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College of Education

Module-1, Week 1-8

Introduction to Entrepreneurship and Enterprise Ramil B. Entana Jr.

Reference: Mosher, A.T. 1978. An Introduction to Entrepreneurship and Enterprise

Module Overview:
Module 1 is all about an introduction to Entrepreneurship and Enterprise. This introductory
module identifies the importance of Entrepreneurship and Enterprise in the development of
agriculture production through promoting agricultural business and entrepreneurship towards the
target community especially to the farmers and people who lived rural areas. It describes the
important roles of the entrepreneurship who engages in the field for the development in the
educational level of the target community.

Lesson 1
Introductory concept and characteristics of Industrial and Manufacturing Enterprise

Objectives / Desired Learning Outcomes

Cognitive ___ 1. Discuss the importance of entrepreneurship and enterprise
Affective ___ 2. Enhance understanding of the role of an entrepreneur on the economy;
Psychomotor _3. Analyze the significance of industrial and manufacturing enterprise.

What is Entrepreneurship? Entrepreneur Definition and Meaning

Entrepreneurship is the act of creating a business or businesses while building and scaling it to
generate a profit.
However, as a basic entrepreneurship definition, it’s a bit limiting. The more modern
entrepreneurship definition is also about transforming the world by solving big problems. Like
initiating social change, creating an innovative product or presenting a new life-changing solution.
What the entrepreneurship definition doesn’t tell you is that entrepreneurship is what people do to
take their career and dreams into their hands and lead it in the direction of their own choice. It’s
about building a life on your own terms. No bosses. No restricting schedules. And no one holding
you back. Entrepreneurs are able to take the first step into making the world a better place, for
everyone in it.

An entrepreneur is someone who organizes, manages, and assumes the risks of a business or
enterprise. An entrepreneur is an agent of change. Entrepreneurship is the process of discovering
new ways of combining resources. When the market value generated by this new combination of
resources is greater than the market value these resources can generate elsewhere individually or in
some other combination, the entrepreneur makes a profit. An entrepreneur who takes the resources
necessary to produce a pair of jeans that can be sold for thirty dollars and instead turns them into a
denim backpack that sells for fifty dollars will earn a profit by increasing the value those resources
create. This comparison is possible because in competitive resource markets, an entrepreneur’s
costs of production are determined by the prices required to bid the necessary resources away from
alternative uses. Those prices will be equal to the value that the resources could create in their next-
best alternate uses. Because the price of purchasing resources measures this opportunity cost— the
value of the forgone alternatives—the profit entrepreneurs make reflects the amount by which they
have increased the value generated by the resources under their control.
Entrepreneurs who make a loss, however, have reduced the value created by the resources under
their control; that is, those resources could have produced more value elsewhere. Losses mean that
an entrepreneur has essentially turned a fifty-dollar denim backpack into a thirty-dollar pair of
jeans. This error in judgment is part of the entrepreneurial learning, or discovery, process vital to
the efficient operation of markets. The profit-and-loss system of capitalism helps to quickly sort
through the many new resource combinations entrepreneurs discover. A vibrant, growing economy
depends on the efficiency of the process by which new ideas are quickly discovered, acted on, and
labeled as successes or failures. Just as important as identifying successes is making sure that
failures are quickly extinguished, freeing poorly used resources to go elsewhere. This is the positive
side of business failure.
Successful entrepreneurs expand the size of the economic pie for everyone. Bill Gates, who as an
undergraduate at Harvard developed BASIC for the first microcomputer, went on to help found
Microsoft in 1975. During the 1980s, IBM contracted with Gates to provide the operating system
for its computers, a system now known as MS-DOS. Gates procured the software from another
firm, essentially turning the thirty-dollar pair of jeans into a multibillion-dollar product. Microsoft’s
Office and Windows operating software now run on about 90 percent of the world’s computers. By
making software that increases human productivity, Gates expanded our ability to generate output
(and income), resulting in a higher standard of living for all.

Two notable twentieth-century economists, Joseph Schumpeter and Israel Kirzner, further refined

the academic understanding of entrepreneurship. Schumpeter stressed the role of the entrepreneur as
an innovator who implements change in an economy by introducing new goods or new methods of
production. In the Schumpeterian view, the entrepreneur is a disruptive force in an economy.
Schumpeter emphasized the beneficial process of creative destruction, in which the introduction of
new products results in the obsolescence or failure of others. The introduction of the compact disc
and the corresponding disappearance of the vinyl record is just one of many examples of creative
destruction: cars, electricity, aircraft, and personal computers are others. In contrast to Schumpeter’s
view, Kirzner focused on entrepreneurship as a process of discovery. Kirzner’s entrepreneur is a
person who discovers previously unnoticed profit opportunities. The entrepreneur’s discovery
initiates a process in which these newly discovered profit opportunities are then acted on in the
marketplace until market competition eliminates the profit opportunity. Unlike Schumpeter’s
disruptive force, Kirzner’s entrepreneur is an equilibrating force. An example of such an
entrepreneur would be someone in a college town who discovers that a recent increase in college
enrollment has created a profit opportunity in renovating houses and turning them into rental
apartments. Economists in the modern austrian school of economics have further refined and
developed the ideas of Schumpeter and Kirzner.
During the 1980s and 1990s, state and local governments across the United States abandoned their
previous focus on attracting large manufacturing firms as the centerpiece of economic development
policy and instead shifted their focus to promoting entrepreneurship. This same period witnessed a
dramatic increase in empirical research on entrepreneurship. Some of these studies explore the
effect of demographic and socioeconomic factors on the likelihood of a person choosing to become
an entrepreneur. Others explore the impact of taxes on entrepreneurial activity. This literature is still
hampered by the lack of a clear measure of entrepreneurial activity at the U.S. state level. Scholars
generally measure entrepreneurship by using numbers of self-employed people; the deficiency in
such a measure is that some people become self-employed partly to avoid, or even evade, income
and payroll taxes. Some studies find, for example, that higher income tax rates are associated with
higher rates of self-employment. This counterintuitive result is likely explained by the higher tax
rates encouraging more tax evasion through individuals filing taxes as self-employed. Economists
have also found that higher taxes on inheritance are associated with a lower likelihood of
individuals becoming entrepreneurs.
Some empirical studies have attempted to determine the contribution of entrepreneurial activity to
overall economic growth. The majority of the widely cited studies use international data, taking
advantage of the index of entrepreneurial activity for each country published annually in the Global
Entrepreneurship Monitor. These studies conclude that between one-third and one-half of the
differences in economic growth rates across countries can be explained by differing rates of
entrepreneurial activity. Similar strong results have been found at the state and local levels.
Infusions of venture capital funding, economists find, do not necessarily foster entrepreneurship.
Capital is more mobile than labor, and funding naturally flows to those areas where creative and
potentially profitable ideas are being generated. This means that promoting individual entrepreneurs
is more important for economic development policy than is attracting venture capital at the initial
stages. While funding can increase the odds of new business survival, it does not create new ideas.
Funding follows ideas, not vice versa.
One of the largest remaining disagreements in the applied academic literature concerns what
constitutes entrepreneurship. Should a small-town housewife who opens her own day-care business
be counted the same as someone like Bill Gates or Sam Walton? If not, how are these different
activities classified, and where do we draw the line? This uncertainty has led to the terms “lifestyle”
entrepreneur and “gazelle” (or “high growth”) entrepreneur. Lifestyle entrepreneurs open their own
businesses primarily for the nonmonetary benefits associated with being their own bosses and
setting their own schedules. Gazelle entrepreneurs often move from one start-up business to
another, with a well-defined growth plan and exit strategy. While this distinction seems
conceptually obvious, empirically separating these two groups is difficult when we cannot observe
individual motives. This becomes an even greater problem as researchers try to answer questions
such as whether the policies that promote urban entrepreneurship can also work in rural areas.
Researchers on rural entrepreneurship have recently shown that the Internet can make it easier for
rural entrepreneurs to reach a larger market. Because, as Adam Smith pointed out, specialization is
limited by the extent of the market, rural entrepreneurs can specialize more successfully when they
can sell to a large number of online customers.

Industrial and Manufacturing enterprises: Similarities and Difference

industrial enterprise means any workplace, permanent or temporary, including any building or

collection of buildings, shed, structure, yard or any other place, where permanently or temporarily
one or more persons are employed in any manufacturing of goods or products processing and any
other activity similar and incidental thereto.

A manufacturing enterprise is typically established for the goal of generating a profit by making and
selling goods. The manufacturer operates out of a facility and employs people and equipment to
convert raw materials into finished products. Some manufacturers rely heavily on equipment for
mass production. Others rely more on laborers for customized or higher-quality products.
Manufacturers in the Distribution Channel
A manufacturing enterprise plays a key role in a traditional distribution channel. A distribution
channel is a collection of companies that take products from manufacture to end consumer. The
manufacturing enterprise traditionally sells its finished goods to a wholesaler or distributor. The
wholesaler sells to a retailer. The retailer sells to consumers. For the channel to succeed, consumers
must see value in the goods they buy. This value comes from a quality product marketed at a fair
price

FARMERS AS ENTREPRENEURS
Can small-scale farmers become entrepreneurs? Yes. Small-scale farmers all over the world have
shown a remarkable ability to adapt. They look for better ways to organize their farms. They try
new crops and cultivars, better animals, and alternative technologies to increase productivity,
diversify production, reduce risk – and to increase profits. They have become more market oriented
and have learned to take calculated risks to open or create new markets for their products. Many
small-scale farmers have many of the qualities of an entrepreneur. For small-scale farmers to
become entrepreneurs they need all of these qualities and more. They need to be innovative and
forward-looking. They need to manage their businesses as long-term ventures with a view to
making them sustainable. They need to be able to identify opportunities and seize them. Some
small-scale farmers do have these qualities, but they still focus on maintaining their traditional way
of life. Their production decisions are based on what they need -- not on what is possible. The
farmer-entrepreneur produces a clear picture in his mind of what is possible and the future he wants.
He knows that what is possible is determined by the market. The farmer-entrepreneur is always
looking for new opportunities. He knows that new opportunities are found in the market. The
farmer-entrepreneur wants to make profits. He knows that profits are made in the market. An
entrepreneurial farmer has the initiative, drive, capacity and ability to take advantage of
opportunities.

Smallholder farmers usually farm for one of four reasons: • Exclusively for home consumption with
rarely any surpluses produced; • Mostly for home consumption, but with the intention of selling
surpluses on the market; • Partly for the market and partly for home consumption; or • Exclusively
for the market.

Lesson 2:
Farming as A Business

Farming Success Depends On Farm Business Planning

It’s hard to be successful at farming or any other enterprise without a plan. Many hail the
romanticism of farming, but in reality, farming is a business, in most cases, a multimillion dollar
business, and one that often involves multiple generations or partners. Managing a farm business
goes beyond the annual profit/loss. It’s more than controlling costs or even knowing how to get the
most benefit from tax laws. Here you will find insight into some of the key issues about the
business end of farming, from marketing strategies to personnel management and passing the
operation to the next generation.
Beyond The Basic Business Plan
Farming is fraught with challenges. Weather, market fluctuations, family, and production issues all
have the potential to put a kink in even the best-laid plans. That’s where having a whole farm plan
that outlines the farm’s mission and objectives comes in.
A bird’s eye view of the operation can help you address all components and how they connect, from
the strengths and weaknesses of family members, to taking stock of assets and investments, to
creating a retirement and succession plan. Having a comprehensive plan in place will help guide the
farm when the unexpected occurs.
Some find that a SWOT analysis can help facilitate the process. The SWOT approach outlines
Strengths, Weaknesses, Opportunities and Threats to the farming operation, as it increases
communication amongst family and other members of the business team.
Managing Labor Resources
Managing agricultural workers can be one of the biggest challenges for today’s farm operators.
Near-record low unemployment in many areas of the country increases labor costs, while labor and
immigration laws can inhibit the flexibility a farm needs to operate efficiently. As farms grow
larger, more hired labor – often skilled labor – is needed, adding attention to recruitment and
retention to the mix.
Meeting a farm’s labor needs begins with hiring the right person. The process starts with assessing
where the business is headed and the best path to get there. Survey your needs, and what employee
traits will be beneficial, then look at what you are willing to pay. While farm workers are looking
for a paycheck, the number one reason they stay, according to the experts, is job satisfaction.
Periodic assessments that involve healthy discussions about job expectations and challenges will
help to reduce turnover and keep the operation running smoothly.
 It May Be Beneficial to Diversify
Diversification can be key to the survival of today’s farming operation. Existing farms can have an
advantage in niche markets. Often it’s a matter of making a small change in production or
marketing strategies. Sometimes it involves identifying a creative local market or adapting
agriculture business ideas picked up from other farmers.
Like any farming operation, having a successful agriculture side business is dependent on producing
a consistent quality product.
Launching an ag side business requires research. There are any number of crops that can fit into an
existing operation, it’s a matter of determining which one is right for you. Options range from non-
GMO and heirloom varieties of traditional crops, to vegetables and crops like cereal rye that can
also serve as a cover crop to prevent erosion during winter months.
What Is the Cost of Farming?
Farming takes money. Lots of money. For new farmers obtaining adequate working capital can be
one of their greatest obstacles. Experts estimate entering into a Midwest grain farming business
with no family backing could require upwards of $5 million. If that beginning farmer chooses to get
a four-year college degree, add another $20,000 to $120,000.
There’s equipment, buildings, and planting inputs. And don’t forget land. Even a combination of
owned and rented land at today’s prices quickly reaches an astronomical number.
Maintaining Sufficient Working Capital
Farm capital needs go beyond start-up expenses. Farmers must be able to weather drought and
market fluctuations as they work through day-to-day and year-to-year operations.
Available credit is tightening, with ag lenders increasing scrutiny of farm balance sheets and their
own lending policies.
Once capital is exhausted, farmers can quickly find themselves in a tight spot with their banker.
Sometimes an outside source is needed to take a fresh look at the farm’s situation.  Using expertise,
financial software, and face-to-face consultation, creative solutions can be found to ease the crisis.
The most important aspect can often be identifying problems early, and in all farming enterprises,
from the traditional to the experimental, farmers need to know the costs of production, overhead,
and family living expenses, and plan accordingly.
With a solid business plan and an open mind to new opportunity and problem solving, farm
operators can weather the storms of a volatile ag industry, allowing multiple generations to enjoy
rural life and the satisfaction that comes from feeding the world and a job well done.

Activity 1-2
1. Discuss the importance of entrepreneurship, and answer the following questions.
a. Define entrepreneurship
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b. Describe the impact of entrepreneurship in the economy and the development of agriculture
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c. What are the role of a farmer as an entrepreneur?
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d. What are the different businesses you can have from agriculture industry
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Self – Reflect:
1. It is necessary to know the concept in farming that engage in business? Why? Write your answer
on the space provided below.
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Prepared by: Ramil B. Entana Jr.

Lesson 3:
Establishing Enterprise/Business

Setting up of a Small Business Enterprise (6 Steps)

Who do establish small business enterprises? Broadly, there are two types of people who establish
small enterprises. One people who want to take the advantages of opportunities available. Two,
people who have no option for making a livelihood.
These two types of entrepreneurs are also termed as ‘entrepreneurs by choice’ and ‘entrepreneurs by
compulsions’ respectively. Starting an enterprise is not so simple and cannot be set up just. In fact,
there are several steps involved in setting up a small business enterprise
1. Information Collection:
The first step involved is to decide which enterprise one wants to set up. This begins with collecting
information about the units already working in that field of concern. This can be done by various
ways such as going through the telephone directories or by visiting the registrar’s office of the
small-scale units.
This will enable the prospective entrepreneur to make an assessment of the present market situation
in that business activity. Based on this information, they can weigh the pros and cons involved in
entering into that business activity.
For example, they can come to know that the medical transcription and call centers have been doing
very well in the service sector enterprises in the country. This is because of high labor cost in high
income countries; the multinational companies have gradually started shifting their labor-intensive
manufacturing activities to the developing countries.
In view of this, there is a great opportunity to tap those products which would be outsourced by the
Multi-National Companies (MNCs) through quality vendors. Similarly, the rapid increase in the
tourist influx in Jammu & Kashmir due to improvement and restoration of peaceful law and order
situation indicates very good prospects for service providing enterprises like travel, tour, and
hospitality industry in the region.
2. Information Organization:
Having collected information about enterprise concern, the prospective entrepreneur needs to
organize the same in an orderly and systematic manner to derive the meanings from them. This will
help to make assessment about the minimum requirements to start an enterprise in a particular
business line.
Here, one generally undertaken exercise is to prepare a checklist for ready reference of all required
and available resources in terms of space, fund, training and development, and manpower
requirements. Once this exercise is over, the step involved will be to prepare a summary of how the
checklist will be transformed into the desired products and services. Here we are presenting you one
exercise based on your above understanding.
3. Acquiring Required/Vocational Skills:
The third step is to understand the need for upgrading one’s vocational skills if it is a pre-requisite
for your Small Enterprise Unit (SEU). The importance of acquisition of required skills is justified
by the statement that “it is better to teach a man to fish than to provide him with fish everyday”.
There is a need to build on one’s strengths in order to gain and feel confident of implementing your
project of setting an SEU. Awareness and training in required subject can remove structural
barriers. You will feel sure of yourself in taking loans and as also taking risk. Risk is a part of
setting up an SEU.
Once your clients have set up their SEU, updating themselves on the latest developments in the
field should be a continuous process. They can also hire skilled workers and staff to carry out the
major tasks at their SEU.
The following anecdote will exemplify how acquiring required skills on continuous basis is
necessary for survival and growth of business.
4. Financial Requirements:
The fourth step involved is ascertaining the financial requirements for setting up a small business
enterprise. This is particularly important because generally small entrepreneurs do not have their
own funds. Hence, they depend upon borrowed funds from family members or relatives or friends
or financial institutions.
While planning for finance, the prospective entrepreneur needs to consider issues like sources,
availability, estimation and management of working capital. One should have the basic knowledge
of preparing income and expenditure statements.
One should also go for insurance cover provided by the concerned financial institutions. Providing
financial services in a commercial way is gaining a lot of credence these days. There are well-
planned credit schemes for small enterprises available offered by the banks and co-operatives.
5. Market Assessment:
No business enterprise can be thought of without market. Enterprise exists, survives and thrives
because of market. Production has no value or meaning if it is not sold /marketed. Therefore, while
planning for establishing a small business enterprise, the prospective entrepreneur needs to know
who will buy his/her product.
Here, the trite saying about the importance of market seems worth citing: “A manufacturer of iron
mails must know before manufacturing who will buy his/her iron nails.” In sum and substance, a
prospective entrepreneur needs to identify market for his/her product before it is actually produced.
Market survey or market research helps the entrepreneur assess market for his/ her product.
6. Provision for Crisis:
The last but not the least step involved in setting up a business enterprise is the preparedness to
manage crisis situations, if any. Yes, some may not consider it as a necessary step because
foreseeing any crisis and its handling is simply an additional step.
Even many may view why to think in a negative way for the worst which may not happen at all.
Admitting that optimism helps, there is no harm in being prepared for any eventuality, if it arises. It
is always useful to remain prepared for something unexpected in terms of resources, policies,
finances and natural calamities takes place. Seeking insurance cover is the best way to deal with
these situations.
10 Initial Steps When Starting a Business
Step 1: Know Yourself
It is often necessary to assess yourself before you can assess the potential of your business idea. Do
you know who will buy your product or service? What benefits does your product or service offer
to them and how much would they be willing to pay?
Step 2: Are you a Risk Taker?
Starting a new business can be an exciting and challenging time, however, it can also be a period of
uncertainty and risk. For some it can mean risking their life savings, secure employment and family
security. Are you fully prepared for this?
Step 3: Market Research
Market research is essential in helping you to identify your target market and getting to know your
potential customers. Conducting market research will also help you to identify who your
competitors are and how to compete effectively in a given market. Research is also effective in
assessing demand for a new product or service.
Step 4: Examine Your Business Requirements
 Consider the best location for the business
 Identify your basic equipment requirement and costs
 Will you need to employ more staff?
 Identify your Insurance requirements
Step 5: Calculate Investment Requirements
 Identify all start-up costs associated with the business
 Identify ways of financing your business venture
 Seek financial support and benefit from direct referral to Government Supports
Step 6: Developing your Marketing Strategy
 Marketing your enterprise is a fundamental aspect of starting up
 Research the most cost-effective methods of marketing your business
 Write your Marketing Plan
Step 7: Developing Your Sales Plan
 Having assessed your business idea, estimate your selling price
 How will you promote the enterprise?
 Who/where is your target market (local/national/international)?
 What channels of distribution will be used?
 Determine the break-even point
Step 8: Decide on an appropriate legal business structure
It is important to research the types of business ownership to help you make the best decisions for
your business. You can choose whether you want a:
 Sole trader
 Partnership
 Limited Company
Step 9: Be aware of legal obligations that will affect your business
 Register your business name with the Companies Registration Office (CRO).
 You will need to understand your tax obligations and register as self-employed with your
local revenue office.
 You will need to be aware of your statutory obligations such as trading licenses, planning
permission, insurance, health & safety, patents
Step 10: Write your Business Plan
 Business Planning is fundamental to success in business. It is the key to making things
happen and reaching goals. A business plan can be used as an operating tool that will help
you to make important decisions and manage your business effectively, the business plan
also has a number of other uses.
Activity 3
Discussion and explanation
Carefully go through the following example as a case, and then respond to the questions that
follow:
Tarun Sony is the youngest son in a family of farmers near to Udhampur. They had so far earned
enough money to sustain themselves respectfully in their society. But Tarun Sony, who has
completed his Masters in Business Administration (MBA) from the Mata Vaishno Devi University,
was not interested in joining the family age-old farming.
During his MBA, he has studied the rags to riches stories of some businessmen like Dhirubhai
Ambani. Inspired from their life stories, Tarun also wanted to be a rich businessman. But he did not
dare to speak of it with his family.
So he wrote all about his dream to his friend Ranjit Tiwari who stays in the nearby city of
Jalandhar. Ranjit Tiwari based on his observations about his uncle’s very successful poultry farm
suggested Tarun about opening a poultry farm in his village itself. Tiwari painted a “quick reward”
picture of the poultry farm to his friend Tarun mentioning as eggs and hen will multiply so the
money will also multiply from selling them.
Though Tarun had no idea at all about taking care of the hen and its eggs but he was so thrilled and
fascinated by the idea given by Ranjit that he immediately bought 25 hens and kept them in a cage.
Thus, this was the beginning of his enterprise.

1. Do you agree with Tarun Sony’s decision to start his poultry farm in this manner? Give reasons
for your answer.
2. What would you recommend other people like Tarun Sony interested in starting a poultry farm?

Here are some inputs that will help you answer the above questions:
a. To open a poultry farm, one should have enough space to keep the well- ventilated cage racks.
b. One should obtain adequate training in the field of poultry farming to be able to identify and
select healthy chicks from the sick ones. He or she should also make provisions for hiring or
purchasing an incubator.
c. There should be easy availability of a Veterinary Doctor near the poultry farm. Sufficient funds
should be available to buy checks and hens. Else it should be possible to seek financial assistance
from external sources including family members, relatives, friends, and financial institutions.
d. The marketing facilities should be conducive for the products.

Akshita Arora was a good tailor. She stitched clothes for her family and friends. She decided to
open a boutique, as a SEU. She took a room on rent near her apartment in Patpaprganj (Delhi) and
shifted all her tailoring material and her machine to it. She started receiving orders. In the beginning
she was satisfied with her work slowly her clients stopped coming to her as she had been cutting out
clothes in the same design. Because she lacked creativity and never felt, the need to upgrade herself
of the new trends in fashion. Added to these is her simple sewing machine. Her business has come
almost to closure.
Give you views about the following issues:
1. Where did Akshita go wrong? Discuss.
2. As Akshita did not try to upgrade her skills in dress designing in order to keep with the latest
trends. What should she do now? Suggest three ways for reviving her SEU.
As a hint for you, following are some of the ways that can help Akshita at her SEU:
a. She should go in for a short-term course in Dress Designing.
b. She should seek financial assistance for buying a latest model of sewing machine with lots of
attachments.
c. She should do some publicity for her boutique in order to get more clients.
Suggest Akshita some ways of publicity to gain popularity for her boutique.

Self – Reflect:
It is necessary to know about business and entrepreneurship in farming? Why? Write your answer
on the space provided below.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________
Prepared by: RAMIL B. ENTANA Jr.

Lesson 4:
Planning a business

Business planning
Effective business planning can be the key to your success. A business plan can help you secure
finance, priorities your efforts and evaluate opportunities. It may initially seem like a lot of work;
however, a well prepared business plan can save you time and money in the long run.
What should a business plan include?
There are no rules about what your plan should cover or the level of detail. In general, plans need to
include information regarding:
 business profile
 vision, mission and goals
 market research
 operational strategy
 products and/or services
 marketing plan
 financial strategy.
Before starting your business plan
 You may want to consider the following key questions to help determine if you are ready to
start writing your business plan.
 Have you thoroughly refined your business idea so you have a good understanding of how
your business will operate?
 Have you researched your business concept to determine if there is a need for it in the
marketplace?
 Have you completed a feasibility study to determine expected level of success?
 Do you have the money required to start and grow the business?
 Are you prepared to invest significant time into the business to get it up and running?
How often should I review my business plan?
 Business planning is an ongoing activity. Review plans regularly and update whenever your
circumstances change.
Writing a business plan
Business plan is the backbone of your business. Every business should have a plan which should be
updated periodically to help you stay on track to success. In this audiobook, I show you a simple
and easy to follow the process of creating your own business plan for any business. You don’t need
to be a writer or a business major to be able to draft a great business plan, it is not your proficiently
in English language, instead, it is all about laying out a simple to understand plan for the future of
your business and how you want to navigate your business forward to prosperity. Here are the three
most common excuses I hear from entrepreneurs about not creating their own business plan:
 I am not good at writing
  I don’t know what to say in the plan
 I am not business savvy enough to write one
Five biggest myths about the business plan:
 It is a complicated document
 Only a seasoned business writer can write a good business plan
 No one reads it, but you have to one to get a loan
 A good business plan needs to be 20-30 page long
 I don’t need a loan to start my business, so I don’t need a business plan
As I am sure you have guessed it, all of them are false.
In this audiobook, I show you the baby steps to get started on the right foot.
Table of content:
 What is a Business Plan?
 How Critical is a Business plan for your Business?
 5 Reasons you should have a Business Plan
 What and How do I write one
 9 Essential components of a great Business Plan
 Two Best Practices of Business Plan Writing
 Lean vs. Traditional Business Plan
 Example of a Lean Business Plan
 Step by Step instructions to Write a Traditional Business Plan
You need to include every major and minor detail in your plan; I'll show you (with
examples), items like:
 Cover page
 Executive summary
 Company Description
 Aspects of Service or Product
 Problems you are trying to resolve
 Your Competitive Landscape
 Your Competitive Edge
 All 4 Stages of Product Life Cycle (PLC)
 Market Analysis
 Evaluation of the Competition
 Marketing & Advertising
 Management Team
 Operating Plan
 Financial Plan (Income statement, Cash Flow, Balance Sheet & Break-Even Point)
 Request for Funding
Activity 4
Discussion
1. Describe the importance in business planning
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2. Describe the process of business planning
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3. Why should you review your business plan?

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Self – Reflect:
It is necessary to consider the step in making business plan? Why? Write your answer on
the space provided below.
________________________________________________________________________________
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________________________________________________________________________
Prepared by: RAMIL B. ENTANA Jr.

Lesson 5

Capitalization for establishing enterprise

The word "capitalization" can have many meanings in small business. It's used in accounting to
describe the cost of equipment that's written off as depreciation over time. It also describes the
conversion of retained earnings into capital and the conversion of an operating lease into a capital
lease. 
In this case, though, capitalization refers to generating the money that allows a business to open its
doors. It's also called funding, backing, capital investment, and owner's stake.
How you capitalize your start-up can have long-term effects on your company’s success.
Funding start-up expenses, inventory, and operations is a challenge for many business owners. It's
important to understand and explore the options available to entrepreneurs, along with each
method's risks and rewards.
Capitalizing Your Startup
Capitalization is the initial investment or seed money for a start-up, and it's usually the investment
that the business owner and any other investors make in the firm. Combined with operating cash
flows, it enables you to start, continue operations and grow the firm by:
 Paying for assets such as equipment, vehicles, and real estate
 Funding growth by purchasing inventory, hiring employees, financing receivables, and more
 Providing reserves for the inevitable rainy days
Capitalization can include both equity and debt, although companies typically prefer to keep debt to
a minimum.

Finding the Money

Start with a comprehensive business plan that contains your educated, best-guess on the goals and
objectives of your start-up, your target market, how you will get customers to buy from you, how
much money you need, when revenue will start to come in, and how much.
Model out financial scenarios to estimate when your business will turn cash-positive, and
subsequently, when will you be able to pay back your investors, whether they're outside investors,
friends and family, or yourself.
Assess your sources for funding. If you can fund the venture out of your own pocket, you retain
complete control. A bank loan means monthly payments, debt covenants, and interest expense.
Outside investors, such as angel investors, who are individuals willing to invest in startups with
promise, private equity groups, and venture capitalists all want equity in the business in exchange
for their money.
These investors want a percent ownership of the business because they have their own financial
goals that, to them, are more important than yours. If you want to pursue outside investors, it's
likely that your business plan will have to show substantial growth within three to five years so that
you can offer these types of investors an exit strategy.
Equity and Debt Funding
Two types of capitalization exist, called equity funding and debt funding. Work with business
mentors and your tax and accounting professionals to determine the right mix of equity and debt
capitalization that makes sense for you and your startup.
Equity means ownership, which could be in stock or shares, partnership interests; or if an LLC,
equity is issued in the form of interests. The advantages of equity include no monthly payments and
no one looking for immediate repayment of their investment.
Some equity investors may even be experts in your field and be able to offer useful business advice.
The downside of equity is you are no longer in complete control of your business because you've
given a certain proportion of your ownership equity in exchange for funds. In some cases, equity
investors may also be entitled to a portion of profits.
Debt is a loan issued to your company. The advantages include allowing you to maintain ownership
control, and the regular timely repayment of the loan builds business credit. Additionally, you can
deduct interest payments on your business income tax return.
How to Set Up an Enterprise
On the surface, the difference between an emerging business enterprise and any other business may
not be easy to discern. It's when you get to know the entrepreneur behind the company and her
motivations for starting it that the difference becomes crystal clear. While people may start
businesses for a variety of reasons, like giving themselves a steady job or having more control over
their work-life balance, the primary motivation of starting an enterprise is to make good money.
"Profit" is the word that usually separates an enterprise from any other business.
Identify a Business Opportunity
When it comes to starting a successful company, having a great idea isn't enough. The internet is
swarming with great ideas that never came to fruition because someone else capitalized on it first,
or the creator was trying to answer a question that nobody asked. The key is to have an idea that
can be leveraged into a profitable business.
This means doing a lot of research. Look closely at the markets in which you are interested and
examine the products, customer buying behaviors and trends. Second, once you identify a potential
opportunity, do some more research. Contact potential customers to find out what features they
want the most and determine how much they may be willing to pay. Third, estimate how much it
will cost you to provide the product or service to determine if it will be profitable or not.
Assemble Your Team of Experts
Mark Zuckerberg didn't start Facebook all alone, and Apple wouldn't have gotten off the ground if
Steve Jobs hadn't paired up with Steve Wozniak. It's important to do an honest self-assessment of
your skills, your strengths and your weaknesses and then seek out people who have skills and
expertise that will complement your own.
If you think you can start your enterprise on your own, it is still a good idea to find yourself some
experienced advisers who can help guide you along the way. Connecting with a good lawyer and an
accountant is often a good place to start.
Start Setting Up Financing
If you require financing, which is more likely when starting an enterprise compared to other small
businesses, it will be worthwhile to find investors who also have an interest in working alongside
you, on your corporate board or as an adviser.
If someone with experience in your market is willing to put up money to back your enterprise, it's
likely that he will also be interested in doing what he can to ensure your business succeeds. If this
person is reputable in your industry, that alone could get you the connections you need with
suppliers and clients as well as making your enterprise more appealing to other investors if needed.
Enterprise Setup Overview
Once you have identified a business opportunity, researched it, developed a business plan and found
financing, it's time to go into business. You will need to create your company, select a name and
decide on its legal entity not to mention finding a location to begin your operations and looking at
the first staff positions you will need to hire. This is really where the hard work and the fun begins,
but it's not something to rush into until all of your other preparations are complete.
Always keep in mind that the research and planning you do while setting up your business will help
ensure your enterprise starts on solid footing. Much like playing a game of chess, the time you
spend setting up your business will put you in a stronger position when it's time to advance

Activity 5
Discussion
1. Define importance of a capital in establishment of an enterprise
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2. What are funding in starting a business.
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3. What are different of equity and debt funding
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4. Why it is important to select a team of expert in your enterprise?
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Self – Reflect:
It is necessary to have a money to start a business? Why? Write your answer on the space provided
below.
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________________________________________________________________________
Prepared by: RAMIL B. ENTANA Jr.
Lesson 6

Feasibility Study

What Is a Feasibility Study?

A feasibility study is an analysis that takes all of a project's relevant factors into account—including
economic, technical, legal, and scheduling considerations—to ascertain the likelihood of
completing the project successfully. Project managers use feasibility studies to discern the pros and
cons of undertaking a project before they invest a lot of time and money into it.
Feasibility studies also can provide a company's management with crucial information that could
prevent the company from entering blindly into risky businesses.
Understanding Feasibility Studies
A feasibility study is simply an assessment of the practicality of a proposed plan or project. As the
name implies, these studies ask: Is this project feasible? Do we have the people, tools, technology,
and resources necessary for this project to succeed? Will the project get us the return on
investment (ROI) that we need and expect?
The goals of feasibility studies are as follows:
 To understand thoroughly all aspects of a project, concept, or plan
 To become aware of any potential problems that could occur while implementing the project
 To determine if, after considering all significant factors, the project is viable—that is, worth
undertaking
The Importance of Feasibility Studies
Feasibility studies are important to business development. They can allow a business to address
where and how it will operate. They can also identify potential obstacles that may impede its
operations and recognize the amount of funding it will need to get the business up and running.
Feasibility studies aim for marketing strategies that could help convince investors or banks that
investing in a particular project or business is a wise choice.

IMPORTANT
When doing a feasibility study, it’s always good to have a contingency plan that you also test to
make sure it’s a viable alternative in case the first plan fails.

Tools for Conducting a Feasibility Study

Suggested Best Practices
Feasibility studies reflect a project's unique goals and needs, so each is different. However, the tips
below can apply broadly to undertaking a feasibility study. You may, for example, want to do the
following:
 Get feedback about the new concept from the appropriate stakeholders
 Analyze and ask questions about your data to make sure that it's solid
 Conduct a market survey or market research to enhance data collection
 Write an organizational, operational, or a business plan
 Prepare a projected income statement
 Prepare an opening day balance sheet
 Make an initial "go" or "no-go" decision about moving ahead with the plan
Suggested Components
Once you have finished your basic due diligence, you might consider the elements below as a
template of items to include in your study:
  Executive summary: Formulate a narrative describing details of the project, product,
service, plan, or business.
 Technological considerations: Ask what will it take. Do you have it? If not, can you get it?
What will it cost?
 Existing marketplace: Examine the local and broader markets for the product, service,
plan, or business.
 Marketing strategy: Describe it in detail.
 Required staffing (including an organizational chart): What are the human capital needs for
this project?
 Schedule and timeline: Include significant interim markers for the project's completion
date.
 Project financials.
 Findings and recommendations: Break down into subsets of technology, marketing,
organization, and financials

KEY TAKEAWAYS
 A feasibility study assesses the practicality of a proposed plan or project.
 A company may conduct a feasibility study if it's considering launching a new business or
adopting a new product line.
 It's a good idea to have a contingency plan in case of unforeseeable circumstances, or if the
original project is not feasible.

Real-World Example of a Feasibility Study

An elite college in a wealthy suburb of Boston had long desired to expand its campus. It kept
putting off the project, however, because the administration had certain reservations, including
whether it could afford to expand. The college also worried about public opinion of the
neighborhood—the original home of this college for more than 100 years. As in the past, the
community board had rejected similar types of development proposals. Finally, the college
wondered if specific legal and political issues might impinge upon its plan.
All of these concerns and unknowns are apt reasons to proceed with a feasibility study, which the
college finally did undertake. As a result, the school now is forging ahead with its expansion plans
without needing to leave its historic home. If it had not taken the time and effort to conduct a
feasibility study, the college would never have known whether its dreamed-of expansion could
become a viable reality.
Activity 6
Discuss the importance of feasibility study, and answer the following questions.
1. What is feasibility study
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2. Is it required to have a feasibility study in starting a business or enterprise?
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3. What are the parts of a feasibility study?
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4. Describer the importance in conducting a feasibility?
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Self –check
1. Student will group themselves, and will make a feasibility study and present to the class.
Prepared by: RAMIL B. ENTANA Jr.

Lesson 7
Government’s Requirement for Enterprise

Start Your Business Right by Procuring All Legal Requirements Needed

STAGES IN THE ADOPTION-REJECTION PROCESS AND ADOPTER CATEGORIES

Starting a business in the Philippines can be a bit confusing because of the many legal requirements
necessary before a business can operate. This article summarizes the essential legal requirements
that are necessary for starting a business.

A. Register the Business Organization

The first step is to register the business with the appropriate government agency depending on the
type of business organization one wants to establish.
1. Sole proprietorship—register with the Department of Trade (DTI).
A sole proprietorship is the simplest type of business organization that may be established by a
person, called the sole proprietor. Unlike a partnership or corporation, which is a business
organization that has a separate existence from the partners in a partnership or stockholders in a
corporation, the sole proprietorship does not have a separate existence from the business owner.
In a sole proprietorship, the business is an extension of the business owner. Thus, the assets and
liabilities of the sole proprietorship are considered the assets and liabilities of the business owner.
2. Partnership—register with the Securities and Exchange Commission (SEC).
A partnership is a business organization whereby two or more persons agree to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among
themselves. Two or more persons may also form a partnership for the exercise of a profession.1
The partnership has an existence separate from that of each of the partners.2
Unlike a corporation, a partnership does not have shares of stock, which are the basis for the
distribution of the profits (i.e., dividends) among the stockholders. Instead, in a partnership, the
losses and profits are distributed in accordance with the agreement of the partners. If only the share
of each partner in the profits has been agreed upon, the share of each in the losses shall be in the
same proportion. In the absence of an agreement, the share of each partner in the profits and losses
shall be in proportion to what he has contributed to the partnership, but the industrial partner shall
not be liable for the losses.3
As for the profits, the industrial partner shall receive such profits as may be just and equitable under
the circumstances. If the industrial partner contributed capital, he shall also receive a share in the
profits in proportion to his capital.4
3. Corporation—register with the SEC.
A corporation is “an artificial being created by operation of law, having the right of succession and
the powers, attributes and properties expressly authorized by law or incident to its existence.”5
The corporation has an existence separate from that of its stockholders.

Corporations may be classified as either stock or nonstock corporations. Stock corporations have
capital stock divided into shares of stock, which may be issued to the stockholders. Stock
corporations are allowed to distribute dividends to the stockholders on the basis of the number of
shares of stock owned by them. Nonstock corporations do not have capital stock divided into
shares of stock and are not allowed to distribute dividends to the members

A stock corporation is the appropriate type of corporation for the purpose of operating a business.
B. Obtain a Mayor’s or Business Permit
All businesses are required to secure a mayor’s permit or business permit from the local
government of the city or municipality where the business is located.
Different cities and municipalities have different registration procedures and requirements. The
following are the general requirements for securing a permit for a new business:
Application forms
1. DTI registration or SEC registration, whichever is applicable
2. Lease contract or title covering the property where the business is located, whichever is
applicable
3. Locational or zoning clearance
4. Building permit and occupancy permit
5. Public liability insurance
6. Barangay clearance
7. Fire safety certificate
Other requirements specific to the type of business to be carried out
For the specific requirements, one needs to visit the city or municipal hall of the city or municipality
where the business will be established.
C. Register with the Bureau of Internal Revenue (BIR)
All businesses have to register with the BIR before the commencement of operation for taxation
purposes.
The registration process involves obtaining and registering a tax identification number (TIN),
obtaining BIR-registered official receipts and invoices, registering the business’s books of accounts,
and paying the applicable fees.
The registration must be done at the Revenue District Office (RDO) of the BIR, which covers the
registered address of the business.
For the specific requirements for BIR registration, one needs to visit the RDO that covers the
registered address of the business.
D. Register with the Social Security System (SSS)
All businesses that have employees must be registered with the SSS. The registered employer will
be assigned an employer number, which will be used as reference for the remittance of monthly
contributions, composed of the employee’s contribution and the employer’s share.
SSS coverage is compulsory for all employees not over sixty years of age and their employers.7
An employer is any person who carries on in the Philippines any trade, business, industry,
undertaking, or activity of any kind and uses the services of another person who is under his or its
orders as regards the employment. Meanwhile, an employee is any person who performs services
for an employer in which either mental or physical efforts or both are used and who receives
compensation for such services, where there is an employer‐employee relationship.8
The SSS provides replacement income for employees in times of disability, sickness, maternity, and
old age. It also provides assistance during death and for funeral expenses.
E. Register with the Philippine Health Insurance Corporation (PhilHealth)
All employers are required to register themselves and their employees with PhilHealth, the
government health-care system. Upon registration, an employer shall be issued an employer
number.
Under the PhilHealth system, the monthly contribution is divided equally between the employer and
the employee. It is deducted and withheld automatically by the employer from the employee’s
salary then remitted to PhilHealth.
F. Register with the Home Development Mutual Fund (Pag-IBIG Fund)
All employees who are or ought to be covered by the SSS are also covered by mandatory
membership in the Pag-IBIG Fund.10 The Pag-IBIG Fund provides various types of housing loans to
employees.
Members make their contributions to the Pag-IBIG Fund through salary deduction. The employer
has the responsibility to deduct the contribution from the employee’s salary. Together with the
employer’s share of the contribution, the employee contribution is remitted to the Pag-IBIG Fund
on a monthly basis.
G. Importance of Securing the Legal Requirements
The above legal requirements are only the essential requirements for starting a business in the
Philippines. There may be other special permits, clearances, or registrations from or with other
government agencies that may be necessary, depending on the kind of business and projects a
business owner plans to engage in.
It is very important to secure these essential legal requirements. The consequences of operating a
business without the said legal requirements range from the closure of business, to the imposition of
monetary fines, and finally, to imprisonment.
Local government units in different cities and municipalities have different penalties for businesses
operating without the required mayor’s or business permit, such as surcharge and interest on the
amount of fees due. However, one common penalty that may be imposed is the closure of the
business. Confiscation of the business property and assets may also be done.
As for failing to register a business with the BIR, the said violation is penalized by a fine ranging
from P5,000 to P20,000, imprisonment of six months to two years. There is also a compromise
penalty of P2,000 to P20,000, depending on whether the business is located in a city or in a
municipality.11
For failing or refusing to register the employees or to deduct contributions from the employees’
compensation and remit the same to the SSS, the penalty is either a fine (ranging from P5,000 to
P20,000) or imprisonment for six years to twelve years.12
Any employer who fails or refuses to register employees with PhilHealth or to deduct contributions
from the employees’ compensation or remit that same amount to PhilHealth is penalized with a fine
of P5,000, multiplied by the total number of employees of the business.13
On the other hand, any employer who fails or refuses to register employees with the Pag-IBIG Fund
or to collect or remit the required contributions is penalized either with a fine of not less than but
not more than twice the amount involved, or imprisonment of not more than six years. The
employer may be both fined and imprisoned, depending on the discretion of the court.

Activity 7
Discuss the importance of Government’s Requirement for enterprise, and answer the following
questions.
1. Describe the government requirements for a business
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2. Enumerate and describe the different requirement imposed by the government.
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3. What are the laws and offices governing agriculture based enterprise?
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4. What are step by step process in acquiring government approval in an enterprise?

________________________________________________________________________________
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Self – Reflect:
It is necessary to know the importance of those requirement from the government? Why? Write
your answer on the space provided below.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________
Prepared by: RAMIL B. ENTANA Jr.

Lesson 8
The 4P’s of Business

The Four Ps Model

 Product – The first of the Four Ps of marketing is product. A product can be either a
tangible good or an intangible service that fulfills a need or want of consumers. Whether you
sell custom pallets and wood products or provide luxury accommodations, it’s imperative
that you have a clear grasp of exactly what your product is and what makes it unique before
you can successfully market it.
 Price – Once a concrete understanding of the product offering is established we can start
making some pricing decisions. Price determinations will impact profit margins, supply,
demand and marketing strategy. Similar (in concept) products and brands may need to be
positioned differently based on varying price points, while price elasticity considerations
may influence our next two Ps.
 Promotion – We’ve got a product and a price now it’s time to promote it. Promotion looks
at the many ways marketing agencies disseminate relevant product information to
consumers and differentiate a particular product or service. Promotion includes elements
like: advertising, public relations, social media marketing, email marketing, search engine
marketing, video marketing and more. Each touch point must be supported by a well-
positioned brand to truly maximize return on investment.
 Place – Often you will hear marketers saying that marketing is about putting the right
product, at the right price, at the right place, at the right time. It’s critical then, to evaluate
what the ideal locations are to convert potential clients into actual clients. Today, even in
situations where the actual transaction doesn’t happen on the web, the initial place potential
clients are engaged and converted is online.
Lesson 9

Problem Solving and Decision Making for Business Establishment

Effective Problem Solving and Decision Making

Types of Decision Makers

Problem solving and decision making belong together. You cannot solve a problem without making
a decision. There are two main types of decision makers. Some people use a systematic, rational
approach. Others are more intuitive. They go with their emotions or a gut feeling about the right
approach. They may have highly creative ways to address the problem, but cannot explain why they
have chosen this approach.
Six Problem-Solving Steps
The most effective method uses both rational and intuitive or creative approaches. There are six
steps in the process:
1. Identify the problem
2. Search for alternatives
3. Weigh the alternatives
4. Make a choice
5. Implement the choice
6. Evaluate the results and, if necessary, start the process again
Identify the problem
To solve a problem, you must first determine what the problem actually is. You may think you
know, but you need to check it out. Sometimes, it is easy to focus on symptoms, not causes. You
use a rational approach to determine what the problem is. The questions you might ask include:
 What have I (or others) observed?
 What was I (or others) doing at the time the problem occurred?
 Is this a problem in itself or a symptom of a deeper, underlying problem?
 What information do I need?
 What have we already tried to address this problem?
For example, the apprentice you supervise comes to you saying that the electric warming oven is
not working properly. Before you call a repair technician, you may want to ask a few questions.
You may want to find out what the apprentice means by “not working properly.” Does he or she
know how to operate the equipment? Did he or she check that the equipment was plugged in? Was
the fuse or circuit breaker checked? When did it last work?
You may be able to avoid an expensive service call. At the very least, you will be able to provide
valuable information to the repair technician that aids in the troubleshooting process.
Of course, many of the problems that you will face in the kitchen are much more complex than a
malfunctioning oven. You may have to deal with problems such as:
 Discrepancies between actual and expected food costs
 Labour costs that have to be reduced
 Lack of budget to complete needed renovations in the kitchen
 Disputes between staff
However, the basic problem-solving process remains the same even if the problems identified
differ. In fact, the more complex the problem is, the more important it is to be methodical in your
problem-solving approach.
Search for alternatives
It may seem obvious what you have to do to address the problem. Occasionally, this is true, but
most times, it is important to identify possible alternatives. This is where the creative side of
problem solving really comes in.
Brainstorming with a group can be an excellent tool for identifying potential alternatives. Think of
as many possibilities as possible. Write down these ideas, even if they seem somewhat zany or
offbeat on first impression. Sometimes really silly ideas can contain the germ of a superb solution.
Too often, people move too quickly into making a choice without really considering all of the
options. Spending more time searching for alternatives and weighing their consequences can really
pay off.
Weigh the alternatives
Once a number of ideas have been generated, you need to assess each of them to see how effective
they might be in addressing the problem. Consider the following factors:
 Impact on the organization
 Effect on public relations
 Impact on employees and organizational climate
 Cost
 Legality
 Ethics of actions
 Whether this course is permitted under collective agreements
 Whether this idea can be used to build on another idea
Make a choice
Some individuals and groups avoid making decisions. Not making a decision is in itself a decision.
By postponing a decision, you may eliminate a number of options and alternatives. You lose control
over the situation. In some cases, a problem can escalate if it is not dealt with promptly. For
example, if you do not handle customer complaints promptly, the customer is likely to become even
more annoyed. You will have to work much harder to get a satisfactory solution.
Implement the decision
Once you have made a decision, it must be implemented. With major decisions, this may involve
detailed planning to ensure that all parts of the operation are informed of their part in the change.
The kitchen may need a redesign and new equipment. Employees may need additional training. You
may have to plan for a short-term closure while the necessary changes are being made. You will
have to inform your customers of the closure.
Evaluate the outcome
Whenever you have implemented a decision, you need to evaluate the results. The outcomes may
give valuable advice about the decision-making process, the appropriateness of the choice, and the
implementation process itself. This information will be useful in improving the company’s response
the next time a similar decision has to be made.
Creative Thinking
Your creative side is most useful in identifying new or unusual alternatives. Too often, you can get
stuck in a pattern of thinking that has been successful in the past. You think of ways that you have
handled similar problems in the past. Sometimes this is successful, but when you are faced with a
new problem or when your solutions have failed, you may find it difficult to generate new ideas.
If you have a problem that seems to have no solution, try these ideas to “unfreeze” your mind:
 Relax before trying to identify alternatives.
 Play “what if” games with the problem. For example, What if money was no object? What if
we could organize a festival? What if we could change winter into summer?
 Borrow ideas from other places and companies. Trade magazines might be useful in
identifying approaches used by other companies.
 Give yourself permission to think of ideas that seem foolish or that appear to break the rules.
For example, new recipes may come about because someone thought of new ways to
combine foods. Sometimes these new combinations appear to break rules about
complementary tastes or break boundaries between cuisines from different parts of the
world. The results of such thinking include the combined bar and laundromat and the coffee
places with Internet access for customers.
 Use random inputs to generate new ideas. For example, walk through the local shopping
mall trying to find ways to apply everything you see to the problem.
  Turn the problem upside down. Can the problem be seen as an opportunity? For example,
the road outside your restaurant that is the only means of accessing your parking lot is being
closed due to a bicycle race. Perhaps you could see the bicycle race as an opportunity for
business rather than as a problem

Activity 8-9
Discuss importance of The 4P’s of Business, and Problem solving and decision making for business
establishment, and answer the following questions.
1. Define the importance of 4P’s of business
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2. Illustrate and explain the 4P’s: product, price, place, and promotion?
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3. What are the common problem in an enterprise business?
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4. Enumerate the risk factors affecting enterprise
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Self – Reflect:
It is necessary to learn and gain skill in problem solving and decision making in business? Why?
Write your answer on the space provided below.
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Prepared by: RAMIL B. ENTANA Jr.

Lesson 10
Structure and Licensing
Types of Business Organizational Structures
Large or small, every organization should operate with a defined organizational structure. A well
thought out and strategic business configuration clarifies reporting relationships and supports good
communication – resulting in efficient and effective work process flow.
The board and senior leadership should be the group who determines the type of organizational
structure that would best support the internal operations, how work is carried out and the chain-of-
command.
Determining the best structure is done by answering the questions:
 What are the functional groupings of work processes?
 Are there natural groupings of teams, work groups or units?
Senior leadership looks at all functions and determines how they would like work activities to be
organized and carried out. This process also identifies natural reporting relationships and chain-of-
command. Reporting relationships can be both vertical as well as horizontal.
6 Common Business Organizational Structures
1. Hierarchical Organizational Structure
Organizations that use a traditional hierarchical structure rely on a vertical chain of command as the
prime method of organizing employees and their responsibilities. Military, government, and other
very large organizations use a hierarchy to determine the level of control employees have over their
work as well as their rank relative to others.
Hierarchical structures typically feature multiple layers of management and are therefore prone to
bureaucracy and the creation of silos that prevent cross-team collaboration.
2. Matrix Organizational Structure
A matrix structure provides for reporting levels both horizontally as well as
vertically. Employees may be part of a functional group (i.e. engineer) but may serve on a team that
supports new product development (i.e. new album). This kind of structure may have members of
different groups working together to develop a new product line.
For example, a recording engineer who works for a music publisher, may have engineers who
report to him but may also use his expertise and work with teams to develop new music albums.
The advantage of a matrix organizational structure is that employees have responsibility not only
for their department but for organizational projects. A challenge with this type of structure presents
itself when employees are given direction from two different managers and they need to prioritize
their work responsibilities.
3. Functional Organizational Structure
Functional organizational structures are the most common. A structure of this type groups
individuals by specific functions performed. Common departments such as human resources,
accounting and purchasing are organized by separating each of these areas and managing them
independently of the others.
For example, managers of different functional areas all report up to one director or vice president
who has responsibility for all of the operational areas.
The advantage of this type of structure is that functions are separated by expertise but the challenges
comes in when different functional areas turn into silos that focus only on their area of
responsibility and don’t support the function of other departments.
4. Product Organizational Structure
Another common structure is to be organized by a specific product type. Each product group falls
within the reporting structure of an executive and that person oversees everything related to that
particular product line.
For example, an executive over Kraft products would be responsible for every product under that
label – dressings, meats, sauces, etc.
The advantage of this type of structure is that it organizes products by category but can create
completely separate processes from other product lines within the organization.
5. Customer Organizational Structure
Certain industries will organize by customer type. This is done in an effort to ensure
specific customer expectations are met by a customized service approach.
An example of this would be in healthcare. A patient seen as an outpatient has very different needs
than those of patients who spend time in the hospital as inpatients.  A customer centered structure
creates customized care for those patients.
The advantage of this type of structure is that it specializes in the needs of each customer group but
can ignore the needs of different customer types.
6. Geographic Organizational Structure
For organizations that cover a span of geographic regions, it sometimes makes sense to organize by
region. This is done to better support logistical demands and differences in geographic customer
needs.
Typically, a structure that is organized by geographical regions reports up to a central oversight
person. You see this type of structure in companies that go beyond a city or state limit and may
have customers all across the country or in multiple states.

Why would a company look for products it can produce under license?
In today's world of rapid technological change, new technologies are the key to economic growth.
Today, many products have very short life cycles and are readily replaced in the marketplace by
new technology. If a company wants to survive, it needs to continually add new products to replace
declining products.
Also, a company may want to grow and diversify by expanding its product line to take up excess
manufacturing or marketing capacity, level out seasonal highs and lows, or simply add to
profitability with a proven product. Companies may not have the internal skills, time, or money to
develop their own new products, so obtaining a proven product quickly through licensing may be
very attractive.
What are the advantages of licensing?
 You get access to the experience and know-how of the company that developed the product.
This company may be much larger than yours, with development capabilities that you
cannot afford.
 You get to break into a new market with this new product, but with the benefit of the
experience gained in another market.
o it costs less than buying an entire company;
o you don't pay for expensive and time consuming research and development;
o you don't pay development costs up front; you pay royalties when you start making
sales; and
o you won't have large losses if the product doesn't become successful in your market
area.
It makes competition easier if you're a small company with limited resources. You minimize your
costs and risks:
What are the disadvantages of licensing?
 The license agreement is normally for a considerable period of time and there may be an
annual minimum royalty required.
 New technology may become available making the licensed opportunity obsolete.
 The agreement may force the licensee to accept restrictions on its marketing.
 The licensee may lose the capacity to develop its own technology internally.
What does a typical licensing agreement cover?
 Subject Matter of the Agreement—may be (1) patent, (2) copyright, (3) trademark, (4)
industrial design, (5) trade secret (know-how, technology, experience, etc.)
 Granting of Rights—defines what licensor is transferring to licensee
 Licensor's Obligation—sets out how transfer is to take place in terms of assistance, support,
training and co-operation
 Licensee's Obligation—sets out financial requirements, guarantees of licensee, secrecy,
costs, etc.
 License Fee—fee paid to licensor on signing agreement
 Royalty—ongoing share of proceeds paid to licensor for the rights. May be a lump sum, or
percentage of proceeds or amount per unit sold, etc., usually a minimum royalty is required.
 Term—how long the agreement is to last
 Designated Area and Exclusivity—define manufacturing and marketing area of license
 Termination—describes rights of both licensor and licensee to terminate agreement
  Guarantees—licensor will normally not guarantee the results of using the rights granted. The
licensee may be required to provide warranties, public liabilities, etc.
How does a company search and find products that may be available for licensing?
Steps to take:
Prepare a profile of your company
 name of contact person and title;
 reason (i.e. diversification, complement present products, efficiency);
 facilities for manufacturing/marketing;
 present products/services;
 marketing area presently serviced;
 sales volume;
 description of search requirements (i.e. product/process, etc.);
 markets desired for licensed opportunity with special note if different from markets
normally being serviced; and
 exclusivity, protection requirements desired.
Search sources
There are a large number of sources that may be used in searching for products/processes, etc.,
under license that can be contacted:
 licensing consultants with clients offering opportunities;
 international licensing exhibitions;
 publications offering licensing opportunities by subscription;
 Canadian consulates in foreign countries;
 provincial trade offices in foreign countries;
 federal/provincial/state agencies in foreign countries;
 trade directories of manufacturers in foreign countries;
 Chambers of Commerce in foreign countries;
 banks with international branches;
 universities with research facilities;
 research and development companies;
 trade associations;
 trade publications; and
 import replacement.
Providing a profile of your company and its search requirements to any or all of the foregoing
would result in you receiving names and addresses of prospective licensors for your direct contact.
When contacting prospective licensors, you should enclose your company profile and request
assurance that they are prepared to license.
It would be important to ask as well if they have licensed others, and if so, request that they provide
the names, addresses, etc., and permission to contact.
Determine feasibility of opportunities found
 Licensor should provide licensee sufficient information to determine feasibility of the
opportunity in the proposed area.
 Licensor should provide: product brochure, bill of materials and specifications, labour and
time, how long marketed and growth, other licensees (where located and right to contact),
benefits over competition, estimated total market, warranties, marketing, training provided,
financial terms, etc.
 Prospective licensee does a feasibility study based on his area and the market he will have.
 Licensor may require the potential licensee to sign a Confidential Disclosure Agreement
before providing a full package of information. If negotiation is lengthy the licensor may
request a letter of intent and some partial payment for keeping the opportunity available for
a period of time until licensee determines feasibility.
Negotiating a license agreement
  Usually a licensing agreement will be provided by the licensor once it has established the
licensee is serious with regard to the opportunity. The terms of the agreement are negotiable.
Using the information obtained from your feasibility study and considering the financial
requirements of the licensing agreement, you should be positive the licensing opportunity
will provide an acceptable profit and return. Minimum annual royalties should be carefully
studied to ensure they can be reasonably met.
 A license opportunity from an inventor, if one is the first licensee should be very reasonable,
as the inventor is looking for credibility, which will be established by the first licensee.
What is the procedure if you or your company has a product to license to others?
You've invented something, it has received a positive evaluation, and has a patent pending. Or
maybe your company doesn't have the capital or expertise to manufacture and market its product to
a global market. Inventors often find it is better to license their technology rather than try to
manufacture and market it themselves. Similarly, licensing may be the only practical way for a
company to maximize the potential for its existing products.
Licensing companies in other areas of Canada or in other countries expands your potential while
minimizing your risk by using companies that have the necessary manufacturing capability and
marketing networks already in place.
Licensing can be done by a single company, however if this is not possible, an alternative is to
consider a multi-prong approach to your licensing with several component parts being done by
different manufactures, final assembly by another, and possibly distribution by yet another. This
may divide up the risk if the magnitude of the project is perceived too large by any one licensee.
Licensing out of a product, process, technology, etc., will follow much the same procedures as
licensing in or searching for opportunities. You will need to prepare a formal presentation to explain
the functionality and marketability of the concept containing the following:
 letter of introduction;
 pictures of the product;
 product description;
 manufacturing information;
 product variations;
 product benefits;
 market research results;
 objectives for your project; and
 pricing breakdown.
Your presentation should be sent to the same sources listed previously in this handout (see the
previous heading Search sources), and you would request that names and addresses of likely
licensees be provided to you.
As a licensor, you will be expected to provide the legal agreement that will ensure both parties are
fully aware of their respective rights and responsibilities, over and above simply determining
royalties. Good legal advice is usually required to negotiate such things as:
 exclusive rights to the invention;
 territories allocated;
 what exactly is being licensed (technology transfer, engineering specs, use of trademark);
 who pays for obtaining patents in licensed territories;
 are future improvements to the product included under the license;
 what resources are available if the licensee is late on payments;
 can either party transfer rights under the agreement to another party;
 who bears liability resulting from injuries sustained from the product; and
 what are termination provisions of the agreement?
Determining an acceptable royalty rate for a product is difficult, as there is no quick-fix percentage
that can be applied as a general measure. Although rates ranging from 3% to 8% of net sales are
common, each licensing agreement is unique and the only consensus that matters with respect to
royalty rates is the one that occurs between the licensor and the licensee as a result of negotiations.
Several factors that may influence the potential royalty rate of a licensed product include:
 if the product is already patented;
 is the product "market ready"; and
 does the licensor have a track record of successful products?
If you are an inventor and wish to approach a large company with your invention, you may find that
they have very specific policies on how they will consider unsolicited proposals. Your first response
from them will usually be to spell out the terms and conditions of their corporate policy on
submissions.

Activity 10
Discuss the importance of Structure and Licensing, and answer the following questions.
1. Describe the importance of structural organization in a business.
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2. Describe the legal aspect in business.
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3. Why it is business licensing and permit are important?
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4. Describe the different organization structure in a business?
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Self – Reflect:
It is necessary to have a proper requirement in applying a business permit and licensing? Why?
Write your answer on the space provided below.
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Prepared by: RAMIL B. ENTANA Jr.
Lesson 11
Preparing a Business plan and Marketing Plan

How to write your marketing plan.

Writing a marketing plan can help you define different aspects of your business and help you focus
on your priorities when you market your products or services.

Why do I need a marketing plan?

A marketing plan helps you promote products and services in your business that meet the needs of
your target market. It requires research, time and commitment, but is a very valuable process that
can greatly contribute to your business success.
Writing and researching for your marketing plan gives you the chance to:
1. Identify your target market and understand how your product or service meets their needs.
2. Identify your competitors and what your target customers think about your competitors'
strengths and weaknesses.
3. Position your brand, products and services so that your target market sees your business as
better than, or different from, the competition.
4. Set specific, measurable goals and time frames for your marketing activities.
5. Map out a strategy to reach your target audience, including the messages, channels and tools
you will use.
1. Look at your industry structure

Find out about your industry, including industry associations, statistics and benchmarks to help you
understand how your business will run compared to others in the industry.
Consider the following when researching your industry:
 What size is the industry?
 Is the industry growing or shrinking?
 What factors might influence how the industry does?
 Does the industry have a strong or weak presence domestically or overseas?
 Where does the industry make most of its profit?
 Who are the leading businesses in the industry?
 What is the size of the market that these leading businesses operate in?
2. Conduct market research

Carry out market research to gather and organize information about your target market, consumer
needs and understand where your business fits within the market. 
To work out your market and business positioning, you may need to know:
 Who your target customers are?
 What they’re interested in?
 What their problems are?
 What needs do your target customers have?
 How do your competitors meet the needs of your target market?
 How can you do it better?
There are two market research methods you can apply. These include:
 Primary research - new research you can collect first-hand through surveys, interviews and
by talking directly to the customer.
 Secondary research - publicly available information that has already been gathered, such as
research reports, government statistics and trade publications.
3. Define your market and customer profiles
Your target market is a group of customers that you plan to sell your products or services to. Your
target audience are the customers most likely to buy your products or services.
To determine your market segments you need to determine the needs of each. For example, was the
need for you product or service already there? Are there different products or services that fulfil the
same need? Will potential customers have a need for your product or service over others?
By evaluating each segment of your target market, you can determine whether there are enough
customers to sell your product or service to. It also ensures you don't waste your resources on
market segments that won't buy your products. 
You can segment your ideal customers into groups sharing the same characteristics such as gender,
location, income, family size, preferred media channels and likes and dislikes. You can then tailor
your marketing strategies to suit your target customer segments.
4. Conduct a SWOT analysis

Identify your business's internal strengths and weaknesses, and external opportunities and threats
(SWOT). They can have an impact on your business.
Developing a SWOT analysis can help you analyze where your business and products fit within the
market and your unique selling position. It can also help you discover how your business can
improve, what you excel at and what practices other businesses are using.
 Strengths - What does your business do well? What do you do better than your competition?
 Weaknesses - What does your business need to improve to stay competitive? What does
your competitor do better than you? What's holding your business back?
 Opportunities - What market trends could lead to increased sales? What can you use to your
businesses advantage?
 Threats - what are the advantages competitors have over your business? What could harm
your business?
5. Study the competition

Who are your competitors? By analyzing your competition you can find out what your competitors
are doing, how you compare and what potential threat they present to your business.
You can identify your competitors from two main groups:
 Direct competitors – businesses that offer the same products or services as you.
 Indirect competitors – businesses that sell products or services that are different but may
satisfy the same consumer need.
For example, a fish and chip shop competes indirectly with a pizza shop but directly with another
fish and chip shop.
Once you have identified who your competitors are determine their profile:
 What products or services do they sell?
 Do they offer a similar product or service?
 What do they offer their customers?
 How do they engage with their customers?
 Where are they located?
 How competitive are they?
 How much market share do they have?
 What type of media channels do they use to market their products or services?
 What are their strengths and weaknesses?
The more you know about your competitors the better you'll be at identifying where you fit in the
market and the potential opportunities available for your business.
6. Set your goals and objectives

Once you're clear about your business and its positioning, you can start thinking about what you
want to achieve.
First, think long-term and figure out your main business goals, whether it's the size of your
business, expansion plans or profit figures.
Then, figure out what your immediate objectives are, whether it's to establish your business in the
market or to increase sales or customers.
7. Outline your marketing strategies

Once you know what you want, start analysing your short-term business objectives and try and
figure out what marketing activity, process or price will help you achieve your objectives.
When choosing marketing activities, try and choose activities that suit your business and your
customers. For example, it's not a good idea choosing newspaper advertising if your customers are
primarily young adults who might not necessarily read the paper.
It's a good idea to choose multiple activities that complement each other, to help you get your
message across. For example, if you're trying to establish a new product in the market, you may
choose to advertise on the local radio, as well as setting up social media channels and introduce a
low-cost pricing strategy for first-time buyers. When used together, these strategies start to
complement each other and help you reach a broader market.
8. Set your marketing budget

Knowing how much you have to spend on marketing and how to spend it is critical to the success of
your business. A marketing budget will ensure you accurately calculate your marketing campaign
or advertising. 
When developing your marketing budget, make sure you're only spending money on the
requirements of your current marketing goals. Advertising and promotion can be expensive. Make
sure to pick options that will give you the best bang for your buck, while still reaching your target
customers.
9. Keep your marketing plan up-to-date

Many factors can impact your marketing results and it’s important you’re aware of them. Analyzing
your results and keeping up to date with new marketing trends is important in keeping your
marketing plan up to date and reaching your business goals. Remember your marketing plan is a
living guide that you should tweak and change as your business and market grow and change.

Activity 11
Discuss the importance of Preparing a Business plan and Marketing Plan, and answer the following
questions.
1. Describe the parts in business plan
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2. How to make a business plan?
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3. What the strategy in carrying a good marketing
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4. Why it is important to have a good customer service care.
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Self – check:
1. Student will make their own business plan and present to the class.
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Prepared by: RAMIL B. ENTANA Jr.

Lesson 12
Financial Management for Enterprise

All About Financial Management in Business

New business leaders and managers have to develop at least basic skills in financial management.
Expecting others in the organization to manage finances is clearly asking for trouble. Basic skills in
financial management start in the critical areas of cash management and bookkeeping, which should
be done according to certain financial controls to ensure integrity in the bookkeeping process. New
leaders and managers should soon go on to learn how to generate financial statements (from
bookkeeping journals) and analyze those statements to really understand the financial condition of
the business. Financial analysis shows the "reality" of the situation of a business -- seen as such,
financial management is one of the most important practices in management. This topic will help
you understand basic practices in financial management, and build the basic systems and practices
needed in a healthy business.

Basics of Financial Management

Role of Treasurer and Board Finance Committee
If your small business is a corporation, you would do well to find someone experienced in financial
management and encourage them to be your board treasurer (your board chair has this responsibility
to find someone suitable, as well). Therefore, it's important to understand the role of the board
treasurer.

Getting an Accountant or Bookkeeper, If Needed

If you are inexperienced in financial management, then you should get an accountant initially to
help you set up your bookkeeping system, generate financial statements and do some basic financial
analysis. But don't count on an accountant to completely take over your responsibility for financial
management! The accountant can help you set up a bookkeeping system, generate financial
statements and analyze them, but you have to understand financial data to the extent that you can
understand the effects of your management decisions, the current condition of your business and
how decisions will affect the financial condition of your business in the future.
You should carefully consider whether you should hire an outside accountant, or hire your own
employee. The IRS pays increasing attention to the hiring of independent contractors.
Hiring Consultants
The following link might help you when you establish a contract with an accountant.
Buy Accounting Software to Help You?
Strongly consider getting a software package to manage your books! There are a number of very
useful software packages that will help you automate bookkeeping, generation of financial
statement and their analysis. Note that an accounting software package can greatly reduce the time
to enter and manage accounting transactions, and generate financial statements. However, you still
should have at least a basic understanding of the accounting process for your organization,
including what journals are used and what general accounts exist. You must have good
understanding of financial statements and how to analyze them -- an accounting package cannot do
this for you!

Getting a Bank and Banker

You'll need to start a business account at a bank. Probably the best way to find a good bank is to ask
for advice and references from other small businesses, especially those that are of the size and
nature of yours. If you're just starting out, you probably don't have much money. You may be able
to get by with a non-interest-bearing checking out that has no, or minimal, feeS.
Basic Overview of For-Profit Financial Management
To get an overall sense for the recurring financial activities in the typical, read the following
articles. (You'll soon get more basic information below in the section titled "Bookkeeping Basics".)

Understanding Bookkeeping and Accounting

Basics financial managements starts with good record keeping. Be sure that you've read the above-
mentioned article Basics of Financial Management in U.S. Small For-Profit Businesses before you
continue reading the links listed below.
If You Want to Learn All About Bookkeeping and Accounting, Start Here
These sites provide an online tutorial about the basics of bookkeeping and accounting. Don't worry
about thoroughly understanding very term and process. But do think about what you're reading in
order to get a strong "feel" about the process of accounting.
Classification of Accounts (for Chart of Accounts)
In accounting, different types of financial transactions (eg, paying telephone bills, copier bills,
getting money from sales, getting money from interest income, etc.) are assigned specific numbers
(account numbers) which help to record and track those types of transactions. Businesses might
create their own list (or chart) of accounts or adopt a chart used by other organizations. In any case,
you should have some basic impression of a chart of accounts. The following links will help you.

Addressing Financial Controls and Risk Management

Financial controls exist to help ensure that financial transactions are recorded and maintained
accurately, and that personnel don't unintentionally (or intentionally) corrupt the financial
management system. Controls range from very basic (eg, using a checkbook and cash register tapes
to more complex, eg, yearly financial audits).

The following link is to a variety of links about controls to prevent intentional subversion of the
financial management system.

CRITICAL OPERATING ACTIVITIES IN YEARLY ACCOUNTING CYCLE

Now that you have a basic sense of the overall accounting and financial management process, we'll
look at the key parts at the beginning of the overall process, including budgeting, managing cash
and credit.
Financial Planning
Financial planning works from the strategic and business plans to identify what financial resources
are needed to obtain and develop the resources to achieve the goals in the two types of plans.
Typically, financial planning results in very relevant and realistic budgets -- budgets are addressed
later on in this topic. So be sure to consider business planning for each of your products and
services.
Budgeting and Managing a Budget
A budget depicts what you expect to spend (expenses) and earn (revenue) over a time period.
Amounts are categorized according to the type of business activities, or accounts (for example,
telephone costs, sales of catalogs, etc.). Budgets are useful for planning your finances and then
tracking if you're operating according to plan. They are also useful for projecting how much money
you'll need for a major initiative, for example, buying a facility, hiring a new employee, etc. There
are yearly (operating) budgets, project budgets, cash budgets, etc. The overall format of a budget is
a record of planned income and planned expenses for a fixed period of time.

Managing Cash Flow

As a new business, your biggest challenge is likely to be managing your cash flow -- probably the
most important financial statement for a new business is the cash flow statement. The overall
purpose of managing your cash flow is to make sure that you have enough cash to pay current bills.
Businesses can manage cash flow by examining a cash flow statement and cash flow projection.
Basically, the cash flow statement includes total cash received minus total cash spent. Cash
management looks primarily at actual cash transactions.
(Thanks to the Women's Business Center for a very useful set of links!)
Basics of Cash Management
The Importance of Cash Management
Techniques for better cash flow management
Basic Cash Management Techniques
Techniques for Improving Cash Flow

Man oh Man, Don’t Run Out of Cash

Preparing a Cash Flow Statement
Preparing Your Cash Flow Statement
Cash Flow Worksheet
All About Cash Flow Analysis for Your Small Business
Preparing Cash Flow Projections and Forecasts
More information on doing cash flow forecast
How to Make Cash Flow Projections
Short-Term Cash Flow Projections
Managing Your Checking Account
For a new business, your check register very likely will be your primary means to record and track
cash. Whether yours is a new business or an established business, you'll need to know how to
manage your bank account. See
Checking Account Lessons
Managing Your Checking Account
Credit and Collections
One of your biggest challenges in managing cash flow may be decisions about granting credit to
customers or clients, and how to collect payment from them.
Know your rights: Fair Debt Collection Practices Act
Credit Granting Authority
Budget Deviation Analysis
You learned above that a budget depicts what you expect to spend (expenses) and earn (revenue)
over a time period. Budget deviation analysis regularly compares what you expected, or planned, to
earn and spend with what you actually spent and earned. The budget deviation analysis can help
greatly when detecting how well you're tracking your plans, how much to accurately budget in the
future, where there may be upcoming problems in spending, etc. A budget deviation analysis report
might include columns with titles:
Difference % Deviation
Planned for Month Actual for Month
(planned minus actual)(Difference x 100)
 

Test - What is the Quality of Your Financial Management Practices Now?

Before reading more in this topic, you might get an impression of your own financial knowledge
and practices now.
Evaluation of Financial Management Practices in Businesses
So, based on the results of the test, what do you want to improve? Consider the guidelines in the
rest of this topic.

ACTIVITIES IN YEARLY ACCOUNTING CYCLE: Financial Statements and Analysis

Financial Statements
To really understand the current and future conditions of your business, you have to look at certain
financial statements. These statements are generated by organizing and analyzing numbers from
your accounting activities. You should understand the two primary financial statements, the Profit
and Loss Statement (or Income Statement) and the Balance Sheet. (Some sources believe that there
are other primary statements, too, such as the cash flow statement or change in capital, etc.
However, the Income Statement and Balance Sheet are the two standard statements for any
business.) The following links will give you an overview of these two key statements, and we'll
soon get into them in more detail later on below. Here are several perspectives on the statements.

Profit and Loss (Income) Statements

These "P and L" statements depict the status of your overall profits. These statements include much
money you've earned (your revenue) and subtract how much you've spent (your expenses), resulting
in how much you've made money (your profits) or lost money (your deficits). Basically, the
statement includes total sales minus total expenses. It presents the nature of your overall profit and
loss over a period of time. Therefore, the Income Statement gives you a sense for how well the
business is operating.
Balance Sheets
Whereas the P and L statement depicts the overall status of your profits (or deficits) by looking at
income and expenses over a period of time, the balance sheet depicts the overall status of your
finances at a fixed point in time. It totals your all your assets and subtracts all your liabilities to
compute your overall net worth (or net loss). This statement is referenced particularly when buying
or selling a business, or applying for funding. Here are several perspectives.

Financial Analysis
Financial analysis can tell you a lot about how your business is doing. Without this analysis, you
may end up staring at a bunch of numbers on budgets, cash flow projections and profit and loss
statements. You should set aside at least a few hours every month to do financial analysis. Analysis
includes cash flow analysis and budget deviation analysis mentioned above. Analysis also includes
balance sheet analysis and income statement analysis. There are some techniques and tools to help
in financial analysis, for example, profit analysis, break-even analysis and ratios analysis that can
substantially help to simplify and streamline financial analysis. How you carry out the analysis
depends on the nature and needs of you and your business. The following links will help you get a
sense for the "territory" of financial analysis.
Profit Analysis
There are a variety of ways to help determine profitability of your business.
The break-even analysis uses information from the income statement and cash flow statements to
compute how much sales much be accomplished in order to pay for all of your fixed and variable
expenses. Fixed expenses are expenses that you'd have regardless of the level of sales of products or
services (eg, sales, rent, insurance, maintenance, etc.). Variable expenses are incurred according to
the level of sales of products or services (eg, sales commissions, sales tax, freight to ship products,
etc.). Break-even analysis can help you when projecting when you'll make a profit, deciding how
much to charge for a product, setting a sales goal, etc.
How to Do a Breakeven Analysis
Break-even Point
How to Perform a Break-Even Analysis
Ratios
There are a variety of ratios that can be used to help determine the current and future condition of a
business. The following links provide explanation and procedures for using those ratios. The ratios
are produced from numbers on the financial statements. Note that the usefulness of ratios often are
from comparing ratios from different time periods in the same business or from industry standards
for a type of business, e.g., manufacturing, wholesale, service, etc.
Overview of major types of ratios and how they're computed
Financial Ratio Analysis (Definition)
Financial Ratios (different types)
Lesson 13-15
Major Areas in Enterprise Management
Entrepreneurship and Entrepreneurs
Entrepreneurs; Facing sales and risk

8 Branches of Business/ Enterprise Management

Breaking down the different types of business management can be tricky, but determining the key
characteristics of each is a great way...

Business management can't be boiled down to one department, one aspect, or one person. Breaking
down the different types of business management can be tricky, but separating and determining the
key characteristics of each is a great place to start. While some fields of management overlap, There
are eight sectors of business management, each as equally important as the others: financial
management, marketing management, human resource management, strategic management,
production management, operations management, service management and information technology
management.

Financial management
Financial management, the most important part of business management, in the corporate world is
about finding a healthy balance between profit and risk so that even with a setback, the business is
profitable in the long-term. This type of business management involves planning, directing, and
coordination between accounting, investing, banking, insurance, securities, and other financial
activities of a business. Financial planning, control and decision making are the three key elements
of financial management. Short-term financial management is often referred to as "working capital
management" and relates to cash-, inventory- and debtors management. Both the assessment and
technique of financial decisions fall under this type of business management.

Marketing Management
The business discipline focused on the practical application of marketing techniques and the
management of a company's marketing resources and activities is referred to as marketing
management. Whether you're talking about brand management, strategy, or pricing, these are all a
part of marketing management. The four major areas of marketing management are company
analysis, collaborator analysis, competitor analysis and customer analysis. Spending time analyzing
the different aspects of a business is necessary for developing the best branding opportunities and
executing marketing tactics for the best ROI possible. The scope of a business' marketing
management depends on the size of the business and the industry it's a part of. Effective marketing
management will use a company's resources to increase its customer base, improve customer
outlook and feedback, and increase the company's perceived value.

Human Resource Management

Referred to as HRM, Human Resource Management focuses on the recruitment of, management of,
and provides direction for the people who work in the organization. Compensation, hiring, safety
and wellness, benefits, and all that encompasses employee administration fall under HRM. A
common misconception about HRM is that it is the responsibility of a human resources department
or individual to execute HRM. However, the managers of all departments should understand that
effective HRM enables employees to contribute effectively and productively to the overall company
direction and the accomplishment of the organization's goals and objectives. This is the
responsibility of an entire corporation, not just one department or one person. In previous years,
HRM was more focused on personnel administration. Now, HRM needs to add value to the
strategic utilization of employees and the employee programs to positively impact the business.

Strategic Management
Strategic management is the application of strategic thinking to the job of leading an organization.
Many of the other branches of business management revolve around strategic management because
the success of a business is often based on the strategies of finance, marketing, operations, etc.
Strategic management focuses on the "big picture" of a business -- where do we want to be and how
can we get there? Perhaps the most chameleon branch of management, the most important element
of strategic management is formulation of the organization's future goals despite external factors
such as regulation, competition, and technology. Strategic management is adaptive, incorporates
competitive strategy, and keeps an organization relevant.

Production Management
The decision making that comes with the manufacturing of products or services is production
management. Production management techniques are used in both manufacturing and service
industries. Machines, methods, materials and money are the "4 M's" of production management
because this type of business management is about converting the raw materials into a finished
product, or service. One of the main focuses of production management is ensuring that production
is efficient -- this includes inventory control and employee training. Inventory control is by far the
most important responsibility of product managers and involves tracking all components of
production from required materials and finished goods to general supplies. Another major focus of a
business's production management team is research and development (R&D) of both the production
process and the product itself. Businesses looking to expand, cut costs, and develop newer and
better products must conduct R&D as a part of their product management.

Operations Management
Operations management involves the responsibility of ensuring that business operations are
efficient, no matter the department. Managing the operations of a business means dealing with a
plethora of departments, strategies, and processes. Operations teams need to consider the
acquisition, development, and utilization of resources that their business needs to deliver the goods
and services that clients want. Similar to other branches of business management, operations
management must work with other departments and branches. Depending on the industry of a
business, operations management can vary, but the end goal is the same: make sure the company
and all aspects of it are running as efficiently as possible.

Service Management
Service management varies completely on the industry and the business, but is essential to a
company's success. Service management is sometimes viewed synonymously with IT service
management, but the two differ in a few different areas. Service management usually incorporates
automated systems along with skilled labor and often provides service development, even if it is not
IT related. Managing and streamlining workflow for the automation or support of human decision
making is only one focus of service management. Service management is what enables a provider to
understand the services that they are providing from both a consumer and provider perspective and
ensure that the services facilitate the outcomes that their clients want to achieve. No matter the
service, managed service providers need to understand and manage the costs and risks involved, as
well as the value and importance of the services to their clients.

IT Management
Managing the technology resources of a business to meet its needs and priorities is referred to as IT
management. IT managers and teams are focused on making sure the technology of a business is
aligned with the strategies set in place. IT configuration, service, and financial management are the
three key elements of IT management as a whole. IT management means meeting business goals
while fulfilling the expectations of customers. Managing IT means focusing on individual
components and the delivery of end-to-end services using the best methods for reducing costs and
improving employee efficiency. IT management incorporates the education and development of
managers who can effectively manage the planning, design, selection, implementation, use and
administration of emerging and converging information and communications technologies.
What Risks Does an Entrepreneur Face?
Most entrepreneurs are risk-takers by nature. Many entrepreneurs risk all that they have when they
decide to launch a business. For entrepreneurs, there is no secure monthly income, and spending
time with family can be a challenge. Here are some of the risks that every entrepreneur and investor
should evaluate and minimize before starting a business.
Financial Risk
An entrepreneur will need funds to launch a business either in the form of loans from investors,
their own savings, or funds from family. The founder will have to put their own "skin in the game."
Any new business should have a financial plan within the overall business plan showing income
projections, how much cash will be required to break-even, and the expected return for investors in
the first five-year timeframe. Failure to accurately plan could mean that the entrepreneur risks
bankruptcy, and investors get nothing.
Strategic Risk
An impressive business plan will appeal to investors. However, we live in a dynamic and fast-paced
world where strategies can become outdated quickly. Changes in the market or the business
environment can mean that a chosen strategy is the wrong one, and a company might struggle to
reach its benchmarks and key performance indicators (KPIs). 
Technology Risk 
New technologies are constantly emerging, particularly in the era of the Fourth Industrial
Revolution. Some of these changes are characterized as "paradigm shifts" or "disruptive"
technologies. To be competitive, a new company may have to invest heavily in new systems and
processes, which could drastically affect the bottom line.
Market Risk
Many factors can affect the market for a product or service. The ups and downs of the economy and
new market trends pose a risk to new businesses, and a certain product might be popular one year
but not the next. For example, if the economy slumps, people are less inclined to buy luxury
products or nonessentials. If a competitor launches a similar product at a lower price, the competitor
might steal market share. Entrepreneurs should perform a market analysis that assesses market
factors, the demand for a product or service, and customer behavior.
Competitive Risk 
An entrepreneur should always be aware of its competitors. If there are no competitors at all, this
could indicate that there is no demand for a product. If there are a few larger competitors, the
market might be saturated, or, the company might struggle to compete. Additionally, entrepreneurs
with new ideas and innovations should protect intellectual property by seeking patents to protect
themselves from competitors.
Reputational Risk
A business's reputation is everything, and this can be particularly so when a new business is
launched and customers have preconceived expectations. If a new company disappoints consumers
in the initial stages, it may never gain traction. Social media plays a huge role in business reputation
and word-of-mouth marketing. One tweet or negative posting from a disgruntled customer can
mean huge losses in revenue. Reputational risk can be managed with a strategy that communicates
product information and builds relationships with consumers and other stakeholders.
Environmental, Political, and Economic Risk 
Some things cannot be controlled by a good business plan or the right insurance. Earthquakes,
tornadoes, hurricanes, wars, and recessions are all risks that companies and new entrepreneurs may
face. There may be a strong market for a product in an under-developed country, but these countries
can be unstable and unsafe, or logistics, tax rates, or tariffs might make trade difficult depending on
the political climate at any point in time. Also, some business sectors have historically high failure
rates, and entrepreneurs in these sectors may find it difficult to find investors. These sectors include
food service, retail, and consulting.

Activity 12-15
Discuss the importance of Financial Management for Enterprise, Major Areas in Enterprise
Management, Entrepreneurship and Entrepreneurs, and Entrepreneurs; Facing sales and risk, and
answer the following questions.
1. What is financial management?
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_____________________________________
2. Describe the importance of bookkeeping and accounting in financial management.
________________________________________________________________________________
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3. What are the effective management in enterprise?
________________________________________________________________________________
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4. What are the effectiveness of entrepreneurship skill to farmers?
________________________________________________________________________________
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________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________

Self – Reflect:
It is necessary to know the risk and problems in establishing a enterprise? Why? Write your
answer on the space provided below.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________
Prepared by: RAMIL B. ENTANA Jr.

Lesson 16-18
Entrepreneurship; Record Keeping
Enterprise monitoring
Key Skills in Enterprise Management
Importance of Record Keeping
You might be thinking just how critical is the keeping of records? It is important to keep records for
the following reasons:
 Future reference;
 Keeping track of business transactions;
 Filing of taxes;
 Compiling final accounts
In order to fulfil the needs identified above you will need different sets of records. An entrepreneur
should maintain records to meet his or her business requirements. The following are examples of
records that can be maintained:
 Credit records
 Debtors records
 Production records
 Cash book
 Purchases records
 Stock records
 Assets records

Process of keeping of records

An entrepreneur should entrust record keeping to a knowledgeable person. We will read the case
below to understand the importance of record keeping

There are three sets of basic records that should be kept by the owner of a small fruit and vegetable
processing unit: financial records, those that relate to the production of the products and sales
records. The uses of these records are inter-related and are described in more detail in Sections 2.3
and 2.7. In this Section, the format of the records and the likely ways in which information will be
obtained are summarized.

As with all other inputs to a business, keeping records is an investment of time and money and the
benefits must outweigh the costs. There is no point in recording information for its own sake and
records must be used if they are to have any value. This means that the owner or manager must
understand why the information is collected and what it can be used for. Similarly, the time and
effort spent in keeping records must be related to the scale and profitability of the business. While it
is true that some successful entrepreneurs keep all of the information in their head and do not keep
records, no-one else can help run the business during times of illness or absence. Some examples of
the value and costs of keeping records are shown below:

Value of record keeping:

· detailed knowledge about the operation of the business

· identification of trends
· accurate control over finances and product quality
· identification of individual costs to allow changes to a product or process to optimize profits
· keeping track of money owed to the business
· evidence for tax authorities (may be a legal requirement)
· factual basis for product pricing or salary levels
· knowledge and avoidance of theft.
Costs of record keeping:

· time spent learning how to keep records or training staff time spent writing them
· cost of materials such as ledgers and pens

· information is written down and therefore potentially available for competitors or authorities to
see

· cost of keeping records private and secure.

Enterprise Monitoring Explained: How monitoring the enterprise becomes an opportunity for
greater customer satisfaction

The IT layout of any enterprise (on-premises or hosted) consists of everything from off-the-shelf
products to systems that produce custom workloads. It is comprised of a variety of networks,
domain name systems, servers, storage, web components, and applications with various technology
stacks and databases (RDBMS and NoSQL). In addition, IT environments have many
interdependencies among various cross-functional intersection points and interconnections.
Enterprise monitoring is the first step in getting your arms around effectively and efficiently
managing your interconnected IT infrastructure and delivering the best customer satisfaction.
The ideal enterprise monitoring platform
Enterprise monitoring platforms need to listen, gather, alert and co-relate the events and data from
every single mission-critical application and its underlying IT environment. A well-defined
monitoring system will empower you with the ability to dynamically move into any technology or
any architecture type (monolithic applications, micro services, and micro applications) that can
scale on-demand, either on-premises or in the cloud.
Monitoring complexity grows as IT expands to the digital edge
Based on the scope of your specific enterprise’s digital IT domain, applications can multiply across
the globe. Every system and software component that is deployed to form an enterprise IT backbone
must be benchmarked, fine-tuned and deployed in a stable, scalable environment. And, the
complexity of managing enterprise applications increases along with the growth of the business
functionality and distributed components that form a global digital edge.
Managing the growth of an enterprise IT infrastructure and adhering to SLAs is one of the key
responsibilities of enterprise IT teams and drivers of customer satisfaction. Today’s monitoring
tools and products have absorbed so many enterprise use cases from data center, cloud and hybrid
hosting environments, and have grown significantly as a specialty domain in global IT. By
deploying an intelligent enterprise monitoring system, you can get better control over complexity of
multiple interconnected systems and detect & remediate errors to significantly mitigate risks.
Challenges: Enterprise monitoring landscape and systems
Be it cloud, on-premises, or a hybrid IT infrastructure, specific areas must be monitored with baked-
in proactivity to achieve an enterprise-level of resiliency, or what is commonly known as the
“nines.” The nines refer to the level of availability offered as an uptime percentage. For example,
six nines would equate to 2.63 seconds of downtime per month.
The following are descriptions of the required areas of monitoring for you to achieve a high level of
resiliency:
 Infrastructure monitoring
Monitoring servers and their operating systems (OS) needs to be proactive according to
well-defined baselines and thresholds for file systems, disks, critical processes, important
log files, and ports and patching which ensure the base bed availability of a hosting
environment.
 Network monitoring
The whole enterprise monitoring concept is undermined if it doesn’t include complete
network monitoring and fault reporting for network devices and links. This typically
involves the identification and classification of network devices, IP range, ports, and
configuration of SNMP traps, loading and configuring MIB files, and then configuring the
monitoring rules for alert thresholds.
 Storage monitoring
The storage monitoring tool should provide a holistic view of the storage infrastructure that
is updated in near real-time, which helps to accurately predict storage-related errors that
tamper application performance.
Alert thresholds for each of these different monitoring components are based on the metric system
they operate in within their respective areas. Hence, multiple systems are required to monitor each
area. An intelligent monitoring system builds a unified layer that collects, understands, correlates,
alerts and enables the remediation of issues during various transactions.
Defining enterprise application monitoring for an interconnected platform
A flexible enterprise application monitoring system provides integration with and deep insights into
the tools you may already have in place, as well as those you invest in or develop in future. Every
enterprise will need the following features and functionality in creating an application monitoring
system for an interconnected platform:
 An open, extensible, and interoperable platform that suits your business needs today or in
the future
 End-to-end visibility of the data center, network, storage, servers/OS and applications on-
premises, in the cloud or even on proprietary satellite systems
 Platform extensibility to monitor every element of your interconnected enterprise
application
 Broad and deep support for multiple technology stacks and vendors, including technologies
such as containers, cloud, hyper-converged networks and SDN, and easy integration with
third-party and SaaS products
 Highly configurable thresholds per best practices and escalation metrics and easy to build
dashboards and setup of remediation for recurring issues (e.g., service restarts, scale on
different virtual machines and regions)
 Provides higher management via a single-pane dashboard view of the status of all critical
components of the enterprise. The administrative team can access the data across all layers
for easy debugging.
 Does not require highly-skilled labor to manage monitoring system, making it more cost-
effective

Essential business skills

You will require a number of skills to start and run a business. It is important to identify the skills
you need to develop or improve so that you can succeed in your day-to-day business operations.

These business skills are essential

Financial management
Being able to effectively manage your finances is critical. You will need to be able to forecast your
cash flow and sales, as well as, monitor your profit and loss. You will also need to declare your
income to the Australian Tax Office.
Having sound financial management skills will help you to run your business profitably and protect
your financial investment.
Find out more about managing your financials.
Marketing, sales and customer service
It is important to be able to promote your products or services effectively. Providing good customer
service and having a marketing strategy in place will help you to generate sales.
Find out more about marketing.
Communication and negotiation
You will need to communicate and negotiate with your suppliers, potential investors, customers and
employees. Having effective written and verbal communication skills will help you to build good
working relationships. Every communication should reflect the image you are trying to project.
Leadership
If you employ people, leadership will be a key skill. You must be able to motivate your staff in
order to get the best out of them and improve productivity. Allocate time to mentor and coach your
employees.
Find out more about employing staff.
Project management and planning
Starting a business means you will have to manage a range of projects, such as setting up a website,
arranging the fit-out of your premises and developing a range of policies and procedures. Knowing
how to effectively manage your resources, including time, money and staff will help you to achieve
your goals.
Delegation and time management
Failure to delegate is a trap many business owners fall into usually because they are reluctant to let
go of control. Managing your time effectively may mean delegating responsibility to someone else
in the business or outsourcing. Identifying who you can delegate tasks to, allows you to concentrate
on those tasks that generate revenue.
Problem solving
However much you plan, you will encounter problems in your business. This means you need to be
able to make good decisions, sometimes under pressure.
Networking
Building good relationships through networking will help you to grow your business and give you
the support you’ll need.
Consider joining an industry or business association to grow your network.
Further your knowledge and skills
Running a business is a demanding task. Seek assistance if you are unsure about your abilities and
skills. Developing the necessary skills will provide your business with solid foundations.

Activity 16-18
Discussion and explanation

John operated a small scale business which dealt in selling fruits of all varieties, such as
pineapples, oranges, passion fruit, bananas, watermelons, grapes and many others. He received
his supplies directly from the farmers. To ensure good operation of the business he tried very
hard to keep good records. He maintained a supplies book where he recorded all the supplies
 from each supplier. In the supplier book he recorded the quantities supplied and the amount of
money the supplies were worth. He also maintained a cash book where he recorded the cash
sales. He also recorded any credit given to his customers on small pieces of paper. He also
recorded all the business expenses in a hard cover book.
John was very happy with the record keeping but one day the pieces of paper on which he
recorded the creditors disappeared and subsequently, he was not able to tell how much he was
owed by his creditors. John found it difficult to reconstruct the credit from his memory. In 2008,
the Kenya Revenue Authority staff visited John’s business and demanded to see John’s records.
John was surprised to hear that he was required to maintain records for inspection by the Kenya
Revenue Authority staff. The KRA staff gave him one month to prepare the records. John did not
know where to begin.

Gather into groups of five and discuss this case. In your journals record:

1. How effective in your opinion was John at record keeping?

2. Identify the records that John should maintain to meet the requirements of the KRA.
3. In the group’s opinion, what methods could John employ to improve his system?

5. What is mobilization and empowerment skill in farmers?

________________________________________________________________________________
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6. Describe the risk and problems in starting a business enterprise
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________
7. Why it is necessary to have a recordkeeping in a business enterprise?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________
8. What are the importance of monitoring in a business enterprise?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________

Self – Reflect:
It is necessary to know the important for farmer to gain managerial skills for agriculture
entrepreneurship? Why? Write your answer on the space provided below.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________
Prepared by: RAMIL B. ENTANA Jr.