanding by tapping new
customers. However, there are signs that it will be difficult to sustain being a market leader if the
following conditions exist; (1) if there are major customers purchasing the entrepreneur’s product or
services, (2) if there are major players in the industry that control the majority of the distribution
network, (3) if technology has changed the way the entrepreneur operates the business, compelling
him/her to invest on rigorous product research and development, (4) if technology replaces the need for
the entrepreneur’s product or service, and (5) if the competitors can easily tap the market of the
entrepreneur. Maintaining the market position has a large dependency on the overall condition of the
market.
3. Return on investment (ROI) takes to long and too small. Entrepreneurs did venture in a business
enterprise because they want to earn profits for the purpose of sustainably. ROI is very important to the
entrepreneur because it validates that the business is doing well and hat money is flowing in as expected
during the planning stage. An ideal business model is characterized by a reasonable ROI earned at the
right time and with the right amount. However, if reports sat that ROI is less than approximately 25% in
the first three years of business operations, it is a sign that the entrepreneur is not operating an ideal
business model. Another sign is that production of additional products or services requires an ample
amount of additional capital. Moreover, only less than 50% of the capital required will be allocated to
revenue-generating activities such as selling and manufacturing. It is also a red flag if the present capacity
is also not capable to produce or handle new commitments; therefore, additional investments must be
made again to accommodate the new demands. The last sign is the uncontrollable industry factor where
generally everyone in the industry always has unacceptable ROIs.
The financial plan
One of the most difficult parts of the business plan is the financial plan. Not all entrepreneurs are
adept with accounting procedures , rules, and reporting policies. However, there is no choice for the
entrepreneur but to be familiar with numbers. The sustainability of a . business depends on a meticulous
monitoring of finances. This is the portion of the business plan that speaks of the product or service
performance. It also provides the entrepreneur financial data such as liquidity, cash flow, and financial
standing of the business. The financial plan also gives the entrepreneur bases for his or her decisions on
financial matters such as offering credit terms to customers, applying for a bank loan, expand, or sell the
business. Without proper accounting of business activities and transactions, the entrepreneur will be at
loss on where his or her business is leading his or her.
Financial management begins when the entrepreneur starts to raise capital for the business
venture. Capital is the money the will be allocated by the entrepreneur to establish a business. If
shouldn’t be mixed with the personal money of the entrepreneur. A business is a separate entity and
should not be mixed with the personal finances of the entrepreneur.
A number of the entrepreneurs produce capital out of their personal savings. This money came
from a disciplined habit of consistently saving when the entrepreneur used to be an employee. Some of
the budding entrepreneurs borrow money from families or friends, whereas some look for interested
inventors or stakeholders. The entrepreneurs can also turn banks decisions on the business performance
(i.e., the net income of the business). Some starups may find it difficult to secure a loan from banks
because of the performance angle as one of the qualifications
 Collateral refers to high value asset that is submitted by the business to the bank when
applying for a loan and will be subject for repossession if the business default. Regardless of
where the capital was sourced, putting this capital at risk one of the major reasons that most
entrepreneurs are afraid to engaged in a business venture. But those who take the risks also gain
the experience and use this experience to succeed. Not all entrepreneurs became successful the
first time they ventured into business. All of them experienced failures and used these failures to
their advantage.
Factors affecting estimation of revenue
A business opportunity can only be considered a real one when the entrepreneur
recognizes that the opportunity may bring him or her revenue. Revenue is the output of a sale
wherein the sales price exceeds the cost to procedure the product or render the service.
Revenue is considered earned when the product is already sold or service has been rendered
regardless if the business is paid in cash or credit. Revenue is considered deferred when the
product or service has not yet been delivered or sold but the customer already paid in advance.
After establishing that the business opportunity will really bring revenue, the next step is
to estimate how big the revenue is on annual basis. This will give the entrepreneur an inkling on
where his or her hard-earned money will go. It is not easy to estimate potential revenue, as it
requires a thorough analysis of external and internal factors that can affect the business. All of it
will appear realistic and will not mislead the entrepreneur.
1. The economy and the external primary target market. Similar to finding business
opportunities, estimating revenue is greatly affected by the entire economy and the
behaviour of the primary target market. The entrepreneur must be able to incorporate the
overall health of the economy and its estimation of projected revenue. He or she needs to
know if the economy is either booming, stable, or slowing down. However, there will be
times when the overall economy is not a reflection of what the entrepreneur’s primary target
market is experiencing. Therefore, the entrepreneur must also separate revenue estimation
for the primary target market as to whether it is booming, stable, or slowing down. For
example, the overall Philippine economy is growing but, the target of the entrepreneur A is
the class D, and the economic condition of the members of this socioeconomic class is still
worsening. He or she must be able to reconcile these and come up with realistic estimates.
2. The external competitors. The entrepreneur must devise a comprehensive competitive
profile matrix- a chart that details the relevant data of both direct and indirect competitors
and how these factors affect profitability. Direct competitors are those that offers exactly the
same product/product lines or services but influence or affect the entrepreneur’s market
(e.g., if the entrepreneurs sells softdrinks, his or he market share will affected by those who
sell other beverage products such as mineral water, iced tea, juices, or alcoholic drinks).
The entrepreneur must plot the strengths of each competitors, its financial data, and its
respective market share. A thorough analysis must be conducted to assess whether the
entrepreneur will really earn from the business opportunity.
When entering a market dominated by stronger and larger competitors, the challenge for the
entrepreneur is to come up with a highly differentiated product or service with a very strong
unique selling proposition. Otherwise, he or she will be “eaten alive” by these large players.
What these large players will do to beat a newbie in the market is reduce their prices leveraging
on economies of scales and still earn profit. To compete, there is no choice for the entrepreneur
but also reduce price, thereby greatly affecting profitability.
When entering a market with weaker or smaller competitors, the challenge is to compete with
them directly. Unlike the first one, however, there is a bigger chance here to succeed and take
away the market with no competitors.
The entrepreneur can also enter a market with no competitors. This rarely happens though;
these days, there are virtually no unique products or services, or there are only few
entrepreneurs who want to venture in an entirely different market that no one has tried yet. An
example of this is venturing in a war-stricken area where the risk is very high because the
entrepreneur has no competitors to share his or her market. Also, entrepreneurs can impose
unreasonable prices, as the buyers have no bargaining power because they have no choice.
Aside from basic financial data, the entrepreneur must also be vigilant in reviewing and assessing
the business and marketing strategies of the competitors must be emulated and altered a bit by
the entrepreneur, and those that were certified as ineffective must not be repeated to avoid
unnecessary losses. Understanding the strategies of the competitors allows the entrepreneur to
neutralize its effects to his or her business.
 Unit II: Implementing a business Plan
After you have learned how to formulate a business plan, you will now be
given the chance in this unit to implement a simple business. This experience will
hopefully open door for you to carry out your fresh ideas and put them into action.
The implementation of the business plan, however, is a tough endeavor for
most entrepreneurs. Plans can easily be designed on paper. Ideas and concepts for a
good business plan are easy to come up with, but appropriate implementation is
more of a challenge. The realization of the entire business plan will be, to a great
extent, dependent on a well-timed, effective, and efficient execution. A reexamination
is needed to assess whether or not enough research has been done so hat your
strategies will go as planned. There are instances that plans do not materialize
themselves perfectly because the entrepreneur did not prepare for the
uncertainties that often arise. Thus, the entrepreneur must develop a positive
attitude and employ a flexible approach to face sudden changes in the business
environment .
 The entrepreneur must aim for the execution of the business plan at the right time
and using the right methodology. Measure of progress should be based on actions and not
words. At the end of the day, the entrepreneur has to reflect on how to be better by fine-
tuning business strategies and adjusting to sudden changes regularly.
As a modern entrepreneur, executing ideas is always a trial-and-error undertaking. As
part of the creative process, the more times the entrepreneur tries, the more he/she learns,
and the better he/she gets at bouncing back from missteps.
Because business is a risky endeavor, you have to manage all the business
implementation risks. In beyond wall 1.2, apply it in real life activity in module 1, you were
able to interview successful entrepreneurs and inquire about how they started and manage
their business. You have learned that most of them did not experience success on their initial
attempt. The first letdown they experienced did no push them out of the business; rather,
they kept going using their experience as an investment rather than a liability.
This unit will be very exciting and very challenging for you at the same time because
you will be tasked to implement a small business in your locality. This will also validate if you
really have a calling for entrepeneurship.
 MODULE 5: Implementation of marketing plans and strategies
At the end of this module, I can,
1. Implement marketing plans and strategies
2. Sell the product or service to the primary and the secondary target market
3. Manifest an understanding of starting and operating a simple business
____________________________________________________________________________
The marketing plan plays a very important role in the entrepreneur’s business plan as
discussed in module 3. Its role is to ignite the customers to be informed, be persuaded, and be
reminded to buy a product or avail of a service. To fulfil this role, this module will teach you how to
make marketing concepts a reality. The implementation of a marketing plan and strategies is the stage
when the entrepreneur puts his/her marketing ideas into action. Therefore, this module will cover
the basic steps on how to implement a marketing plan and eventually sell the product or service to the
primary target market. You will be tasked to implement a marketing plan for your selected product or
service in your locality.
Implementing the marketing plans and strategies
Preparing a marketing plan and implementing a marketing plan are two different disciplines.
Preparing a marketing plan research-based, very technical, and focused on coming up with a
methodical marketing plan. Implementing a marketing plan is strategy- and tactics-based, needs
manpower to execute, and is results-oriented. Implementation of the marketing plan is an iterative
process and does not end after one round. It changes and adapts to the internal and external factors
Affecting the product or service. Therefore, the entrepreneur should always prepare a marketing plan
ideally for one year.
Effective marketing implementation starts with listing the marketing activities and those who
will be involved in executing the tasks. As the driver of the business, the entrepreneur must be able
to know who are responsible for what and must manage them to perform their functions effectively.
Hence, it is important to monitor the monitor the specific tasks related to each and every marketing
plan component.
Here are the ideal marketing plan implementation steps.
Step 1: divide the marketing plan into small manageable pieces and manageable time lines.
The entrepreneur must discuss the marketing plan and the marketing objectives thoroughly
to the marketing team at the onset and establish accountabilities. The value proposition, the unique
selling proposition, and the 7Ps or the marketing mix must be clear with the members of the
marketing team and why these were chosen to best communicate the product or service to target
customers. The entrepreneur must also discuss thoroughly with the marketing team critical
implementation aspects such as organizational preparedness, allotted budget, implementation
schedule, and risks. Promotional strategies to be implemented such as sales promotion, public
relations, advertising, direct marketing, or personal selling, and tasks to be divided must also be
explained well among the marketing team members. The promotional channel to be used must also
be clear to them, as to why these are considered the most effective (TV, radio, internet, mobile, print)
Risks must always be factored in so that the marketing team is ready to encounter all the
negative effects of the marketing plan implementation. These risks could be in the form of
reputational risk, financial risk ( if unable to reach the target market ), or strategic marketing
risk.
Examples of unique selling proposition, value proposition, marketing mix strategies,
and tactics for an online clothing business:
Value proposition: virtual shopping mall
Unique selling proposition: hand-made fashionable clothes from indigenous Filipinos
7Ps marketing mix strategies
Product – hand-made fashionable clothes
Place – online/internet
Price – penetration pricing ( will start with low price until it peaks)
Promotion – internet marketing (e-mails, social media, Web sites)
People – 24/7 helpdesk
Packaging – organic paper
Process – return policy of 10 calendars days
 For a detailed and organized time line, entrepreneurs usually prepare a Gantt chart. A
Gantt chart is an important implementation tool that enumerates all planned marketing
activities into one file and arranges the marketing activities chronologically, together with the
interrelations with each other and other dependencies.
Below is an example of a Gantt chart. It is customizable depending on the
entrepreneur’s business and own preference. The main point is that the Gantt chart must
summarize the marketing implementation plan in one document that very member of the
marketing team can easily access and understand. This helps them track their performance and
their deliverables.

Person Responsible Specific Marketing Time line and Budget

Tactic Deliverables
E-mail marketer Sends first batch of Beginning January ₱50 000
clothing products with 2016 and must be
special discounted sent every month Discount: ₱100 off for
prices to the first 500 every purchase × 500
primary target = ₱50 000
market’s e-mail
addresses
Social media marketer Gives special January 2016 ₱20 000
discount prices to
first 100 customers Special discount:
who will like the ₱200 × 100 =
page on Facebook or ₱20 000
follow on Twitter,
and purchase any
clothing product

Channel: Internet
Marketing strategy:
sales promotion,
social media
marketing
Web site designer Creates a Web site January-June 2016 ₱100 000
where customers
can choose, order
online, pay online,
Step 2: Explain and delegate the marketing tasks to assigned individuals.
In Table 5.1, the online clothing entrepreneur must discuss the marketing objectives
and specific marketing tasks to assigned people so they know exactly what they will do and
when to deliver them. The entrepreneur must also update, monitor, and evaluate the
marketing assignments every week or every month depending on the importance and
urgency of the marketing tasks.
From Table 5.1, assuming the entrepreneur also planned to launch the online clothing
business using the traditional approaches aside from the Internet and mobile, these tasks
must be explained and delegated well to the marketing team to avoid confusions and to
execute theTactic
Marketing plans and
as imagined.
Person Responsible Rationale Timeline
Channel to Be Used

Direct Direct marketer To instigate January-June 2016

-newsletters awareness to the
marketing and primary target market
infomercials using and eventually lead to
social media purchase
Public relations PR coordination To establish a credible online January-March 2016
-press releases via a reliable reputation because the
fashion web site or a blog site internet is susceptible to
of a famous fashion blogger various threats

Sales promotion Digital marketer To encourage the primary january-march 2016

 500 off and free delivery target market to try the
fee on the first online product and eventually to
purchase of any clothing change the habit from
product traditional purchase to online
purchase
Step 3: Keep the communication line open
the entrepreneur must ensure that the line of communication between him or her and
the marketing team is always open to avoid implementation issues. This is very critical because if
there is a communication gap, customers will be the ones to suffer. In the previous example, the
online clothing entrepreneur and his or her marketing team must ensure that they talk regularly
to ensure that the marketing execution is done as planned. With the advent of technology, the
entrepreneur and his or her marketing team can communicate via face-to-face meeting, landline,
mobile phone,or the Internet. Communication channel these day have been revolutionized by
technology, thereby leaving no reason for the modern entrepreneur to not communicate well
with his or her marketing team.
Step 4: Monitor accomplishment and progress
Each of the marketing team member’s tasks must be monitored and evaluated to see if the
deliverables were done correctly and timely. The entrepreneur must also review the results
according to the set standards ( highly acceptable, acceptable, a little acceptable, or not
acceptable). If there are marketing tasks that were not performed, as planned , the entrepreneur
must help the employee. If helping the employee is not viable option he or she can resort to
transferring the employee to other function that he or she will be or better use. Using the
example chart in step 1, add two more columns for Performance Score and On-time Delivery
Score. The entrepreneur must check the progress on a weekly or monthly basis depending on the
nature of the business and marketing objectives. He or she should also interpret the the results
so that he or she knows what to do next.
 Person Specific Timeline Performance On-time
Responsible Marketing Score Delivery Score
Tactics
E-mail marketer E-mail marketing Every month ? ?
campaign beginning
January 2016
Social media marketer Facebook and January 2016 ? ?
Twitter Page
Web site designer Transacting January-June ? ?
trough the Web 2016
site
Step 5: Open yourself to relevant ideas of your marketing team.
Because the ones in the frontline are the entrepreneur’s marketing team members, the
entrepreneur should listen carefully to all their specific insights and findings a document them.
They have the firsthand experience and idea about the behavior, psychology, demographics,
and geography of the target market. They can better describe to the entrepreneur the picture
of reality. The marketing plan implementation results and other relevant feedback that may
not be covered by marketing plan. Marketing plans are not fully encompassing. Many times, it
is in the implementation stage that the entrepreneur gets the best marketing ideas and not on
the product or service development stage.
Person Responsible Feedback from the Marketing Team
E-mail marketer Even though most of the target market have e-mail addresses,
45% of them have not read the entire e-mail marketing campaign
because the e-mail was heavy in pictures. Most of the recipients
are using a basic data plan for their mobile phones.

Social media marketer The target market responded positively with the social media campaigns.
The sales price discount for the first 100 persons who liked the Facebook
page or followed the campaign on Twitter worked. They request that
another batch of discount be given soon.
 Web site designer A mobile application can also be done be done
simultaneously to mirror the functionally of the Web site
because 90% of the target market are using smartphones.

Step 6: Adapt to the internal and external factors that affect the marketing function.
The entrepreneur must always be at pace with the changes happening within and
outside the environment where his/her business operates. The entrepreneur must not ignore
all relevant factors so he/she knows how to counter them or follow them by devising a revised
marketing plan. The marketing plan is a work in progress and must be revisited accordingly. It
evolves in relation to the internal movements and the market condition where it operates.
Marketing Tactic in Internal Factor External Factor Marketing Tactic in
2016 2017
Online ordering via 90% of the target Ordering via Web site
Web site market have and mobile
smartphones with a application
data plan.
E-mail marketing alerts A system that automatically E-mail marketing alerts
every month where the e- adds new customers’ e-mail every month. New
mail marketer adds e-mail addresses is purchased customers will receive the e-
addresses of new customers mail alerts one day after
manually. These new registration
customers receive the e-mail
alerts one week after
registration
Social media campaigns and 40% of the target market Add instagram as a new
promos in Facebook and joined instagram in 2016 channel for social media
twitter promos

Step 7: Incorporate incentives and penalties for motivation.

Every milestone should be celebrated, and one of the best ways to do it is to incentivize the
marketing team. On the other hand, non-performance or mediocre performance of the marketing team
should also have some consequences. These incentives and penalties will always remind the members
of the team to keep themselves on their toes. A congratulatory remark plus a tap in the back means the
team member did a task right, whereas repeated coaching sessions and reminders mean the team
member was not quite effective in the task given. The low-performing team members should be given
reasonable chances before replacing them or transferring them to another department or unit.
Incentives have been proven to really work well in motivating employees.
Table 5.6. sample incorporation of incentives for team performance
Marketing Tactic
Send first batch of clothing products
with special discounted prices to the
first 500 primary target market’s e-mail
addresses.
Channel: internet
Marketing strategy: sales promotion,
online advertising
Give special discount prices to first 100
customers who will like the page on
Facebook or follow on twitter, and
purchase any clothing product
Channel: internet
Marketing strategy: sales promotion,
social media marketing
Create a web site where customer can
choose, order, and pay online, and
deliver goods to the customer’s
doorsteps
Performance Metrics Incentive
• Conversion rate to sales Commission for every sale generated by
• Bounce rate (undelivered e-mails) the e-mail marketing campaign
• E-mail sharing or forwarding rate
• List growth rate
• Conversion rate to sales One-time bonus if there will be 1 000
• Brand search volume incremental customers on top of the
• Lead growth first month after launch
• Brand sentiment
• Inbound links
• Social media engagement
• Number of visitors New mobile gadget if the visitors
• Number of referrals reached 1 500 on the first month of
• Bounce rate (visitor of the Web site that web site launch
immediately clicks the back button
• Exit pages
• Conversion rate
Step 8: Analyze and interpret the results
This final step is one of the most crucial. The entrepreneur must analyze and interpret the
overall results of the marketing plan implementation. Each accomplished marketing task must be
marked as a milestone to recognize that a task is already executed as envisioned. All the relevant
insights and learning must be recognized and incorporated in the next marketing plan. Effective
marketing strategies and tactics must be maintained and monitored if they still work. If there are signs
that the strategies lose effectiveness, the entrepreneur must be vigilant to revise them urgently. The
entrepreneur must always be updated with the internal and external surroundings, so he/she can
always include these factors in devising new and relevant marketing strategies and tactics for the next
marketing plan.
There are so many entrepreneurs in the Philippines who have generated bright and unique
business ideas and excellent marketing plans, but some of them did not succeed. The major reason is
poor implantation of the marketing plan. An effective marketing plan implementation, on the other
hand, will sustain the business and establish credibility to customers.
Actual selling of a product or a service
The first objective of a marketing strategy is usually to create awareness. But the ultimate
objective of any marketing strategy is for the product or service to be sold because this is where the
revenue comes in. Awareness cannot be translated to peso value but sales can be. The validation of
how good or bad a marketing strategy is can be manifested through how much sales the entrepreneur
generated. The actual selling of a product or service may seem to be easy for some, or it may vary per
person or per business. But many successful entrepreneurs believe that there are proper methods to
sell products or services. Sellers are expected to be skilled in probing and digging deep into the needs
and wants of customers. These pieces of information can be translated as a significant investment of
the seller to effectively drive sales
 There are various selling strategies entrepreneurs use that you can also apply when you sell your actual
product or service:
1. Cold calls – this is a selling strategy whereby the seller calls a random person who has no relationship with
the business yet but is considered as potential customer. This selling strategy is one of the most difficult to
pull off. The seller should expect that the customers are “cold” and skeptic when he/she sells the product to
them.
2. Consultative selling – unlike cold calls, consultative selling is a dialog process between the buyer and the
seller (who acts as an expert consultant) as to how the buyer’s problem or pain points can be addressed by
the product or service of the seller.
3. Direct selling – this is a selling strategy that is a common in the Philippines. It is where an independent direct
seller goes directly to the customer’s house or office and presents his/her products for selling.
4. Persuasive selling – this is often associated with being pushy, but persuasive selling is different in such a way
that it is selling with subtlety. This is positioning the product or service as rare, limited, or recommended by
experts. The persuasive seller is able to engage a customer in a conversation rather than a sales pitch. This
way, the customers are put at ease.
Step 1: find prospects
There is no such thing as “everyone,” “all of them,” or “everybody” when it comes to marketing and
selling. At the onset, the entrepreneur has to choose an initial group of people that has common interests and
preferences that the entrepreneur has to find. This mechanism lessens unnecesary marketing and selling
expenses and makes the strategy more effective and suited to the primary target market. These primary target
markets are also called sales leads or prospects. These prospects have to be screened as their potential
profitability and longevity with business. The entrepreneur must segment the prospects according to his/her
preferred demographics, psychographics, behavior, and geography. When an entrepreneur begins to gather a
number of new customers, he/she can leverage on them by asking for their referrals.
Step 2: sell credibly to your primary target market (sales presentation)
The selling presentation is one of the most challenging tasks selling. The entrepreneur or his/her sales
team/agents must contact the prospects in any of the possible channels where they can be easily reached such
as face-to-face, internet(e-mail, web site, social media), mobile phone, landline phone, text message,
advertisement, affiliates, or any other creative and strategic channel where they will be enticed to buy. This
initial selling phase determines who in the household is the decisions-maker and how the product or service can
be of use to them. But all of these pieces of information are difficult to acquire if the customers do not trust the
business. Therefore, the sales team or sales agents must establish credibility from the beginning and give the
customers a compelling reason why they should trust the business.
Once trust has been established, the sales team members must come up with a convincing proposition
about the product that will catch the customers’ attention. Once attention has been given, they have to offer a
deal that will inspire the customers to act. Last, they have to institute a selling tactic that will actually prompt
customers to buy the product or service.
There are four types of sales presentation as follows:
a. Stimulus response – offering the customer a compelling proposition that triggers them to initiate purchase.
b. Formula selling – follows a standardized selling approach or based on a formula
c. Canned presentation – is a sales presentation memorized by the presenter
d. Need presentation – is a question-and-answer presentation with the aim of understanding the exact needs
and wants of the customer
Step 3: manage customers’ inquiries and objections
Customers are not buying for the sake of buying. They are the entrepreneur’s major critique. They are
usually asking questions related to price or value proposition. They need to be assured that the value of their
money is satisfied by the value of the product or service. Therefore, the challenge for the seller is to address the
unique needs of customers based on their interests, needs, and situations to proceed with closing the sale.
Step 4: close the sale
The entrepreneur must close the sale by ensuring that both the seller (entrepreneur)
and the buyer agree to the conditions of the sale. The entrepreneur must inspire the buyer to
instigate an action by making a firm commitment to buy the product or avail of the service. In
processing the sale, the entrepreneur should ensure that the customers will have a seamless
buying experience so that they will be encouraged to repeat transacting with the business.
Incorporating a value-added feature or service in the sales process also makes a dent in the
minds of the customers, triggering them to do a repeat transaction. In essence, closing a sale
is not just a transaction but an organic ending of the sales process.
Step 5: develop a long-lasting relationship with customer
Closing the sale as stated is the organic end of the sales process. However, when one
process ends, another one begins. Closing the sale spearheads a long-lasting relationship with
customers. The entrepreneur must ensure that he/she asks for customer feedback regarding
the product or service sold so that he/she knows if the customer is satisfied or not. The
entrepreneur should assess the product or service satisfaction of customers and confirm if
their satisfaction is complete. Entrepreneurs must also prepare their after-sales strategy to
entice customers to come back and repeat the purchase over and over again. This way, the
entrepreneurs will save on additional marketing expenses to acquire new customers, because
maintaining happy customers is more cost-effective than getting new ones. In short, the
entrepreneur (seller) must maintain the good rapport that he/she has with loyal customers.
Module 6: Implementation of the Business Operations Plan
At the end of this module, I can:
1. Manifest an understanding of starting and operating a simple business following the operations plan
strategies.
2. Demonstrate the knowledge on how to implement the business operations plan using the 4Ms.
______________________________________________________________________________
Implementing the operations plan is one of the most difficult processes to undergo due to the
details that the entrepreneur has to consider. It covers the 4Ms of operations that are equally important
to cover all aspects of business operations. The flow implementation of the 4Ms will depend on what
business model or nature/type of business the entrepreneur will choose. Regardless of the business
type/model, the entrepreneur must implement the methods (processes) that he or she envisioned in the
operations plan, hire the right manpower to do the job description crafted, acquire or lease machineries,
and use relevant technologies, such as e-commerce, in conducting businesses and source materials from
the most efficient and practical suppliers.
Similar to the marketing plan implementation, all of these will be learned in this module using the
practical approach of being with a real entrepreneur rather than confusing on the academics of
implementing the operations plan. you will be acquainted with a business example that involves both
manufacturing and service, so you can relate how to operate and run a business from the beginning until
it matures and becomes an established venture.
Methods
The implementation of processes or methods in the operations plan will depend n the
entrepreneur’s business type or model. The general classification of the business type or model
would be the manufacturing business or service business. For your better appreciation, these
tow will be discussed in the following hybrid business, which is both manufacturing and service
business.
Roainne’s Homemade Batutay Bsiness in Cabanatan City
Mr. Ron lopez Mrs. Allaine Lopez decided to put up Roannie’s batutay Longganisa
business in Cabanatuan City. Based on their marketing research, they discovered that not only
the people of Cabanatuan like the taste of batutay, the native beef longganisa, but also the
nearby areas including metro manila. They plan to manufacture their own batutay because Ron
just came from his one-year traning from TESDA where he learned how to make longganisa.
Aside from manufacturing. Allaine suggested that it will make a difference if they will
incorporate service in their business as well. They will implement a longganisa delivey service vis
mobile and social media but limited to Cabanatuan City only. This service will include delivery of
cooked and uncooked longganisa for a minimum purchase of two kilos for the uncooked
longganisa and one kilo for the cooked longganisa. Both will have ₱30 delivery charge.
To compliment the manufacturing business, they will also put up mini-restaurant that
serves Batutay as their main course in their business residence. They are now ready to operate
the business. They started with the methods and processes needed to run it.
Step 1: Register the business. Go to the city or municipality hall’s business permit licensing office to
secure a business permit, and to the department of trade and industry for the business name.

Business name: Roainne’s Homemade Batutay

Business Classification: manufacturing or Service

Step 2: determine the manufacturing elements or ingredients of the product. Determine the service
elements for the mini-restaurant and longganisa delivery service.

Manufacturing elements:
• Input
• Beef
• Beef fat
• Soy sauce
• Sugar
• Garlic
• Salt
• Black pepper
• Cooking oil
• Pork isaw (intestines)
• Processes
• grinding of the beef
• Mixing of the ingredients
• Filling the pork isaw with beef mixture
• Packaging
• Output
• Batutay longganisa

Service elements- delivery service:

• Input
• Mobile phone (customer and roainnie’s staff)
• Social media account (customer and roainnie’s staff)
• Landline phone (customer and roainnie’s staff)
• Motorcyle
• Delivery staff
• Customer’s order request
• Processes
• Cooking process (for cooked longganisa process)
• Ordering process
• Payment process
• Output
• Batutay delivery and payment
Service elements- mini-restaurant:
• Tangible elements (Servicescape)
• 20 chairs
• Four tables
• Big rice cooker
• Frying pan
• Uncooked longganisa
• Eggs
• Garlic
• Rice
• Cooking oil
• Intangible elements
• Cooking process
• Ordering process- dine-in and take out
• Payment process
• Output
• Batutay meal
Step 3: decide the most practical and efficient manufacturing site and location: home-based or
rent/buy a commercial space.

Manufacturing site: home-based and commercial space renting

Location: Barangay Aduas centro, cabanatuan city (near cabanatuan city public market)

Step 4: decide whether to follow a product-based layout internal layout, and then draw the
manufacturing process flow.
Internal layout: Product-based layout (facilities are prearranged according to the manufacturing
process flow)

Manufacturing process flow:

1. using the manually operated grinder, grind the beef fat and meat.
2. mix the ingredients in the following order
 • Mince the garlic and mix the ground beef meat and fats
• Add soy sauce and pepper to taste
• Add sugar and salt to taste
• Mix all the ingredients thoroughly
3. fill the pork isaw with the beef meat mixture using a manually operated machine. After this, tie the
pork isaw and cut it.
4. Pack the finished product.
Source: http:/www.mysmartschool.ph/web/bototay/prepare_batutay.html
Batutay delivery process flow:
1. customer sends his or her order via text message or via social media private message.
2. upon receipt of the text message or social media private message, a Roainnie staff will
prepare the order and receipt and instruct the delivery staff to deliver to the customer within
an hour.
3. delivery staff will deliver the batutay to the customer and get payment
Mini-restaurant service delivery process flow:
1. customer goes to the mini-restaurant and orders a batutay meal (garlic, rice, batutay, and
egg). Aside from the batutay meal, the menu also includes tocino, fried milkfish, tapa, hotdog,
sausage, and sardines meal. Beverages include softdrinks, mineral water, coffee, and juice drinks.
2. customer pays at the cashier
3. roainnie staff serves the longganisa meal.
Step 5: decide on what distribution process and distribution channel will be the most economical
for the business.
Distribution process and channel: because the business is still a startup, the finished
products will be distributed at the Cabanatuan city public market where the longganisa products
are usually being sold. Roainnie will rent a small commercial space there. The products will also
be available at roainnie’s residence and in the mini-restaurant to cater to the customers in their
barangay. Roainnie will also introduce the “batutay text, landline, and social media delivery
service”
Manpower
Because the business model has already been identified and set up, the next aspect of
operations to be looked into is to identify how many persons are needed and what their
qualifications are to operate the business.
Step 1. create a table of organization to show a graphical description of the manpower
complement of the business.
Step 2. prepare a job description for each member of the organization so that everyone is aware
of what is expected of him or her
• Ron Lopez- being the general manager, he is in charge of the overall management of the
business from marketing, to operations, to human resources, and to finance.
• Allaine Lopez- she will mange the mini-restaurant and delivery of batutay, including the three
restaurant staff members. She will also be the cashier
• Restaurant assistants- they will be in charge of cooking, packing the orders, serving customers,
and cleaning the mini-restaurant. One of the restaurant assistants will also handle deliveries
during peak days.
• Delivery staff member- he or she will be in charge of receiving orders via text or social media
and the delivery of batutay. Om a nonpeak day, he or she will also assist the restaurant staff
members.
• Supermarket staff members- they will be in charge of selling, cashiering, and inventory
management at the super market.
• Manufacturing staff members- they will be in charge of the production of batutay.
Step 3: List the qualifications of employees needed and decide where to source them.
• Restaurant assistants- K to 12 graduates (specifically with background in restaurant
management), customer-friendly, hardworking, and honest. One assistant should be skilled in
driving a motorcycle and has a license.
• Delivery staff member- K to 12 graduate and should be skilled in driving a motorcycle (should
also have a license, is customer-friendly, hard working and honest)
• Supermarket staff members- k to 12 graduate and should be skilled in selling, cashiering, and
inventory management.
• Manufacturing staff members- K to 12 graduate and should be skilled in longganisa making.

Step 4: decide on where to source candidates (e.g., friends, relatives, employment agencies,
referrals, manpower agencies, newspaper, social media, walk-ins).
Roainne will source candidates from friends’ referrals so that they can also vouch for the
characters of the candidates.
Step 5: Interview the potential candidates and ask them relevant questions about the job.
Ron and allaine Lopez should ask potential candidates about their works ethics, attitude
toward customers, service, road knowledge (delivery staff), accounting, and sales experience.
Step 6: choose the best candidates and provide a job offer. The job offer should contain the
following details.
Job offer Restaurant Delivery staff Supermarket Manufacturing
Content/position Assistants member Staff members Staff members
List of responsibilities or In charge of the In charge of the In charge of the In charge of:
deliverables and its following: following: following: • Longganisa making
scope and limitations • Cooking • Delivery of batutay • Selling batutay • packaging
• Cleaning • Alternate restaurant • Cashiering
• Dishwashing assistant • Inventory
• Serving the management
customer
• Alternate cahier
• Alternate delivery

Salary an benefits ₱11 000 per month SSS, ₱11 000 per month SSS, ₱11 000 per month SSS, ₱11 000 per month SSS,
including vacation and Philhealth, Pag-ibig, 13th Philhealth, Pag-ibig, Philhealth, Pag-ibig, Philhealth, Pag-ibig,
sick leaves month pay 13th month pay 13th month pay 13th month pay

Work schedule Staff member 1: 9am-6pm, Monday to Staff 1: 8am-5pm, Monday to

6am- 3pm, Monday to suturday 5am-2pm, Monday to Saturday
Saturday Sunday
Staff member 2: Staff 2:
12pm-9pm Monday to 11am-8pm, Monday to
to become a regular to regularization and to regularization and to regularization and to regularization and
employee entitlement of other entitlement of other entitlement of other entitlement of other
benefits such as 5 day benefits such as 5-day benefits such as 5-day benefits such as 5 day
paid vacation leaves paid vacation leaves paid vacation leaves paid vacation leaves
and 5 day paid sick and 5-day paid sick and 5-day paid sick and 5 day paid sick
leaves leaves leaves leaves

Duration of contract 6 months subject to 6 months subject to 6 months subject to 6 months subject to
renewal renewal renewal renewal

Resignation 15-day notice 15-day notice 15-day notice

procedure(i.e., 30-day
notice or leave
immediately)

Step 7: ensure there is an employee training and development program for the business.
Mr. and Mrs.Lopez will be in charge of training their five employees on the following
aspects:
• Cashiering
• Customer service
• Table setting
• Longganisa-making
Machine
Third in the list of 4Ms to be considered is the machine. It could be the physical equipment or technology
that can help the business operate seamlessly and with quality.
Step 1: List all the equipment and technology needed and decide whether it is economical to purchase them or just
rent them.
General manager:
• Laptop
Manufacturing site:
• Meat grinder
• Manually operated machine for the filling of meat into the pork isaw freezer
• Delivery van for buying of ingredients and for delivering finished product to the supermarket.
Delivery business
• Motorcycle
• Smartphone
• Data plan or postpaid
• Landline
Mini-restaurant
• Big rice cooker
• Big frying pan
• Gas range
• Cashiering machine
• Coffee maker
• Big refrigerator
• Electric fan
• Air conditioner
• Television
Public market stall
• Small freezer
• Electric fan
It is economical for the longganisa business to buy all of the pieces of equipment because
they are all needed to operate the business on a long-term basis, and perhaps the longganisa
business has enough capital for it. These pieces of equipment will be valued base on their
depreciable life.
Step 2: Understand how to use these machines properly. and apply all the necessary safety
precautions before using theme. Protect these pieces of equipment from physical and security
risks.
step 3: List alternate options in case the equipment becomes dysfunctional. They key is for the
business to continue no matter what. Know where to find repair shops when needed.
Material
The last M in the 4Ms of operations is material. The general premise for materials is
where to source these easily with a cheaper price and of good quality. The entrepreneur must
have a minimum of two or more major suppliers for contingency purposes (e.g., in case one
supplier is unable to deliver).
Step 1: To determine the requirements for materials, the entrepreneur must decide on which
path to choose :(1) manufacture own products or offer own service, (2) outsource manufacturing
or service activities to a third party , and (3) purchase finished products or services from a
manufacturer.
As shown above, roainne chose option 1: manufacture own products or offer own
services. They have decided on this because marketing research has shown that this is a feasible
business. Mr. and Mrs. Lopez decided to invest on manufacturing/service business, manpower,
machines, and materials on their own so that they will also have independence in running the
business. They also want to disrupt and provide value-added services to the customers that the
usual longganisa entrepreneurs do not offer.
Step 2: List all the materials needed for the manufacturing or service business and decide where
to source them efficiently (at least two suppliers).
 Requisitioning of manufacturing ingredients and mini-restaurant supplies
Roainne will buy the batutay ingredients and mini-restaurant supplies in bulk depending
on the market demand from the Sangitan Public Market. This is where fresh produce from
nearby provinces are distributed. Not only are they fresh but also very cheap. Ideally, the
ingredients will be bought very early in the morning (around 4 am), so they can still get the
freshest ingredients and supplies. Other products in the mini-restaurant such as softdrinks will be
sourced from two distributors. In case, there are no available ingredients at the Sangitan Public
Market, Roainne will buy at the Cabanatuan City Public Market.

Step 3: implement efficient logistics management- warehousing, transportation, and inventory

management.
• Warehousing- Roainne will buy a big freezer sufficient to initially store at least 50 kilos of
longganisa. If the business expands, another freezer will be bought to cover the orders from
the three businesses- supermarket, mini-restaurant, and delivery service. A small freezer will
also be bought for the supermarket stall.
• Transportation- a delivery will be purchased by the business so transport the ingredients from
the Sangitan public Market to the manufacturing site and to transport the finished products
from manufacturing site to the Cabanatuan City Public Market stall. This will initially be driven
by Mr. Ron Lopez. If the business expands, he will hire a driver.
• Inventory management- it is ideal to sell all homemade batutay the day they were produced.
But because longganisa can be stored in the freezer for a long time, it is also ideal to produce in
bulk and store the longganisas in freezer. This will save Roainne in manufacturing costs because
they will produce them in bulk. The concept of “economies of scale” is very much applicable.
Producing in bulk also addresses the demand in public market stall, in the mini-
restaurant, and in the delivery orders. They will be able to determine the actual number of
batutay kilos to be produced and stored once they operate. At the onset, they should be
conservative first to avoid spoilage. The business should monitor the demand every day to match
with the supplies to be produced. This will also largely depend on marketing strategies Roainne’s
Batutay Business will implement.
Module 7: Financial Statement Analysis and Overall
Interpretation of Business Results
At the end of this module, I can:
1. Manifest an understanding of starting and operating a simple business following the
proper financial accounting practices, standards, and reporting.
2. Identify the reasons for keeping business records.
3. Perform key bookkeeping tasks.
4. Interpret financial statements (balance sheets, income statements, cash flow
projections, and summary of sales and cash receipts)
5. Prepare an income statement and a balance sheet
6. Identify where there is profit or loss for a business.
7. Generate an overall report on the activity
8. Interpret business results and devise a strategic direction
 This module is the last part of the business plan that evaluates the overall efficacy or
inefficacy of the marketing and sales strategies as well as the operational strategies
implemented. This part is the checker in a “marker-checker” concept. Accounting business
transactions are mandatory and should never be left out of the equation, whether the business
is flourishing or losing money. You will be taught on the logical reasons that business records are
very important.
This module will teach you how to properly record business transactions and reflect them
in the accounting books of the business. You will do accounting entries and prepare basic
financial statements such as an income statement, a balance sheet, and a cash flow statement.
You will assess the performance of an actual business and generate your overall interpretation of
the results. Last, you will have to devise a strategic business direction from overall interpretation
of the business.
The importance of keeping business records
Before an entrepreneur can prepare accounting entries and financial statements, he or
she should appreciate first why these are needed in the first place. The truth is that from the day
an entrepreneur chose to engaged in a business, all his or her transaction related to the business
should be recorded. The entrepreneur must understand that his or her personal transactions
must be separate and distinct from his or her business transactions. This is where the basic
accounting concept of “separate entity” comes in, where the business is a separate and distict
personality from the business owner.
 Business records serves as a powerful analytical tool review the past performance of the
business, to understand the current performance of the business, and to project future business
performance. Without proper recording of business records, the entrepreneur will have a hard
time analysing the business and his or her next steps. Business records also serve as an audit trail
where the entrepreneur can track the transactions of the past. It is mandatory that only
authorized accounting entries or accounting records to the entity’s books. It is best to safe keep
the hard copy of these records and maintain a digital copy for backup purposes, these data must
also be kept private and confidential, and only for the use of the entrepreneur or his or her
accountant/accounting staff. Passwords must be incorporated in digital copy. Hard copies, on the
other hand, must be kept in a secure place where they can be accessed only by authorized
personnel. Internal control is very important in managing the business records. Critical functions
such as accepting and disbursing cash must be assigned to an authorized employee and must be
recorded appropriately in the books of the business. These records must be checked by another
person independently to prevent fraud.
Business transactions are initially recorded in a general journal, and then in the general
ledger. The former is where the initial entries are recorded and is considered as books of original
accounting entries, and the latter is where all the original accounting entries are transferred to
appropriate accounts. These appropriate accounts (e.g., cash, accounts recievable, accounts
payable, capital) are the bases of forming basic financial statements. With the advent of
technology, the entrepreneur should use a computerized accounting system, because this will
make the accounting processes more efficient and more reliable. Moreover, these systems and
records can be safely secured for a long time with a strong password.
Actual record keeping and bookkeeping for business
Most budding entrepreneur do not instantly have an accountant or a bookkeeper to manage the
accounting records of the business because it is costly to hire one. Also, because accounting is also a
management function where the entrepreneur should be fully skilled and aware of, the entrepreneur is
usually the accountant/book keeper at the onset. When the business grows, the entrepreneur can now
hire an accountant or a bookkeeper, so that he/she can focus more on other important management
functions. This, however, does not relieve the entrepreneur of his/her responsibilities of overseeing the
accounting books of the business and making sure they are accurate and follow the generally accepted
accounting principles. In this scenario, the entrepreneur becomes the checker in the “maker-checker”
accounting concept, where the checker should ensure that the marker did his/her accounting right.
As you have learned in module 4, the accounting equation is
Assets = liabilities + owner’s equity
And
Net income = gross income – expenses
These are the high-level equations. To get to these, entrepreneur or his/her accountant needs to
understand that process starts with accounting entries posted in the general journal, then to general
ledger, and then to financial statements. In recording business transactions through accounting entries,
the entrepreneur or accountant must know the concept of debit and credit by applying the double-entry
bookkeeping. Essential, double-entry bookkeeping requires a combination of debit and credit for every
accounting entry and to adhere to the balance sheet and income statement equations.
In preparing the balance sheet, the entrepreneur must remember that the normal balance of the
asset side is “debit”, and the normal balance of liabilities and owner’s equity is “credit.” The equation
must always be balanced. In preparing the income statement, the entrepreneur must remember that the
normal balance of the expense side is “debit,” and the normal balance of the income side is “credit.”
These normal balances must be inculcated in the entrepreneur’s mind so he/she won’t get lost in
preparing the accounting entries.
After preparing the accounting entries, the accountant or the entrepreneur must summarize
these using T-accounts. The T-account is a summary of the debits and credits for each balance sheet or
income statement account that will be offset from each other to come up with the ending balance. The
ending balance of these T-accounts will be reflected in the general ledger that will eventually be reflected
in the balance sheet and income statement.
Last, in preparing a cash flow statement, the entrepreneur must account the whereabouts of
cash, which could be in a form of receipts or disbursements from operating activities, financing activities,
and investing activities.
_____________________________________________________________________________________
Normal balances of income statement accounts:
Income – credit
Expenses – debit
Normal balances of balance sheet accounts:
Asset – debit
Liabilities – credit
Owner’s equity – credit
_____________________________________________________________________________________
 To appreciate actual record keeping and bookkeeping, let us use the previous business in module 6, which
is Roainne’s batutay business. Let’s assume that the business officially started on 1 January 2016. The business
needs to record its transactions for one year and prepare the basic financial statements for the year ending 31
December 2016
Step 1. prepare the accounting entries manually (using a general journal) or by using an excel sheet (spreadsheet)
1. January 2016. Mr. Ron Lopez and Mrs. Allaine Lopez started Roainne’s batutay business and invested ₱200 000.
They borrowed this capital from a bank, payable in three years with an 8% interest per annum
Dr. cash 200 000
Cr. Roainne, capital 200 000
Explanation: cash is a current asset account; therefore, its increase is recorded with a debit. Capital is the owner’s
equity account; therefore, its increase is recorded with a credit.
2.January 2016. Mr. Lopez went to the Cabanatuan City Business Permit and Licensing Office and paid ₱3 000 for
business registration. Mrs. Lopez, on the other hand, went to the Department of Trade and Industry and paid ₱500
for the DTI permit.
Dr. Business registration expenses 3 500
Cr. Cash 3 500
Explanation: Business registration is an expense account; therefore its increase is recorded with a debit. Cash is
credited because its normal balance is debit, but the transaction was a decrease in cash
3.January 2016. Mr. and Mrs. Lopez purchased two kinds of manufacturing equipment needed to produce batutay.
They paid ₱40 000 in cash. They also bought a large freezer worth ₱35 000 in cash. These pieces of equipment are
expected to last for five years, and the straight line of depreciation will be used to compute for its net book value.
Dr. Manufacturing equipment 40 000
Dr. Freezer 35 000
 Cr. Cash 75 000
Explanation: property, plant, or equipment are noncurrent assets; therefore their increases are
recorded with a debit. The example above shows a compound journal entry because it involves
more than one debit.
4. January 2016. To support the starting capital expenditure of the business, Mr. and Mrs.
Lopez applied for a bank loan last 15 December 2015 and was approved and released on 1
January 2016. The loan amounting to ₱300 000 is payable in three years with an 8% interest
per annum.
Dr. cash 300 000
cr. Loan payable 300 000
Explanation: loan payable is considered a long-term liability because it is more than one year
and should be increased with a credit.
5. January 2016. The couple also purchased a motorcycle worth ₱60 000, a delivery van worth
₱450 000, and a smartphone worth ₱30 000. The motorcycle and the delivery van were
purchased on account and are payable for one year. They were given a special instalment plan
by dealer and will pay zero percent interest for 12 months starting 1 February 2016. The
monthly amortization is ₱5 000 per month for the motorcycle ₱37 500 for the delivery van.
The smartphone was paid in cash and delivery van is five years end of every calendar.
Dr. motorcycle 60 000
Dr. delivery 450 000
Dr. smartphone 30 000
Cr. Accounts payable 510 000
Cr. Cash 30 000

Explanation: Property, plant, or equipment are noncurrent assets; therefore, their increase in
recorded with a debit. Accounts payable for the motorcycle and delivery van was recognized because
these were purchased on credit. Increase in account payable, a current liability account, is recorded with a
credit because its normal balance is credit.
5. January 2016. The couple also purchased a motorcycle worth ₱60 000, a delivery van worth ₱450 000,
and a smartphone worth ₱30 000. The motorcycle and the delivery van were purchased on account and
are payable for one year. They were given a special instalment plan by the dealer and will play zero
percent interest for 12 months starting 1 February 2016. The monthly amortization is ₱5 000 per month
for the motorcycle and ₱37 500 for the delivery van. The smartphone was paid in cash and has an
expected life of two years. The expected life of both the motorcycle and delivery van is five years and will
be fully depreciated thereafter. Straight line depreciation will be applied at the end of every calendar year.
Dr. motorcycle 60 000
Dr. delivery van 450 000
Dr. smartphone 30 000
Cr. Accounts payable 510 000
Cr. Cash 30 000
Explanation: property, plant, or equipment are noncurrent assets; therefore, their increase is recorded
with a debit. Accounts payable for the motorcycle and delivery van was recognized because these were
purchased on credit. Increase in accounts payable, a current liability account, is recorded with a credit
because its normal balance is credit.
6. January 2016. The couple bought all the items needed for their mini-restaurant and ublic market stall
as follows:
• 20 chairs ₱10 000
• Four tables ₱10 000
• Big rice cooker ₱2 000
• Frying pan ₱1 000
• Two refrigerator ₱40 000
The pieces of equipment for the mini-restaurant are expected to last for three years. Straight
line of depreciation will also applied.
Dr. mini-restaurant furniture and equipment 63 000
cr. Cash 63 000
7. January 2016. Roainne hired seven people (manpower) for the business – three for the
manufacturing of the products, two for the public market stall, and three for the mini-restaurant with
respective monthly salaries of ₱11 000 each. They are also required to have mandatory 13th month pay
and SSS benefits worth ₱5 000 each per year. Their official start sate is 8 January 2016 and will have
their first payroll paid on 15 January 2016. Their monthly salary will paid in two instalments, every 15th
and every 30th of the month.
 No entry. Only financial transactions are recorded in the books of the business. In this
example, no financial transaction has transpired yet.
8. January 2016. with the assistance of Mr. and Mrs. Lopez, the manufacturing staff members
started manufacturing batutay. They bought bulk ingredients in cash from sangitan public
market. They were able to initially produce 100 kilos of batutay, and they expect to sell thses in
to 2 to 3 days. Per computation of Mr. and Mrs. Lopez, the cost per kilo of batutay, which has
about 16 pieces, is ₱170
Direct materials ₱100
Direct labor 40
Manufacturing overhead 30
Cost of goods manufactured ₱170
Dr. batutay inventory (₱170 x 100) 17 000
Cr. Cash 17 000
Explanation: being a current asset, inventory was debited to represent the increase. Salaries
payable and utilities payable are current liability accounts, therefore, they were increased by a
credit.
9. January 2016. the couple did a competitive analysis and saw that the current price of batutay
in the market is at an average of ₱250. To differentiate themselves and be competitive,
the price of batutay that they will introduce to the market is ₱230. For every kilo of battay, they
estimate to make ₱60 worth of gross profit. They bought 70 kilos of batutay at the public market stall
because this is where the couple expects that the majority of sales will come from. They left 30 kilos at
their home-based location for the delivery service and mini-restaurant.
They officially opened the delivery service and mini-restaurant on 9 January 2016. For the delivery
service, the customer must order a minimum of 1 kilo of raw batutay which will have the same price of
₱230 but with a ₱30 delivery charge. The customer can also choose to order the cooked batutay from
the mini-restaurant with the pricing as follows:
Longsilog meal ₱100
Cooked batutay (8 pieces) ₱200
Other meals priced at ₱100 each include the following:
Tosilog
Tapsilog
Cornsilog
Chicksilog
Sardinsilog
Tunasilog
Tuyosilog
Soft drinks and purified water are also served with a markup of ₱10 per serving. Coffee, on the other hand, is sold
for a ₱20 markup. The cost od silog meals is ₱50 per meal. The cost of delivery is ₱20 per trip.
10. 1 January – 31 December 2016. Roainne was able to produce additional 20 000 kilos of batutay for the whole
year to supply their public market stall, mini-restaurant, and delivery service. The other products in the mini-
restaurant are bought in demand, which means that these are usually sold out at the end of the week.
Dr. batutay inventory (₱170 x 20 000) 3 400 000
cash (₱170 x 20 000) 3 400 000
Roainne bought other inventories for the mini-restaurant business from two suppliers. It paid ₱800 000 in
cash for the whole year. These inventories consist of coffee, sugar, cream, soft drinks, purified water, tocino, eggs,
sardines, tuna, tapa, chicken, corned beef, tuyo(dried fish), rice, and garlic.
Dr. others: inventory 800 000
cash 800 000
Roainne was then able to come up with the following summary of sales and cash receipts data:
• 15 000 kilos of batutay from the public market stall
• 1 500 kilos of raw batutay and 500 kilos of cooked batutay from the mini-restaurant
• 1 000 kilos of batutay from the delivery service, which means 300 trips for the delivery service
• 15 000 servings of silog, 10 000 servings of which are longsilog meals ( two pices of batutay per serving, which is
equivalent to 1 250 kilos x ₱170 = ₱212 500)
• 6 000 servings of coffee
• 6 000 servings of soft drinks.
 It is evident from these data that the business thrived and that demand grew and grew
every month. The unique selling proposition of roainne’s batutay business is its efficient and
friendly customer service. The business did not spend much on marketing but invested on
quality service, thereby instigating word of mouth not just in Cabanatuan city but also in its
nearby municipalities and cities. It also used the power of social media in promoting its
business. See Table 7.1 for the details of the computation for the sales, cost of sales, and cash
receipts data for 2016
Table 7.1. Sample 2016 sales report for Roainne’s batutay business
2016 sales report Quantity sold Sales price(₱) Gross sales(₱) Cost per kilo or Total cost of sales
per kilo/unit unit (₱) in (₱)

Batutay: public market 15 000 230 3 450 000.00 170 2 550 000.00
stall( per kilo)
Batutay: mini- 1 500 230 345 000.00 170 255 000.00
restaurant(per kilo)
Batutay: delivery 1 000 230 230 000.00 170 170 000.00
service (per kilo)
Delivery fee (per trip) 300 30 9 000.00 20 6 000.00
Cooked longganisa(per 1 000 200 200 000.00 85 85 000.00
8 pieces)
Silog meals ( per 15 000 100 1 500 000.00 50 750 000.00
meals): 10 000
longsilog; 5 000
others
Coffee( per cup) 6 000 40 240 000.00 20 120 000.00

Soft drinks and 6 000 30 180 000.000 20 120 000.00

purified water (per
bottle
Total 6 154 000.00 4 056 000.00

For easy identification and analysis, accounting entries must be recorded as the business
transaction happens and from which business segment they originated. But for the sake of simple
illustration, the following will be the consolidated entry for thses sales and cost of sales reports.
Dr. cash 6 154 000
Cr. Sales revenue 6 154 000
Dr. cost of sales 4 056 000
Cr. Batutay inventory 3 272 500
Cr. Others: inventory 783 500
Batutay inventory computation:
₱2 550 000 + 255 000 + 170 000 + 85 000 + 212 500 = ₱3 272 500
Others – inventory computation:
₱6 000 + ₱537 500 (750 000 – 212 500) + 120 000 = ₱783 500
For the following transactions, these should ideally be recorded per month, but for simplicity and
consolidation, the entries will be consolidated for one year.
31 December 2016
• Roainne’s annual lease contract for the public market stall requires a monthly payment of ₱5 000 per
month.
Dr. rental expense (₱5 000 x 12) 60 000
Cr. Cash 60 000
• Depreciation for the manufacturing equipment and freezer is computed below:
• Manufacturing equipment :₱40 000/5 = ₱8 000
• Freezer: ₱35 000/5 = ₱7 000
Dr. depreciation expense: manufacturing equipment 8 000
Dr. depreciation expense: freezer 7 000
Cr. Accumulated depreciation: manufacturing equipment 8 000
Cr. Accumulated depreciation: freezer 7 000
• Depreciation for the motorcycle and delivery van is computed as follows:
• Motorcycle: ₱60 000/5 = ₱12 000
• Delivery van: ₱450 000/5 = ₱90 000
Dr. depreciation expense: motorcycle 12 000
Dr. depreciation expense: delivery van 90 000
Cr. Accumulated depreciation: motorcycle 12 000
Cr. Accumulated depreciation : delivery van 90 000
• Depreciation for mini-restaurant equipment is computed as follows:
• Mini-restaurant equipment: ₱63 0000/3 = ₱21 000
Dr. depreciation expense: mini restaurant equipment 21 000
Cr. Accumulated depreciation: mini-restaurant equipment 21 000
• Depreciation for the smartphone is computed as follows:
• Smartphone: ₱30 000/2 = 15 000
Dr. depreciation expense: smartphone 15 000
Cr. Accumulated depreciation: smartphone 15 000
• Full payment of motorcycle and delivery van is recorded as follows:
Dr. accounts payable 510 000
Cr. Cash 10 000
• Payment of salaries for the 7 employees with ₱11 000 monthly salary plus 13th month pay and
SSS benefits.
Dr. salaries expense (7 x ₱11 000 x 13 months) 1 001 000
Dr. SSS benefits expense ( 7 x ₱5 000) 35 000
cr. Cash 1 036 000
• The principal amount and interest of the bank loan were paid. Loan amount is ₱300 000 with
8% interest per annum payable in three years.
Dr. loan payable 100 000
Dr. interest expense 24 000
Cr. Cash 124 000
• The business paid 20% tax based on net income before tax. In the income statement below,
the net income before tax (NIBT) is ₱821 500. The tax due will be ₱821 500 x 20% = ₱164 300
Preparation of income statement, balance sheet, and statement of cash flows
Step 2: calculate the balance of each account using T-account or an excel sheet. The balances
must be chronologically arranged according to their order in the financial satements.
Balance sheet accounts (in Philippines peso)
Cash Batutay inventory Others: inventory
20 000.00 3 500.00 17 000.00 3 272 500.00 800 000.00 783 500
300 000.00 75 000.00 3 400 000.00 16 500.00
6 154 000.00 30 000.00 144 500.00
63 000.00
17 000.00
3 400 000.00
60 000.00
510 000.00
1 036 000.00
124 000.00
800 000.00
371 200.00 164 300.00
Manufacturing equipment freezer motorcycle
40 000.00 35 000.00 60 000.00
___ ____________________________________________________________________________________
40 000.00 35 000.00 600 000.00
_____________________________________________________________________________________
Delivery van mini-restaurant equipment smartphone
450 000.00 63 000.00 30 000.00
_____________________________________________________________________________________
45 000.00 63 000.00 30 000.00
_____________________________________________________________________________________
Accumulated depreciation: accumulated accumulated depreciation:
Manufacturing equipment depreciation: freezer motorcycle
8 000.00 7 000.00 12 000.00
_____________________________________________________________________________________
8 000.00 7 000.00 12 000.00
Accumulated accumulated depreciation: accumulated
Depreciation : delivery van mini-restaurant equipment depreciation : smartphone
90 000.00 21 000.00 15 000.00
_____________________________________________________________________________________________
90 000.00 21 000.00 15 000.00
*accumulated depreciation is deducted from the balance of the noncurrent asset account to arrive at the net book value of the
noncurrent asset.
accounts payable loan payable roainne, capital
510 00.00 510 000.00 100 000.00 10 000.00 200 000.00
__________________________________________________________________________________________________
200 000.00 200 000.00
*the net income that will be derived from the income statement will be added as retained earnings of the business, which is reflected in
the roainne, capital section of the report
Income statement accounts
Sales revenue cost of sales
6 154 000.00 4 056 000.00
_______________________________________________________________________________________________
6 154 000.00 4 056 000.00
Salaries expense interest expense
1 001 000.00 24 000.00
________________________________________________________________________________________________
1 001 000.00 24 000.00
Business registration rental expense SSS benefits expense
Expense
3 500.00 60 000.00 35 000.00
__________________________________________________________________________________________________________
3 500.00 60 000.00 35 000.00
Depreciation expense
21 000. 00
12 000. 00
90 000. 00
8 000. 00
7 000. 00
15 000. 00
_________________________
153 000. 00
 Roainne’s batutay business
income statement
as of 31 December 2016
Sales revenue 6 154 000.00
Less: cost of sales 4 056 000.00
Gross profit 2 098 000.00
Less: operating expenses 1 276 500.00
Business registration expenses 3 500.00
Salaries expense 1 001 000.00
SSS benefits expense 35 000.00
Interest expense 24 000.00
Rental expense 60 000.00
Depreciation expense 153 000.00
Net income before tax (NIBT) 821 500.00
Income tax (assuming 20% tax rate) 164 300.00
Net income after tax 657 200.00
Step 4:prepare a balance sheet and ensure that the equation is balanced.
roainne’s batutay business
Balance Sheet
as of 31 December 2016
ASSETS
Current assets
Cash 371 200.00
Batutay inventory 144 500.00
Others: inventory 16 500.00
Total current assets 532 200.00
Noncurrent assets
Freezer 35 000.00
Less: accumulated depreciation 7 000.00
Motorcycle 60 000.00
Less: accumulated depreciation 12 000.00
Delivery van 450 000.00
Less: accumulated depreciation 90 000.00
Mini-restaurant equipment 63 000.00
Less: accumulated depreciation 21 000.00
Manufacturing equipment 40 000.00
less: accumulated depreciation 8 000.00
Smartphone 30 000.00
Less: accumulated depreciation 15 000.00
Total noncurrent assets 525 000.00
Total assets 1 057 200.00
LIABIITIES
Current liabilities
Accounts payable 0
Total current liabilities 0
Noncurrent liabilities
Loans payable 200 000.00
Total noncurrent liabilities 200 000.00
Total liabilities 200 000.00

OWNERS EQUITY

Roainne, capital 200 000.00

Retained earnings 57 200.00
Total owners equity