ENTREPRENEURSHIP

Chapter 1: Planning Enterprise

Welcome to Entrepreneurship! This module will help the learners to easily follow
and possibly apply at home, in school and practically everywhere they go. Aided
with the appropriate tools and techniques, learners are ushered to explore
possibilities outside the employed world which is being entrepreneur. This
module will help the students to create new skills that are necessary for
harnessing their knowledge that will be used later on in identifying
opportunities.

OBJECTIVES

At the end of the module, you should be able to:

1. Understand and identify the purpose of the business plan, its contents
and format
2. Know how to make a business plan
 PRETEST

PREASSESSMENT
I. Instructions: Write T if the statement is true and F if the statement is False.
Write your answer on the space provided. 2pts. each
___1. Entrepreneurs try to meet the needs of the marketplace by supplying a
product or service.
___2. Entrepreneurs and employees are both directly affected by the
consequences of the decisions they make.
___3. Entrepreneurial businesses include retailing businesses, such as clothing
and furniture stores, but do not include service businesses.
___4. Manufacturing businesses produce the products they sell.
___5. The failure rate for restaurants is higher than for other types of small
businesses.
___6. The owner's business experience is a factor that contributes to the
likelihood of success.
___7. Successful entrepreneurs need to be self-confident because they must make
decisions alone, but they do not need to be creative because they can hire creative
people.
___8. Being a good team member involves commitment, cooperation, and
creativity.
___9. Everyone has the qualities and aptitude needed to become a successful
entrepreneur.
___10. To determine if entrepreneurship is right for you, you need to perform a
self- assessment.
___11. Many entrepreneurs center a business on a hobby.
___12. Aptitude is the ability to evaluate your strengths and weaknesses.
___13. Entrepreneurship involves risk, which is both an advantage and a
disadvantage.
___14. An advantage of entrepreneurship is that nobody tells an entrepreneur
what to do.
___15. One of the disadvantages of entrepreneurship is that nobody tells an
entrepreneur what to do.
1.1 WHAT IS A BUSINESS PLAN FOR?

A business plan is what entrepreneurs must have as their guide throughout the
process especially when entering into any business endeavor. Different business plans
are prepared for different purposes. Prior to setting up an enterprise, these business
plans are written which are similar to a prefeasibility study and a feasibility study in
order to guide the entrepreneur on which strategies would be most beneficial for the
enterprise to take.
A business plan serves many masters. First, it serves the entrepreneur who must
set a navigational course. Second, it serves investors and cautious financiers. And third,
it serves the managers and staff of the organization so that they will know the strategies
and programs of the enterprise.
In order to aid the entrepreneur in getting is or her business plan organized, the
following format may be a good start:

I. Introduction
A. The Business Concept and the Business Model
B. The Business Goals: Vision, Mission, Objectives and Performance
Targets
C. The Business Offering and Justification
II. Executive Summary
III. The Business Proponents: Organizers with their Capabilities and
Contributions
IV. The Target Customers and the Main Value Proposition to the Customer
V. The Market, Market Justification based on the Industry Dynamics and the
Macro Environmental Factors Affecting the Opportunities and Threats in
the Market, the Size, Potential and Realistic Share of the Market
VI. The Product and Service Offerings
VII. The Enterprise Strategy and Enterprise Delivery Systems: Business
Competitiveness
VIII. The Financial Forecasts and Expected Returns, Risks, and Contingencies
IX. Environmental and Regulatory Compliance
X. The Capital Structure and Financial Offering: Returns and Benefits to
Investors, Financiers and Business Partners
1.1 CONTENTS OF THE BUSINESS PLAN
The Business Concept and the Business Model
A business concept must be concise but should be in a powerful manner.
It stresses the value of the product offering to the target customers who would
most likely buy it.
The product concept must then be translated into a business model. A
formula on how the enterprise exactly plans to make money out of the business
is called a business model. The four areas of moneymaking which the business
model must address:
1. How will the business raise revenues? What critical factors will cause the
revenues to materialize?
2. What will be the costs of the enterprise products and other costs of doing
business? How will these costs be managed to ensure comfortable profits?
What critical factors will drive the costs? How can these factors be
controlled?
3. What will be the major investments of the enterprise? Why will these
investments give the enterprise a competitive edge?
4. How will the enterprise finance the investments? How will the enterprise
fund its growth?
The Business Goals: Vision, Mission, Objectives, and Performance Targets
The business goals show the future and long-term prospects of the
enterprise.

Case Example 1: Double Happiness

The vision of Double Happiness is “to establish a commanding
presence and market leadership as a food chain servicing major bus
terminals in Central Luzon within the next five years.”
The Business Goals are communicated by articulating the basic
purpose of setting up the enterprise in a mission statement. Needless to say,
all business enterprises are established for the purpose of making money for
its investors.
For Double Happiness, its mission statement is “to provide quality food
and passenger convenience services that would generate sufficient profits for
the stockholders and improve the lives of its employees.”
The vision and the mission statements must then be translated into
measurable end results, more popularly called objectives.
Objectives must be more specific than the vision and mission
statements. They should be measurable, achievable, and time-bound.
For Double Happiness, their stated objectives are:
1. to establish a strong market presence in Central Luzon;
2. to earn good financial returns for its owners;
 3. to delight customers with high quality food and services; and
4. to make Double Happiness a happy and rewarding place to work in.
The objectives should then be translated into key result areas or KRAs.
KRAs are the qualitative manifestations that the objectives are being achieved.
In the case of Double Happiness, the key result areas for each of the
objective are as follows:

Objectives Key Result Areas

1. To establish a strong market 1.a Number of food outlets in major
presence in Central Luzon bus terminals in Central Luzon
1b. Sales volume attained
1c. Market share in Central Luzon
2. To earn good financial returns 2a. Amount of net profits realized for
for its owners the next five years
2b. Return on equity (ROE)
2c. Return on assets (ROA) or return
on investment (ROI)
2d. Return on sales (ROS)
3. To delight customers with high 3a. Growth in sales per outlet
quality food and services 3b. Percentage of repeat customers
3c. Number of customer
commendations or complaints
3d. Awards and recognition given by
the community or the government for
excellent service
3e. Customer survey rating to
ascertain customers’ degree of
delight
4. To make Double Happiness a 4a. Compensation and benefits of
happy and rewarding place to managers and workers are above
work in industry rates
4b. Management and employee
turnover
4c. Number of job applicants
compared to other similar
establishments

In turn, the key result areas must be rendered into quantified

performance measurements, otherwise called performance indicators. These
performance indicators or PIs serve as the aspirational scorecard of the
enterprise managers and the motivational results of the investors. However, the
PIs must actually be credible to the business audience in mind.
 In the case of Double Happiness, the performance indicators for each
of the key result areas are as follows:
Key Result Areas Performance Indicators
2020 2021 2025
(Now) (One Year Later) (Five Years
Later)
1a. Number of food outlets in 3 5 20
major bus terminals in Central
Luzon
1b. Sales volume attained P7 million P13 million P60 million
1c. Market share in Central 2% 3% 12%
Luzon
2a. Amount of net profits P1 million P2 million P10 million
realized for the next five years
2b. Return on Equity (ROE) 30% 40% 60%
2c. Return on assets (ROA) or 15% 20% 30%
return on investment (ROI) 14% 15% 16%
2d. Return on sales (ROS)
3a. Growth in sales per outlet 20% 20% 20%
3b. Percentage of repeat 30% 40% 50%
customers
3c. Number of customer 4 out of 20 6 out of 20 10 out of 20
commendations; number of 1 out of 20 1 out of 50 1 out of 100
customer complaints
3d. Awards and recognition None One by Bulacan Two by
given by the community or the Chamber Central Luzon
government for excellent Provinces
service
3e. Customer survey rating to 3.5 4 4.5
ascertain customers’ degree of (on a scale of 1 to (on a scale of 1 to (on a scale of
delight. 5) 5) 1 to 5)

4a. Compensation and benefits Same as Industry 5% above 15% above

of managers and workers are Industry industry
above industry rates
4b. Management and employee 3 out of 10 per 2 out of 10 per 1 out of 10
turnover year year per year
4c. Number of job applicants 10% more job 20% more job 30% more job
compared to other similar applicants applicants applicants
establishments
The Executive Summary

The executive summary contains everything that is relevant and important

to the business audience. It must contain the major argumentation of the
business proponent on why the business will work and succeed. It should provide
the business plan audience all the arguments on why they should participate in
the business venture.
The executive summary should then introduce and highlight the good
qualities of:
1. the business proponents and their partners;
2. the enterprise organization and its capabilities;
3. the technology providers and their expertise and experience and
4. the suppliers and all the major service providers.
It should likewise describe the products/services of the enterprise, their
features and attributes, and why they are the right ones to deliver to the
customers.
The Executive Summary should then proceed to discuss and justify the
Enterprise Strategy and Enterprise Delivery System. The Enterprise Strategy
builds and develops the game plan for attaining competitiveness. The Enterprise
Delivery System is the entire process of converting input (resources) into output
and these output into outcomes.
It should then render all the major institutional, market, operations, and
organizational strategies previously cited into financial strategies and forecasts.
Investment requirements should be presented along with the summaries
of the projected income statements, balance sheets, cash flows, and funds flow,
and their analyses and conclusions. Yields and returns, along with risks and
contingency measures, should round up this section.
The Executive Summary should also contain a section on the
environmental and regulatory compliance of the proposed business, as well as
the more proactive programs to become a more responsible corporate citizen.
Finally, the Executive Summary should present the capital structure of the
proposed business and show how this structure will respond to the investment
programs and financial forecasts of the enterprise.
However, the Executive Summary can only be written last in order to
capture the findings and insights of the other parts, but for presentation
purposes, it is placed in the first part of the business plan.

The Business Proponents

The third section of the business plan contains information about the
business proponents or stakeholders. There are four types of stakeholders:
 1. Resource mobilizers and financial backers –they will want to know who
else are on board to share the burden of raising money to see the whole
thig through
2. Technology providers and applicators – they will want to know if there
will be sufficient funds to pay for the technology.
3. Governance and top management – they will want to know what strategies
and performance indicators are being proposed.
4. Operating and support team – they will want to know what programs,
activities, tasks, and resources would be in place.

The Target Customers and the Main Value Proposition

The fourth section of the business plan is the Target Customers and the
Main Value Proposition.
The business proponent must be very precise about the target audience or
target customers. Target Customers must be of sufficient size, sufficient paying
capacity, and have sufficient interest to purchase the products being offered by
the enterprise. The Main Value Proposition is the unique selling proposition of
the enterprise.
Since the target customers are exactly concentrated, the business plan
should then pinpoint what the customers buy, how they buy, when they buy,
where they buy and what convinces them to buy. These information should then
be used to justify the exact locations and marketing channels to be employed by
the enterprise.

Market Demand and Supply, Industry Dynamics and Macro Environmental

Factors
The fifth section of the business plan is the market demand and supply,
the industry dynamics and the macro environmental factors affecting the
business of the enterprise.

The business plan should discuss the relevant industry dynamics:

 Who are the competing enterprises in the industry and what are their
comparative advantages and disadvantages? What business models and
strategies are they employing?
 Who are the suppliers in the industry and what are their capabilities and
bargaining power?
 What are the channels of distribution being used by the industry? How
effective are these channels?

Both the industry players and the market are affected by the macro environment,
which includes the social, political, economic, ecological and technological
(SPEET)
  Social environment – includes the demographics and cultural dimensions
that govern the relevant entrepreneurial behavior.
 Political environment – defines the governance system of the country or
the local area of business.
 Economic environment – is mainly driven by supply and demand forces.
 Ecological environment – includes all natural resources and the ecosystem
that define the habitat of man, animals, plants and minerals.
 Technological environment – makes or breaks competing participants in
any industry.

Product/Service Offering: Description, Evolution and Justification

The sixth section of the business plan is the product or service offerings
that should contain a description, evolution and justification of the product or
service offerings.

The products or services must be described by highlighting the features

and attributes that would most appeal to the target customers.

Enterprise Strategy and Enterprise Delivery System

The business plan should expound on the Enterprise Strategy (ES) by

mapping the competitive landscape and by situating the enterprise and its
competitors as to their strategies and chosen positioning.
The business plan should then show how the Enterprise Delivery System
(EDS) would enable the business to implement the Enterprise Strategy.
The Enterprise Delivery System starts from the Input (resources
mobilized), proceed to the Throughput (the transformation process where input
are converted to output), and produces the Output (the products/services). The
output are then marketed to the customers (in the case of goods) or experienced
by the customers (in the case of services. Customer satisfaction level, profits
generated, and the performance of people from the transaction are the Outcomes
of the EDS.

Financial Forecasts: Expected Returns, Risks, and Contingencies

The eight section of the business plan is the financial forecast including
the financial returns, the financial risks and the financial contingencies.
The business plan should calculate the expected returns:
1. Expected return on sales
2. Expected return on assets or investments
3. Expected return on stockholders’ equity
Environmental and Regulatory Compliance
The ninth part of the business plan is composed of the environmental and
regulatory compliance.
The business plan must articulate the laws, rules and regulations
governing the business, and the industry that the enterprise is in. It should
ascertain that all the necessary permits, licenses and authority to use proprietary
intellectual capital had either been secured or would definitely be secured.
The business plan should also assure the reader that all the necessary local
government ordinances and barangay ethics would be followed by the enterprise.

Capital Structure and Financial Offering: Returns and Benefit to Investors,

Financiers and Partners
The tenth section of the business plan contains the capital structure and
financial offerings of the enterprise including some discussions on who are the
investors, the financier and the partners of the enterprise.
Finally, the business plan must appeal to its target audience. It must
highlight for them the main features of the business plan that they are looking
for.

Activity 1. Create a Simple Business Plan under Products and Services which includes
the following:
1. Business Overview
2. Location
3. Goals and Objectives
4. Product Description
5. Benefits of your products or service
6. Cost of sale
7. Marketing and Sales strategy to use
8. Distribution
9. Capital Expenses
10. Projection of income and expenses

Activity 2: Transcribe the interview you made and have it written.

1. Identify then interview three modern entrepreneurs and the nature of
their business activity. These can be persons from your community, city
or town. Take a picture with them as a proof then compile it in a pdf
 form. The file must have your complete name and the number of
activity. (Ex. SarahDique_Activity1)
2. Explain your reason for choosing these three entrepreneurs. In your
answer, be sure to describe how they are examples of your definition of
an entrepreneur.

I have learned that ________________

________________
______.

I have realized that ________________

_________________
_____.

I will apply _____________

_________________
_______________.

References

Eduardo A. Morato, Jr. Entrepreneurship. Philippines. Rex Book Store, Inc. 2016

Compiled by:

SARAH V. VINELES
Faculty
Metro Dumaguete College