Information Sheet No.

1
Overview of Entrepreneurship

Learning Outcome/s:
After going through the module, you are expected to:
a. Demonstrate understanding of key concepts, underlying principles,
and core competencies in Entrepreneurship;
b. determine the relevance of Entrepreneurship to your everyday life and
to society as a whole;
c. Explain the importance of action and practice in entrepreneurship;
 Welcome to the world of the entrepreneur! Around the world, growing
numbers of people are realizing their dreams of owning and operating their
own businesses. Entrepreneurship continues to thrive in nearly every corner
of the world. Globally, one in eight adults is actively engaged in launching a
business.
Entrepreneurial activity is essential to a strong global economy. Many
of the world’s largest companies continue to engage in massive downsizing
campaigns, dramatically cutting the number of employees on their payrolls.
Entrepreneurship is one of the resources economists categorize as
integral to production; the three resources are land/natural resources, labor,
and capital. An entrepreneur combines these three to manufacture goods or
provide services. They typically create a business plan, hire labor, acquire
resources and financing, and provide leadership and management for the
business (www.investopedia.com).
An entrepreneur creates a new business in the face of risk and
uncertainty to achieve profit and growth by identifying significant
opportunities and assembling the necessary resources to capitalize on them.
The process of creative destruction, in which entrepreneurs create
new ideas and new businesses that make existing ones obsolete, is a sign of
a vibrant economy. Although this constant churn of businesses—some
rising, others sinking, new ones succeeding, and many failing—concerns
some people, in reality, it is an indication of a healthy, growing economic
system that is creating new and better ways of serving people’s needs and
improving their quality of life and standard of living. Schumpeter compared
the list of leading entrepreneurs to a popular hotel’s guest list: always filled
with people but rarely the same ones.

Overview of Entrepreneurship
Meaning of Entrepreneurship and Entrepreneur
(www.investopedia.com, www.reference.com,
www.europeanentrepreneurship.com)
Entrepreneurship is…
  The act of creating a business or business while building and scaling
it to generate a profit.
 An important driver of economic growth and innovation.
 What people do to take their career and dreams into their hands and
lead it in the direction of their own choice.
 About building a life on your own terms. No bosses. No restricting
schedules. And no one holds you back.

An entrepreneur is…
• A person who sets up a business with the aim to make a profit and creates
a new business, bearing most of the risks and enjoying most of the rewards.
• An innovator, a source of new ideas, goods, services, and business/or
procedures.
• Playing a key role in any economy, using the skills and initiative necessary
to anticipate needs and bring good new ideas to market.
Note: Understanding what an entrepreneur is can help more people
recognize the value they contribute to the world. Entrepreneurs take the
idea and execute it while entrepreneurship is about the execution of ideas.

Entrepreneurship in the Philippines (Batalla, V. (2011)

The notion of the entrepreneur as simply one who forms and manages
business is apparent in government programs that attempt to develop small-
scale industries. In the Philippines, many entrepreneurial development-
training programs rest on such assumptions. But even without the presence
of government support, the statistics for the past fifty years or so on the
number of business establishments formed every year would generally show
an increasing trend. They were mostly in food processing, property
development, and trade (including shopping malls).
In 2005, the top 50 Philippine corporations in terms of sales
could be broken down into 22 private domestic firms, 23 foreign firms,
and 5 government-owned and/or controlled corporations (BizNews Asia
2007as cited by Batalla, V., 2011). The 22 companies could be identified
with 11 families and individuals, mostly Filipinos of Chinese ethnic
background. The 11 families and individuals were the Zobel family (Ayala),
the Lopez clan, Lucio Tan, Henry Sy, John Gokongwei, Alfonso
Yuchengco, Eduardo Cojuangco Jr., Jose Yao Campos (Unilab Group of
Companies), George Ty (Metrobank), Mariano Que (Mercury Drug), and
Tony Tan-Caktiong (Jollibee).
Relevance of Entrepreneurship to College Students

Importance of Entrepreneurship (www.reference.com)

1. Entrepreneurship generates new wealth in an economy.
2. Entrepreneurship decreases poverty.
3. It creates opportunities, ensures social justice, instills confidence and
stimulates the economy.
4. Entrepreneurship improves productivity
5. Entrepreneurs create jobs.
6. Entrepreneurs innovate.
7. Entrepreneurs create innovation and social change
8. Entrepreneurs give to society
 Researchers have invested a great deal of time and effort over the last
few decades trying to paint a clear picture of “the entrepreneurial
personality.” Although these studies have identified several characteristics
entrepreneurs tend to exhibit, none of them has isolated a set of traits
required for success. We now turn to a brief summary of the entrepreneurial
profile.
1. Desire for responsibility. Entrepreneurs feel a deep sense of
personal responsibility for the outcome of the ventures they start.
They prefer to be in control of their resources, and they use those
resources to achieve self-determined goals.

2. Preference for moderate risk. Entrepreneurs are not wild risk-

takers but are instead calculated risk-takers. The common belief that
entrepreneurs prefer taking big risks is a myth. Unlike “high-rolling,
riverboat gamblers,” entrepreneurs rarely gamble. Their goals may
appear to be high—even impossible—in others’ eyes, but
entrepreneurs see the situation from a different perspective and
believe that their goals are realistic and attainable.

3. Self-reliance. Entrepreneurs must fill multiple roles to make their

companies successful, especially in the early days of a start-up.
Because their resources usually are limited, they end up performing
many jobs themselves, even those they know little about. Yet,
entrepreneurs demonstrate a high level of self-reliance and do not shy
away from the responsibility of making their businesses succeed.
Perhaps that is why many entrepreneurs persist in building
businesses even when others ridicule their ideas as follies.

4. Confidence in their ability to succeed. Entrepreneurs typically

have an abundance of confidence in their ability to succeed and are
confident that they chose the correct career path. Entrepreneurs’ high
levels of optimism may explain why some of the most successful
entrepreneurs have failed in business—often more than once—before
finally succeeding.

5. Determination. Some people call this characteristic “grit,” the ability

to focus intently on achieving a singular, long-term goal.

6. Desire for immediate feedback. Entrepreneurs enjoy the challenge

of running a business, and they like to know how they are doing and
are constantly looking for feedback. The feedback they receive from
their businesses drives them to set higher standards of performance
for their companies and themselves.
 7. High level of energy. Entrepreneurs are more energetic than the
average person. That energy may be a critical factor given the
incredible effort required to launch a start-up company.

8. Future orientation. Entrepreneurs have a well-defined sense of

searching for opportunities. They look ahead and are less concerned
with what they did yesterday than with what they might do tomorrow.
Not satisfied to sit back and revel in their success, real entrepreneurs
stay focused on the future.
Entrepreneurs see potential where most people see only
problems or nothing at all, a characteristic that often makes them the
objects of ridicule (at least until their ideas become huge successes).
Whereas traditional managers are concerned with managing available
resources, entrepreneurs are more interested in spotting and
capitalizing on opportunities.
Serial entrepreneurs, those who repeatedly start businesses
and grow them to a sustainable size before striking out again, push
this characteristic to the maximum. The majority of serial
entrepreneurs are leapfroggers, people who start a company, manage
its growth until they get bored, and then sell it to start another. A few
are jugglers (or parallel entrepreneurs), people who start and
manage several companies at once. Serial entrepreneurs instinctively
know that the process of creating a company takes time and choose
to pursue several ideas at the same time.

9. Skill at organizing. Building a company “from scratch” is much like

piecing together a giant jigsaw puzzle. Entrepreneurs know how to
put the right people together to accomplish a task. Effectively
combining people and jobs enables entrepreneurs to transform their
visions into reality.

10.Value of achievement over money. One of the most common

misconceptions about entrepreneurs is that they are driven wholly by
the desire to make money. On the contrary, achievement seems to be
entrepreneurs’ primary motivating force; money is simply a way of
“keeping score” of accomplishments—a symbol of achievement. What
drives entrepreneurs goes much deeper than just the desire for wealth.

Other characteristics that entrepreneurs tend to exhibit include the

following:
High degree of commitment. Entrepreneurship is hard work, and
launching a company successfully requires total commitment from an
entrepreneur. Business founders often immerse themselves completely in
their companies. Most entrepreneurs must overcome seemingly
insurmountable barriers to launch a company and keep it growing. That
requires commitment and fortitude.
Tolerance for ambiguity. Entrepreneurs tend to have a high
tolerance for ambiguous, ever-changing situations, the environment in
which they most often operate. This ability to handle uncertainty is critical
because these business builders constantly make decisions using new,
sometimes conflicting information gleaned from a variety of unfamiliar
sources.
Creativity. One of the hallmarks of entrepreneurs is creativity. They
constantly come up with new product or service ideas, unique ways to
market their businesses, and innovative business models. Their minds are
constantly at work developing unique business models, services, and
products.
Flexibility. One hallmark of true entrepreneurs is their ability to
adapt to the changing needs and preferences of their customers and the
changing demands of the business environment. In this rapidly changing
global economy, rigidity often leads to failure. Successful entrepreneurs
learn to be masters of improvisation, reshaping and transforming their
businesses as conditions demand.
Resourceful. Entrepreneurs excel at getting the most out of the
resources that are available, however, limited they may be. They are skilled
at bootstrapping, a strategy that involves conserving money and cutting
costs during start-up so that entrepreneurs can pour every available dollar
into their businesses.
Tenacity. Obstacles, obstructions, and defeat typically do not
dissuade entrepreneurs from doggedly pursuing their visions. They simply
keep trying.
What conclusion can we draw from the volumes of research conducted
on entrepreneurial personality? Entrepreneurs are not of one mold; no one
set of characteristics can predict who will become entrepreneurs and
whether they will succeed. Indeed, diversity seems to be a central
characteristic of entrepreneurs. One astute observer of the entrepreneurial
personality explains, “Business owners are a culture unto themselves—
strong, individualistic people who scorn convention—and nowadays, they’re
driving the global economy.” Indeed, entrepreneurs tend to be
nonconformists, a characteristic that seems to be central to their views of
the world and to their success.

THE BENEFITS OF ENTREPRENEURSHIP

Opportunity to Create Your Own Destiny
 Owning a business provides entrepreneurs the independence and the
opportunity to achieve what is important to them. Entrepreneurs want to
“call the shots” in their lives, and they use their businesses to make that
desire a reality. For many entrepreneurs, living where and how they
choose is one of the principal benefits of controlling their destinies through
business ownership.
Opportunity to Make a Difference
Increasingly, entrepreneurs are starting businesses because they see
an opportunity to make a difference in a cause that is important to them.
Known as social entrepreneurs, these business builders seek innovative
solutions to some of society’s most vexing problems. They use their skills
not only to create profitable business ventures but also to achieve social and
environmental goals for society as a whole. Their businesses often have a
triple bottom line that encompasses economic, social, and environmental
objectives. These entrepreneurs see their businesses as mechanisms for
achieving social goals that are important to them as individuals. Whether it
is providing low-cost, sturdy housing for families in developing countries or
establishing a recycling program to preserve Earth’s limited resources, these
entrepreneurs are finding ways to combine their concerns for social issues
and their desire to earn a good living.
Opportunity to Reach Your Full Potential
Too many people find their work boring, unchallenging, and
unexciting. But not entrepreneurs! To them, there is little difference between
work and play; the two are synonymous. Entrepreneurs’ businesses become
their instruments for self-expression and self-actualization. They know that
the only boundaries on their success are those imposed by their own
creativity, enthusiasm, and vision. Owning a business gives them a sense of
empowerment.
Opportunity to Reap Impressive Profits
Although money is not the primary force driving most entrepreneurs,
the profits their businesses can earn are an important motivating factor in
their decisions to launch companies. Entrepreneurs are not constrained by
the boundaries that corporate hierarchies impose on their employees; they
are free to create value by making the best use of their experience, skills,
abilities, and ideas and, as a result, reap the financial benefits of their
creative efforts. Most entrepreneurs never become superrich, but many of
them do become quite wealthy. In fact, more than two-thirds of the
billionaires on the Forbes list of the 400 richest Americans are first-
generation entrepreneurs!
Opportunity to Contribute to Society and Be Recognized for Your
Efforts
 Playing a vital role in their local business systems and knowing that
their work has a significant impact on the nation’s economy is yet another
reward for small business managers. Often, small business owners are
among the most respected and most trusted members of their communities.
Business deals based on trust and mutual respect are the hallmark of many
established small companies. These owners enjoy the trust and recognition
they receive from the customers and the communities they have served
faithfully over the years.
Opportunity to Do What You Enjoy and Have Fun at It
A common sentiment among small business owners is that their work
really isn’t work. Most successful entrepreneurs choose to enter their
particular business fields because they have an interest in them and enjoy
those lines of work. They have made their avocations (hobbies) their
vocations (work) and are glad they did!
Relevance of Entrepreneurship to Students
(www.europeanentrepreneurship.com)
1. To prepare students for livelihood.
2. Entrepreneurship education aids students from all socioeconomic
backgrounds to think outside the box and nurture unconventional talents
and skills.
3. Entrepreneurship develops their initiative and helps them to be more
creative and self-confident in whatever they undertake and to act in a
socially responsible way.
4. It exposes students to numerous opportunities to learn how to think
critically and analyze the pieces on the board.
5. Being aware of all the important factors and seeing how they affect each
other is the foundation of a smart decision-making process.
6. Students have to be exposed to real-world examples and learn from their
own experiences.
7. Entrepreneurship education requires students to be innovative, creative,
and collaborative with others.
8. Entrepreneurship education provides budding entrepreneurs with the
skills and knowledge to come up with business ideas and develop their own
ventures.

The truths in more detail to further understand how entrepreneurship

can be a path for many are as followed;
Truth #1: Entrepreneurship is not reserved for startups
 The entrepreneur creates a business based on research to assess the
validity of an idea or business model. The business may be partially funded
by seed money from family members or investors, but usually, the majority
is funded by the entrepreneurs themselves. Thus, the startup is a
temporary organization in search of a scalable business model. The truth is
that entrepreneurs are everywhere, from corporations to franchises, to for-
profit and nonprofit organizations, to family enterprises.
Truth #2: Entrepreneurs do not have a special set of personality traits
In reality, there is no evidence to suggest that entrepreneurs have a
special set of personality characteristics that distinguishes them from the
rest of us. To us, it makes sense that if entrepreneurs are in the right frame
of mind; there is greater confidence, intentionality, and vision to bring ideas
from the whiteboard to the real world. We are not born with an
entrepreneurial mindset; we have to work to develop it.
Truth #3: Entrepreneurship can be taught (it’s a method that requires
practice)
The entrepreneurial method requires consistent practice so that
knowledge and expertise can be continuously developed and applied to
future endeavors.

Truth #4: Entrepreneurs are not extreme risk-takers

Risk is very personal and relative. Entrepreneurs practice a cycle of
the act–learn–build that encourages taking small actions in order to learn
and build that learning into the next action.

Truth #5: Entrepreneurs collaborate more than they compete

Community plays an important role in entrepreneurship.
Entrepreneurs draw on shared experience and desire to learn from others
facing similar challenges. It can be hard to know what entrepreneurship is
all about until you are actually in the throes of it, so it becomes very
important to have a support group of like-minded entrepreneurs willing to
help one another out with a “pay it forward” attitude—collaborating for the
greater good.

Not only do successful entrepreneurs collaborate with other

entrepreneurs, but they also collaborate with their target customers to test
new ideas, potential investors to build trust, and family and friends for
support. Entrepreneurs also have a tendency to collaborate with competitors.
One of the best-known examples of this is the collaboration of the late Steve
Jobs of Apple and Bill Gates of Microsoft on the creation of the Apple Mac—
leaders of two technology giants that were seemingly at war with each other.
Truth #6: Entrepreneurs act more than they plan
Investors will want to know if the entrepreneurs have the capability to
roll with the punches, take action, and accept the constructive feedback
they receive from coaching.
Truth #7: Entrepreneurship is a life skill
 The meaning of entrepreneurship has transcended into something
more than just the ability to begin a new venture. Many individuals and
institutions perceive entrepreneurship as a life skill that helps people to deal
with an uncertain future by providing them with the methods to think, act,
identify opportunities, approach problems in a specific way, adapt to new
conditions, and take control of personal goals and ambitions. It also
provides people with a set of skills that can be applied to many other fields.
Being entrepreneurial empowers us to create opportunities and reach our
goals.
Types of Entrepreneurships
Corporate Entrepreneurship
Corporate entrepreneurship (also known as intrapreneurship) is a
process of creating new products, ventures, processes, or renewal within
large organizations. It is typically carried out by employees working in units
separate from the organization to create and test innovations that are then
assimilated back inside the broader organization.
Corporate entrepreneurs tend to explore new possibilities and seek
ways in which the organization’s current structure and the process can
enable innovation. Similar to external entrepreneurs, corporate
entrepreneurs identify opportunities, build team, and create something of
value in order to enhance competitive position and organizational
profitability.

Entrepreneurs Inside
Entrepreneurs inside consist of employees who think and act
entrepreneurially within organizations. Although this sounds similar to
corporate entrepreneurs (employees who work for large, established
organizations), there is an important difference: entrepreneurs inside can
exist and function in any type of organization, big or small, including
government agencies, nonprofits, religious entities, self-organizing entities,
and cooperatives. These types of entrepreneurs often need to gain inside
support from senior managers or other team members for their initiatives,
which can be difficult if those people tend to resist new ideas, or are keen to
simply “stick to the company brief” rather than pushing boundaries.
Buying a Franchise
A franchise is a type of license purchased by an entrepreneur
(franchisee) from an existing business (franchisor) that allows the
entrepreneur to trade under the name of that business. Franchising can be
a beneficial way for entrepreneurs to get a head start in launching their own
businesses, as they do not have to spend the same amount of time on
marketing, building the brand, developing processes, and sourcing products.
Buying a Small Business
Buying a small business is another way to enter the world of
entrepreneurship. In this arrangement, the entrepreneur is buying out the
existing owner and taking over operations. For some entrepreneurs, this is a
less risky approach than starting from scratch.
Social Entrepreneurship
Since the beginning of the 21st century, social entrepreneurship has
become a global movement, with thousands of initiatives being launched
every year to improve social problems in areas such as water shortages,
education, poverty, and global warming.
Some argue that all types of entrepreneurships are social, while others
define it as purely an activity of the nonprofit sector. These blurred lines
imply that entrepreneurs are forced to choose between making a social or an
economic impact. We contend that social entrepreneurs can do both. It is
possible to address a social issue and make a profit—keeping a company
economically stable ensures its capability to consistently meet the needs of
its customers without relying on fundraising or other methods to keep it
afloat. We, therefore, define social entrepreneurship as the process of
sourcing innovative solutions to social and environmental problems.
A subcategory of social entrepreneurship is the benefit corporation
or B-Corp. This is a form of organization certified by the nonprofit B Lab
that ensures that strict standards of social and environmental performance,
accountability, and transparency are met.
Family Enterprising
A family enterprise is a business that is owned and managed by
multiple family members typically for more than one generation. What
makes family enterprising part of the portfolio of entrepreneurship types is
that each generation has an opportunity to bring the organization forward in
new, innovative ways.
Serial Entrepreneurs
Serial entrepreneurs, also known as habitual entrepreneurs, are
people who start several businesses, whether simultaneously or one after
another. Not satisfied with just focusing on one business, serial
entrepreneur are constantly looking out for the next big thing or exploring
ways to implement their diverse range of ideas.
What Makes a Country Entrepreneurial?
What makes one country more entrepreneurial than another? The
following are certain conditions that need to be put in place for small and
medium businesses (SMEs) to flourish. Together, these conditions form The
Entrepreneurship Ecosystem.
▶ Financial resources: entrepreneurs need access to appropriate
financing such as grants and subsidies, loans, private equity, angel
investors, venture capital funds, and so on.

▶ Support from the government: entrepreneurs need support from

government policies that incentivize entrepreneurship by tax incentives,
lower interest rates, loans, and the like. Some countries also offer
government entrepreneurship programs that provide entrepreneurs with
access to tools, mentors, and educational resources.

▶ Entrepreneurship Education: certain countries provide

entrepreneurship courses and training at primary and secondary levels; and
at higher education such as colleges, business schools, and other
institutions.

▶ Research and Development (R&D) transfer: the extent to which

scientists and research will pass on their knowledge to entrepreneurs
involved in innovation. Many SMEs do not have their own R&D department
so it is important that they have the opportunity to access knowledge from
other resources.

▶ Commercial and Legal Infrastructure: entrepreneurs should be

supported by a secure commercial and legal framework assisted by experts
and advisors in property rights, accounting, law, investment banking, and
technology.

▶ Entry Regulation: entrepreneurs should be able to meet the regulatory

costs of starting a new business as well as undergoing administrative
procedures. The extent of these costs and procedures is dependent on two
factors: market dynamics—the annual rate of change in markets; and
market openness—the degree to which new businesses have the freedom to
enter new markets.

▶ Physical Infrastructure: entrepreneurs should be able to easily access

or purchase at a reasonable price vital resources in the areas of
communication, land, office space, and transportation.

▶ Cultural and Social Norms: entrepreneurs tend to thrive more in an

environment where they feel encouraged enough to start a business, or have
the confidence to choose entrepreneurship as a career path.
 Self-Check No. 1
I.Give what is asked in the items below. Write your answer in a yellow paper.

II.You have to fill in the L component of the KWL chart to generalize the
things you have learned about the topic. Write your answer in a yellow
paper.
III.Multiple Choice: Read and answer each statement carefully then write
the letter of the best answer on a separate sheet of paper.

1. Who acts as a coordinating agent in a capitalist economy?

A. Manager C. Entrepreneur
B. Finance Officer D. Broker

2. Which of the following is not a definition of Entrepreneurship?

A. It creates opportunities, ensures social justice, instills
confidence and
stimulates the economy.
B. It is an important part of the economic growth strategies of
many local
and national governments around the world.
C. Refers to a person who sets up a business with the aim to make
a profit.
D. The act of creating a business or businesses while building and
scaling it to generate a profit.

3. Which of the following is a relevance of Entrepreneurship to SHS

Students?
A. It generates new wealth in an economy.
B. It aids students from all socioeconomic backgrounds to think
outside the box.
C. It creates opportunities and ensures social justice.
D. It creates job.

4. Which statement is not correct about the status of entrepreneurship in

the
Philippines?
A. The number of business establishments formed every year
would generally show an increasing trend.
B. N-entrepreneurs are people who can secure resources such as
technology
and information to gain distinct, sustainable, competitive
advantages.
C. In 2005, the top 50 Philippine corporations in terms of sales
could be
broken down into 25 private domestic firms, 20 foreign firms, and
5
government-owned and/or controlled corporations.
 D. The 22 companies could be identified with 11 families and
individuals,
mostly Filipinos of Chinese ethnic background.

5. Which of the following words is not associated with entrepreneur?

A. innovative C. collaborative
B. impulsive D. Creative

Answer Key No. 1

I.
II.
III.
1. C
2. C
3. A
4. C
5. B
 Task Sheet No. 1
I. DIRECTIONS: In the table below, write down at least five (5)
sentences why you want to become an Entrepreneur someday.

II. Make a reaction paper about this topic. Use two bond papers for
this.
 Information Sheet No. 2
Competencies in Entrepreneurship and Job opportunities for
Entrepreneurship as a Career

Learning Outcome/s:
After going through the module, you are expected to:
a. Gain insights about the competencies every Entrepreneur should
develop; and
b. explore job opportunities for Entrepreneurship as a career
Are entrepreneurs born or made?
This question has long been debated with little agreement. However,
as cited by Longenecker, J.G., et.al. (2016), Stephen Spinelli and Robert
Adams described entrepreneurs as having and exhibiting “desirable and
acquirable attitudes and behaviors” such as commitment and determination,
leadership, opportunity obsession, risk-takers, motivation to excel, creativity,
self-reliance, and adaptability. According to (www.ideasforleaders.com),
competencies such as risk-seeking, assertiveness, and vision are considered
typical of a successful entrepreneur. But these are innate predispositions or
aspects of temperament; by using them as a yardsticks, it is wrongly
concluded that only certain types of people make good entrepreneurs or are
capable of worthwhile innovations.

Is there such a thing as a ‘natural-born entrepreneur’?

Accordingly, there is not. Specific techniques and habits must be
practiced and developed by all would-be entrepreneurs. Aside from business
competencies, entrepreneurs need interpersonal and self-leadership skills
too; however, these are often overlooked. Entrepreneurial behavior‟ can be
learned and developed (www.ideasforleaders.com).
The question is not who entrepreneurs are, but what they do, and
more important than business skills can be other competencies that provide
a foundation for those business skills (www.ideasforleaders.com).
Furthermore, according to www.ideasforleaders.com, there are three
levels of competencies, which all entrepreneurs need:
1. Personal competencies – These are your abilities to ground
yourself so that you are secure and self-assured in whatever situation you
may find yourself (www.free-management-ebooks.com).
Ex. creativity, determination, integrity, self-criticism.
2. Interpersonal competencies – These are your ability to lead,
influence, communicate, supervise, negotiate, and control people at all levels.
It is the ability to get along with people and motivate people to perform jobs.
Entrepreneurs must effectively manage people (baseread.com).
 Ex. communication, engagement, delegation
3. Business competencies – These are set of particular abilities and
knowledge that sets a company apart from its competitors
(yourbusiness.azcentral.com). It also refers to the key characteristics that
successful entrepreneurs should have in order to be successful
(www.mustangbols.com).
Ex. business vision, financial management, networking

Core vs. Common Competencies in Entrepreneurship

Competencies in entrepreneurship play a leading role in making

entrepreneurs successful (baseread.com).
Entrepreneurial competencies facilitate opportunity recognition,
help adapt rapidly to changes, enhances business performance, strengthen
the firm’s competitive position and stir the achievement of organizational
success. It is the sum total of the personality, skills and knowledge that the
entrepreneur possesses, which are necessary to effectively perform their
functions and responsibilities (Edralin, D. M., 2016).
Competence is an underlying personal characteristic which leads to
superior performance. It is a combination of knowledge, skills, attitudes,
and motives (baseread.com).
Core competence is the foundation for sharpening a company's
competitive edge and it guides brand reputation, business growth, and
marketing strategy (www.thebalancesmb.com).
Common competence is one that describes the knowledge, skills and
abilities found in most or all position (www.ifpm.nifc.gov).
Examples of Core and Common Competencies in Entrepreneurship

Core Competencies Common Competencies

1. Organizing and Planning 1. Analytical and critical thinking
2. Cash flow management 2. Decision making
3. Personnel management 3. Leadership
4. Operations and distribution 4. Communication
5. Customer Relations 5. Computer Literacy
6. Bookkeeping/Accounting 6. Human Relations
7. Promotions and Advertising 7. Managing Change
8. Resources Management 8. Creative Thinking
9. Financial Management 9. Time Management
10. Information Management 10. Conflict Management

Job Opportunities for Entrepreneurship as a Career

If you’re an aspiring entrepreneur, there are different career paths you
can take to turn your dream into a reality. Which path you choose will
depend on your experience, skills, finances, and flexibility, as well as your
goals for the future (Doyle, A., 2020).
Career opportunities you might pursue according to Michalowicz
(2011) as cited by Edralin, D. M., 2016):
Entrepreneurship Career Opportunities
for the Academic Track

• Business Consultant • Artist

• Sales • Graphic designer
• Research and development • Photographer
• Not-for-profit fundraiser • Art gallery manger
• Teacher • Film director
• Talent recruiter • Designer wear production
• Business reporter • Fashion marketing, planning and
• New venture creation concept management
• Career in existing entrepreneurial • Fashion media design
ventures management
• Fashion accessory design, quality
control, and promotion brands
• Costume designer
• Fashion consultant and personal
stylist
• Technical designer and graphic
designer
•Fashion coordinator
• Health club manager
• Strength, wellness or conditioning
coach
• Fitness program or event planning
manager
• Professional or amateur team
manager
 • Sports facility manager
• Corporate fitness director
• Rehabilitation center director
• Nutrition center manager
• Cook/Chef
• Automotive mechanic
• Electrician
• Technical support specialist
• Tool keeper and technician
• Network support Associate
• Mechanical technologist

Note: Most would-be entrepreneurs, however, remain self-employed,

preferring to be the boss.
Reasons why many would like to become an entrepreneur
(www.scu.edu):
1. Achievement, Challenge, & Learning
2. Independence & Autonomy – you can set your own goals, pick their own
partners, and face the consequences of your decisions.
3. Income Security and Financial Success
4. Recognition and Status
5. Family
6. Dissatisfaction with Current Work Arrangements
7. Community and Social Motivation

These guiding beliefs mean that you as the student must take action
and practice entrepreneurship at every opportunity.

▶ Entrepreneurship in Action: In entrepreneurship, there is no one right

answer. Role models are very important because, by learning through others,
you can develop empathy for entrepreneurs around the world who may be
doing the same as you someday. Entrepreneurship in Action includes
interviews from entrepreneurs from many different businesses and
disciplines around the world.

▶ Mindshift: Since entrepreneurship requires action, the Mindshift feature

requires you to close the textbook and go and act.

▶ You Be the Entrepreneur: This feature asks you to imagine yourself in

situations based on events that have happened in real life, so you can think
critically about what you would do if you were in the same position.
▶ Entrepreneurship Meets Ethics: Entrepreneurs sometimes face
complex ethical challenges that cause conflict. Peppered with situations
faced by real-world entrepreneurs, the Entrepreneurship Meets Ethics
feature challenges you to think about how you would take action if you were
confronted with a similar ethical dilemma.

▶ Research at Work: This feature highlights recent seminal

entrepreneurship studies and their impact and application to the real world.
This will allow you to view how the latest research applies to real-life
settings.

▶ Case Study: Finally, test your knowledge in the short case study
presented at the end of each chapter. These case studies are based on real
companies of all kinds including for-profit, nonprofit, technology, social,
product-based, service-based, online, and others; they have been started by
entrepreneurs of all types.
The Five Skills Most Important to The Practice of Entrepreneurship

The Skill of Play

The skill of play frees the imagination, opens up our minds to a wealth
of opportunities and possibilities, and helps us to be more innovative as
entrepreneurs.
The Skill of Experimentation
The skill of experimentation is best described as acting in order to
learn: trying something, learning from the attempt, and building that
learning into the next iteration. In the context of entrepreneurship,
experimentation means taking action, such as getting out of the building
and collecting real-world information to test new concepts, rather than
sitting at a desk searching databases for the latest research. It involves
asking questions, validating assumptions, and taking nothing for granted.
The Skill of Empathy
The skill of empathy is understanding the emotion, circumstances,
intentions, thoughts, and needs of others. Empathy is being able to relate to
how others are feeling because you have been in a similar situation yourself.
Why is empathy so important for an entrepreneur? Developing
empathy is essential for truly understanding the reality of being an
entrepreneur as well as evaluating your own ability to become an
entrepreneur. Exercises such as interviewing practicing entrepreneurs help
you to develop empathy for what they have been through, and enable you to
put yourself in the shoes of that person and imagine what you would do in
the same situation. Furthermore, empathy allows you to connect with
potential stakeholders in a more meaningful way, which could help to
identify unmet needs, leading to the creation of new products and services.
The Skill of Creativity
The skill of creativity requires a general openness to the world and
relates to unleashing our creative ability to create and find opportunities
and solve problems.

The Skill of Reflection

The skill of reflection helps make sense of all of the other actions
required of play, empathy, creativity, and experimentation. It helps codify
our learning from practicing the four other skills. You may not realize it, but
taking the time out to reflect is also an action, and it can be the most
important of all the five skills. Reflection makes us aware of feelings of
discomfort, helps us to critically analyze our own feelings and the knowledge
we possess, provides us with new perspectives, and allows us to evaluate
outcomes and draw conclusions.
 Self-Check No. 2
I.Read and analyze the facts about the competencies in Entrepreneurship
below. Determine whether the statement is TRUE OR FALSE. Write TRUE if
the statement is correct and write FALSE if otherwise. Write your answer
before the number.

_________1. Entrepreneurship can be learned by anyone, it’s not something

that can simply learn in a classroom.
_________2. Certain skills, such as communication, delegating and
respecting others can only be acquired through practice and developing
„habits of character‟.
_________3. Habits of character may not strictly be related to business but
are to do with the kind of person the entrepreneur is and what he/she does.
_________4. An entrepreneur has to have certain cultivated and inherent
qualities in order to make a success of his or her venture.
_________5. Hard work and determination to win have made many
successful business people to reach their aspired goals.
_________6. An Entrepreneur must hesitate for personal or other reasons.
_________7. Business involves many risks, which an entrepreneur must
hesitate to take.
_________8. New ideas help make a business venture successful.
_________9. Certain attributes are essential for an Entrepreneur to establish
his or her business on sound footing.
_________10. The only way to acquire the habits essential for entrepreneurs
is by acting in a way inconsistent with them.
II. Word Search: Please search for the ten (10) competencies of an
entrepreneur in the box below. Clues are provided. Encircle the word in the
box and write it before the clue.

Clues:
_______________1. Showing assurance and self-reliance
_______________2. Firmly resolved
_______________3. Capable of devising ways and means
_______________4. Showing initiative and willingness to undertake new
projects
_______________5. Having the quality of something created rather than
imitated
_______________6. Introduce something new or different
_______________7. As good as or better than others of a comparable nature
_______________8. The act or fact of doing something that involves danger
_______________9. Habitually engaged in earnest and energetic work
_______________10. The cultivation of productive relationships for
employment or business
Answer Key No. 2
I.
1. True
2. False
3. True
4. True
5. True
6. False
7. False
8. True
9. True
10. False
II.
Confident
Determined
Resourceful
Enterprising
Creative
Innovative
Competitive
Risk Taking
Hardworking
Networking

Task Sheet No. 2

I.Read and analyze the statements below and identify whether it requires a
common competency or core competency. Write A if it is a common
competency and B if it is a core competency. Write your answer in the space
provided.
_________1. Writing business correspondence.
_________2. Preparing income statement
_________3. Designing for packaging and labelling.
_________4. Relating with staff and co-workers.
_________5. Managing quality customer service.
_________6. Giving solution to a problem.
_________7. Coordinating with channel of distribution.
_________8. Negotiating with suppliers.
_________9. Adopting to work environment.
_________10. Able to operate computer system and applications.

II.DIRECTIONS: As would-be Entrepreneur, you are tasked to write down at

least 3 career opportunities which attract you most. Indicate what
competencies you need to enhance in order to become successful in these
opportunities. Write your answer in the space provided.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________

Information Sheet No. 3

The Potential Market and the Market Need

Learning Outcome/s
After going through the module, you are expected to:
a. recognize a potential market and analyze the market need
The Potential Market
1. Potential market is the part of the total population that has shown some
level of interest in buying a particular product or service. Potential market is
also called Total addressable market (TAM) (MBA Skool Team, 2018).
2. A potential market is the part of the market you can capture in the future.
It includes the demographic groups that are not currently your customers
but could become customers in the future (Lake, L, 2019).
3. Market potential is the total demand for a product in a given business
environment (Bhasin, H., 2018).

The Importance of Potential Markets (Lake, L., 2019)

• Potential markets are an important part of a business's future
growth.
• Ensure the future of your business by identifying new customers.
• Think proactively about ways for your business to grow and change.
• Show the potential of your business to investors or collaborators.
• Increase your revenue.
• Create a plan B that will weather changes in the economy or market.

How to Identify Your Potential Markets (Lake, L., 2019)

• Consider every target demographic that you currently sell to, as well as
those you have not yet targeted. Identify what they have in common with
each other, new milestones that they will encounter in their lives that will
impact their buying patterns, and where they overlap or diverge from your
current customers.
Ask yourself these questions that will help you identify both new ways
to market your current products or services, as well as new products and
services that you can begin selling.
 • What other products do my customers need now?
• What related products will they need in the future?
• Who else could make use of the products I am selling now?
• What demographic information does that new group have in
common with my current customers?
• What demographic information does that new group have in
common with each other?

For example, a business that makes face masks and PPEs could
identify potential markets such as:
• Hospitals and other health related industries whose employees are
prone to COVID -19 virus and other viruses.
• Business industries and other organizations who want to ensure the
health condition of their employees.
• Employees and workers who need to report to work to earn income.
• Households who needs to go out for their necessities.

Note: Depending on the size and age of your company, as well as your
industry, you may have a clear picture of the potential markets that are
available.
Reaching Your Potential Market (Lake, L., 2019)
Once you've identified and chosen a potential market to begin
targeting, you will need new marketing strategies in place to communicate
with them. Use this profile to identify:
• The demographic information that people in a group have in
common.
• The best forms of media to reach them.
• How they prefer to shop and make purchases.
• The concerns, struggles, or problems that you can help them
overcome.
• What values matter to them, both in everyday life and when
shopping.
• The language that resonates with them.

The figure below depicts what is a potential market with respect to the total
population and how it can be converted to a penetrated market:

MBA Skool Team, 2018

Available Market
• Prospects who are willing and capable (have sufficient resources)
buyers, and have access to a particular market or service
(www.businessdictionary.com).
• Defined as the number of people who are both willing and capable of
buying a particular product or service in a particular market (MBA
Skool Team, 2020).
Target Market
• Refers to a group of potential customers to whom a company wants
to sell its products and services. Target markets are generally categorized by
age, location, income, and lifestyle. Defining a specific target market allows a
company to home in on specific market factors to reach and connect with
customers through sales and marketing efforts. (Kenton, W., 2019).

Penetrated Market
• A set of customers or clients who are already using a particular
product or service. A penetrated market means that the potential users of a
product or service are aware of it, and in many cases are active consumers
of it. (www.businessdictionary.com).
 The size of a potential market helps a company understand the level
of investment it should make further in the market, while taking into
consideration other factors. If the potential market is very small, it means
there is a very small fraction of the total population showing any interest in
the product or category. This means that it is better that the company
doesn’t invest further in the product or category because people won’t buy it.
If the size of the potential market is large, it means that there is a huge
fraction of the total population which is showing interest in the product, so
further investment can be made on the product development or modification,
marketing, promotions etc. The size of the potential market gives an
estimate of what all a company should do and how much it should invest
(MBA Skool Team, 2018).

The Market Need

1. Need
►A motivating force that compels action for its satisfaction. Needs
range from basic survival needs (common to all human beings)
satisfied by necessities, to cultural, intellectual, and social needs
(varying from place to place and age group to age group) satisfied
by necessaries (www.businessdictionary.com).

►A driver of human action which marketers try to identify,

emphasize, and satisfy, and around which promotional efforts are
organized (www.businessdictionary.com).

2. Market
► A Market is a place where two parties can gather to facilitate the
exchange of goods and services. The parties involved are usually
buyers and sellers. The market may be physical like a retail outlet,
where people meet face-to-face, or virtual like an online market,
where there is no direct physical contact between buyers and
sellers (Kenton, W. & Boyle, M., 2020).

►A market does not refer to a particular place but it refers to a

market for a commodity or commodities. It refers to an
arrangement whereby buyers and sellers come in close contact
with each other directly or indirectly to sell and buy goods (Shaikh,
S., retrieved 2020).

► A market is any place where sellers of particular goods or

services can meet with buyers of those goods and services. It
creates the potential for a transaction to take place. The buyers
must have something they can offer in exchange for the product to
 create a successful transaction (Moffatt, M., 2019)

Your market consists of (Stull, C., Myers, P.& Scott D.M. (2008) as cited in:
https://learn.marsdd.com/):
Existing customers: People who have already purchased your
product.
Prospects: People who have not yet purchased your product but are
considering it.
Target market users: People in your target market who are not
currently looking for a solution.

Define the Market Need for Your New Business

Why is it important to clearly define market needs?
The market now demands that your business align to their needs. In
order to properly align your marketing efforts ‒ and your content, in
particular ‒ to what buyers need, you have to have a clear understanding of
the many intricacies, pains and pressures within your market. To achieve
such alignment, the ability to define market patterns, needs, interests,
preferences, etc. for a comprehensive view of the buying process is critical
(www.aberdeen.com).

Below are ways to define your market (Lancaster SCORE (2010):

• Consider whether the business offers a new solution to an old
problem or complements an emerging trend.
• Have a clear picture of your target market.
• Determine the benefits that your product or service offers.
• Examine industry data that can confirm whether there is a
sustained, growing demand for your product or service.
 • Identify the percentage of market share that it is realistic for you to
capture. The more competition you have, the lower the margins will be.
• Consider how realistic your pricing is. How can you present your
product or service to potential customers so that it appears to be a
good value, while still affording you a healthy profit?
Pinpointing the Target Market
Target market—the specific group of customers at whom the
company aims its goods or services. The more a business knows about its
local markets and its customers and their buying habits and preferences,
the more precisely it can focus its marketing efforts on the group(s) of
customers who are most likely to buy its products or services. These
entrepreneurs develop new products that do not sell because they are not
targeted at a specific audience’s needs. They broadcast ads that attempt to
reach everyone and end up reaching no one. They spend precious time and
money trying to reach customers who are not the most profitable, and many
of the customers they attract leave because they do not know what the
company stands for. Smart entrepreneurs know they do not have the luxury
of wasting resources. They must follow a more focused, laser like approach
to marketing. Entrepreneurs must identify a specific market niche that has
a specific need or “pain point” and tailor a solution, be it a product or a
service, to address this need.
To be customer driven, an effective marketing strategy must be based
on a clear, comprehensive understanding of a company’s target customers
and their needs. A customer-driven marketing strategy is a powerful weapon
for any company that lacks the financial and physical resources of its
competitors. Customers respond when companies take the time to learn
about their unique needs and offer products and services designed to satisfy
them.
Determining Customer Needs and Wants through Market Research
Shifting patterns in age, income, education, race, and other
population characteristics (which are the subject of demographics) have a
major impact on new opportunities in the market and on existing small
businesses. Entrepreneurs who ignore demographic trends and fail to adjust
their strategies accordingly run the risk of becoming competitively obsolete.
Entrepreneurs who stay in tune with demographic, social, and economic
trends are able to spot growing and emerging market opportunities.
An entrepreneur’s goal is to make sure that his or her company’s
marketing plan is on track with the most significant trends that are shaping
the industry. Trend tracking not only keeps a company on the pathway to
success but also helps it avoid losing its focus by pursuing opportunities
that are out of favor.
 Trends are powerful forces and can be an entrepreneur’s greatest
friend or greatest foe. For entrepreneurs who are observant and position
their companies to intercept them, trends can be to their companies what
the perfect wave is to a surfer. For entrepreneurs who ignore them or
discount their importance, trends can leave their companies stranded like a
boat stuck in the mud at low tide.
The Value of Market Research
By performing some basic market research, aspiring entrepreneurs
and owners of existing small business can detect key demographic and
market trends. Marketing consultants argue that information is just as
much a business asset as equipment, machinery, and inventory. Market
research is the vehicle for gathering the information that serves as the
foundation for the marketing plan. It involves systematically collecting,
analyzing, and interpreting data pertaining to a company’s market,
customers, and competitors. The objective of market research is to learn
how to improve the level of satisfaction for existing customers and to find
ways to attract new customers.
How to Conduct Market Research
Successful market research consists of four steps: define the problem,
collect the data, analyze and interpret the data, and draw conclusions,
including how you may need to pivot your business model.
Step 1. Define the objective. The first—and most crucial—step in market
research is to define the research objective clearly and concisely. For a new
business, the objective is to test the assumptions made while developing the
business model. For an existing business, the objective is to better
understand changes occurring in its business or in its market. To get to the
heart of the matter, entrepreneurs must list all the possible factors that
could have caused it. Do we face new competition? Are our sales
representatives impolite or unknowledgeable? Have customer tastes changed?
Is our product line too narrow? Do customers have trouble finding what they
want? Is our Web site giving customers what they want? Is it easy to
navigate?
Step 2. Collect the data. The marketing approach that dominates today is
individualized (one-to-one) marketing, which involves gathering data on
individual customers and then developing a marketing program designed
specifically to appeal to their needs, tastes, and preferences.
How can entrepreneurs gather valuable market and customer
information? Two basic methods are available: conducting primary research,
data you collect and analyze yourself, and gathering secondary research,
data that have already been compiled and that are available, often at a
reasonable cost or even free. Primary research techniques include the
following:
 ● Customer surveys and questionnaires. Keep them short. Word
your questions carefully so that you do not bias the results and use a simple
ranking system (e.g., a 1-to-5 scale, with 1 representing “unacceptable” and
5 representing “excellent”). Test your survey for problems on a small number
of people before putting it to use. Online surveys are inexpensive, are easy to
conduct, and provide feedback fast. Vertical Response, a self-service
marketing firm for small businesses, regularly sends out e-mail surveys to
its customers. Because the company relies on word-of-mouth for much of its
new business, knowing what its customers like and don’t like about how
they are doing business and the products it offers is critical to adding new
customers.16
● Focus groups. Enlist a small number of customers to give you
feedback on specific issues in your business—quality, convenience, hours of
operation, service, and so on. Listen carefully for new marketing
opportunities as customers or potential customers tell you what is on their
minds. Once again, consider using the Internet; one small bicycle company
conducts 10 online focus groups each year at virtually no cost and gains
valuable marketing information from them.
● Social media conversations and monitoring. With social media,
companies have the opportunity to engage in direct conversations with their
customers. In addition, monitoring social media for comments about a
business and its products or services can provide useful feedback from
customers. Many companies use the Google Alerts feature of the leading
search engine to track and receive e-mail updates whenever someone writes
about their brands online. Most social networking sites, including Facebook
and Twitter, offer search features that allow users to track what people are
saying about a company and its products or services.
● Test market. One of the best ways to gauge customer response to a
new product or service is to set up a test market.
● Daily transactions. Sift as much data as possible from existing
company records and daily transactions—customer warranty cards,
personal checks, frequent-buyer clubs, credit applications, and others.
● Other ideas. Set up a suggestion system (for customers and
employees) and use it. Establish a customer advisory panel to determine
how well your company is meeting needs. Talk with suppliers about trends
they have spotted in the industry. Contact customers who have not bought
anything in a long time and find out why. Contact people who are not
customers and find out why. Teach employees to be good listeners and then
ask them what they hear.
Secondary research, which is usually less expensive to collect than
primary data, includes the following sources:
 ● Business directories. To locate a trade association, use Business
Information Sources.
● Direct mail lists. You can buy mailing lists for practically any type
of business. The Standard Rates and Data Service Directory of Mailing Lists
(Standard Rates and Data) is a good place to start looking.
● Demographic data. The Sourcebook of ZIP Code Demographics
(CACI, Inc.) provides detailed breakdowns of the population in every ZIP
code in the country. Sales and Marketing Management’s Survey of Buying
Power (Bill Communications) has statistics on consumer, retail, and
industrial buying.
● Census data. The Bureau of the Census publishes a wide variety of
reports that summarize the wealth of data found in its census database,
which is available at most libraries.
● Forecasts.
● Market research. Someone may already have compiled the market
research you need.
● Articles. Magazine and journal articles pertinent to your business
are a great source of information. Use the Reader’s Guide to Periodical
Literature, the Business Periodicals Index (similar to the Reader’s Guide but
focusing on business periodicals to locate the ones you need.
● Local data. Your state department of commerce and your local
chamber of commerce will very likely have useful data on the local market of
interest to you. Call to find out what is available.
● The Internet. Most entrepreneurs are astounded at the marketing
information that is available on the Internet. Using one of the search engines,
you can gain access to a world of information—literally.
Thanks to advances in computer hardware and software, data mining,
once available only to large companies with vast computer power and large
market research budgets, is now possible for even very small businesses.
Data mining is a process in which computer software that uses statistical
analysis, database technology, and artificial intelligence finds hidden
patterns, trends, and connections in data so that business owners can make
better marketing decisions and predictions about customers’ behavior.
Step 3. Analyze and interpret the data. The results of market research
alone do not provide a solution to the problem; business owners must
interpret them. What do the data tell you? Is there a common thread
running through the responses? Do the results suggest any changes needed
in the way the business operates? Can the entrepreneur can take advantage
of new opportunities? There are no hard-and-fast rules for interpreting
market research results. Entrepreneurs must use judgment and common
sense to determine what the results of their research mean.
Step 4. Draw conclusions and act. The market research process is not
complete until the business owner acts on the information collected. In
many cases, the conclusion is obvious once a small business owner
interprets the results of the market research. Based on an understanding of
what the facts really mean, the owner must then decide how to use the
information in the business.
A Seven-Sentence Bootstrap (Guerrilla) Marketing Strategy
Bootstrap Marketing is an online program where small businesses
and individuals learn how to use digital marketing to improve their users
experience, and increase their on-site conversions.
(https://www.rosaclare.com/#:~:text=Bootstrap%20Marketing%20is%20an
%20online%20program%20where%20small,their%20users%20experience%2
C%20and%20increase%20their%20on-site%20conversions.)

1. What is the purpose of your marketing? In other words, what action do

you want customers or prospective customers to take as a result of your
marketing efforts? Should they visit your store? Go to your company’s Web
site? Call a toll-free number for more information?
2. What primary benefit can you offer customers? What is your
company’s competitive advantage? and what does it do for customers?
Bootstrap marketers express their companies’ competitive advantage as a
solution to a customer’s problem, which is easier to market than just a
positive benefit. Successful bootstrap marketing requires an entrepreneur to
have a clear understanding of a company’s unique selling proposition, a key
customer benefit of a product or service that sets it apart from its
competition.
3. Who is your target market? At whom are you aiming your marketing
efforts? Answering this question often requires some basic research about
your target customers, their characteristics, their habits, and their
preferences. Bootstrap marketers know that broadcasting is old school; they
realize that narrowcasting—focusing their marketing efforts on those people
who are most interested in and are likely to purchase their goods and
services—is much more efficient and effective. Most small companies have
more than one target market; be sure to identify all of them.
4. Which marketing tools will you use to reach your target audience?
This list should include only those tools your company understands, knows
how to use effectively, and can afford. The good news is that marketing tools
do not have to be costly to be effective. In fact, bootstrap marketers are
experts at using low-cost methods to market their companies.
5. What is your company’s niche in the marketplace? How do you intend
to position your company against your competition? Bootstrap marketers
understand that their markets are crowded with competitors, some of them
much larger with gigantic marketing budgets that dwarf their own, and that
finding a profitable niche to occupy can be highly profitable. Many
successful entrepreneurs position their companies in profitable niches. One
insurance agent markets his agency as specializing in serving the needs of
small businesses.
6. What is your company’s identity in the marketplace? A company’s
identity is a reflection of its personality, its DNA. Small companies often
have an advantage over large businesses when it comes to communicating
their identities because of the interesting, unique stories behind their
creation and the enthusiasm and passion of their founders. Customers
enjoy doing business with small companies that have a clear, meaningful,
and compelling identity in the marketplace.
7. How much money will you spend on your marketing? What is your
marketing budget? Entrepreneurs should decide how much they intend to
invest in their marketing efforts, an
amount usually expressed as a percentage of sales. Small companies should
allocate a portion of their budget to marketing; after all, it drives sales. The
good news is that many of the bootstrap marketing techniques that small
companies can use are either low cost or no cost. When allocating their
budgets, bootstrap marketers recognize the importance of putting their
money where they will get the greatest “bang.”
Seven Principles That Make Your Shop Pop
Pamela Danziger, president of the marketing consulting firm Unity
Marketing, offers seven principles that can transform any store into a shop
that “pops.”
1. Offer high levels of customer involvement and interaction. When
customers have the opportunity to interact with a product, they spend more
time in the store, which increases the probability that they will buy
something.
2. Evoke shoppers’ curiosity to explore with a unique display, store
layout, and selection of merchandise.
3. Exude a contagious air of excitement, energy, and “electricity.”
4. Create a synergistic convergence of atmosphere, store design, and
merchandise that results in a special place for customers. The goal is to
create a “paradox environment,” one that offers customers displays and
products they expect but also surprises them with something that is unique
and unusual, even bizarre.
5. Provide an authentic values-driven experience.
6. Provide a price-value model that customers understand and support.
7. Maintain a friendly, welcoming store that gives customers a reason
to return. In some stores, salespeople act as if they are doing customers a
favor by waiting on them. Stores that pop take the opposite approach,
welcoming customers and treating them as if they are important (because
they are!).
The goal is to create a store with “soul” that engages customers on
many different levels; that creates a fun, festive atmosphere; and that has a
mission that goes far beyond merely selling product

Self-Check No. 3
I.Read and analyze the given situations below. Identify whether this
refers to existing customer, prospects, or target market users. Write your
answer in the space provided.

1. Students need 6. Arlene, a

to buy a tablet/ student of a
laptop for school public school,
requirements. needs mobile
data in order to
comply with the
requirements in
school.
2.Ana used to 7. Hospitals need
buy shampoo. facemasks
and PPEs.
3. Households 8. Mike, a sari-
living in a remote sari store owner,
area. wants to go
online selling.
4. Martha, a call 9. Jeep drivers
center agent, need to modify
needs a their jeeps for
Wi-Fi. public
transportation.
5. Karlo, a 10. Ella needs to
factory worker, buy her vitamin
needs C to boost her
transportation. immune system.

II.Give the meaning of the following word/phrase in each item. You may use
the internet to define the given word/phrase. Write your answer in the space
provided.
1. Customer vs. consumer
_________________________________________________
___________________________________________________________________________
2. Demographic group_____________________________________________________
___________________________________________________________________________
___________________________________________________________________________
3. Market share ___________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
______________________________________
4. Market size
_____________________________________________________________
___________________________________________________________________________
______________________________________________________
5. Marketing
strategies_____________________________________________________
___________________________________________________________________________
_____________________________________________
 Answer Key No. 3
I.
1. Prospects
2. Existing customer
3. Target market users
4. Existing customer
5. Prospects
6. Prospects
7. Existing customers
8. Prospects
9. Target market users
10. Prospects
II.
1. Customer vs. consumer - consumer is the one who consumes the goods,
and customer is a person who buys the goods or commodity and pays the
price for it.
2. Demographic group - include the generations known as Generation Z,
Millenials (previously known as Generation Y), Generation X, baby boomers,
etc.
3. Market share - represents the percentage of an industry, or a market's
total sales that is earned by a particular company over a specified time
period.
4. Market size - The number of individuals in a certain market who are
potential buyers and/or sellers of a product or service.
5. Marketing strategies - refers to a business's overall game plan for
reaching prospective consumers and turning them into customers of the
products or services the business provides.

Task Sheet No. 3

I.As would-be Entrepreneur, you are tasked to identify your dreamed
business, one that involves your interests. Indicate who are your potential
market, target market, available market and/or penetrated market. Write
your answer in the space provided.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________

II.Considering the ways to define your market, evaluate the situations below
using 1 to 5 rating scale, 5 as the highest and 1 as the lowest. Justify your
answer in 1 to 2 sentences only. Write your answer in the space provided.

Situations Rating Jsutification

To produce face masks
and PPEs.
To open on-line
business for fashion
accessories.
To open a massage
center.
To open a computer
shop.
To open a carinderia

Information Sheet No. 4

The Possible Product/s or Service/s That Will Meet the Need
Learning Outcome/s:
After going through the module, you are expected to:
a. determine the possible product/s or service/s that will meet the need

As would-be entrepreneurs, there is a need to find the right products or

services for your target market. The product or service should deliver
superior customer value (Claessens, M., 2015).

Concepts about Product and Service

A product can be defined as anything that we can offer to a market
for attention, acquisition, use or consumption that could satisfy a need
or want. However, the definition of product does not only involve tangible
goods such as a car, a fridge or a phone. The definition is extended to
include intangible objects as well, because they can be offered to a market.
Therefore, the broad definition of product includes services, events,
persons, places, organizations or even ideas (Claessens, M., 2015).
 Services are special form of product which consists of activities,
benefits or satisfactions offered for sale that are intangible and do not
result in the ownership of anything. A service can thus include banking,
airline travel, communication services, hotel services and so on
(Claessens, M., 2015).
A product is a tangible item that is put on the market for acquisition,
attention, or consumption, while a service is an intangible item, which
arises from the output of one or more individuals
(https://corporatefinanceinstitute.com).
Examples:
1. When a consumer buys a car, the product comes with a lot of other
service responsibilities, such as tune-up and maintenance
(https://corporatefinanceinstitute.com).
2. A laptop buyer now buys a bundle of service benefits in addition to
the tangible components of the laptop.

Specific Examples of products and services (https://www.archives.gov)

Products
• new prints of motion picture film elements
• prints for exhibit purposes
• reference copies on DVD/CDs, books, magazines for the reading rooms or
other clients
• Cars, tables and chairs, etc.

Services
• consulting with clients on appropriate products for specific purposes
• providing advice on risk assessment and priority setting
• working on standards committees
• conducting training and other educational outreach

The Difference of Product and Service (https://accountlearning.com)

Identifying and Meeting Customer Needs
Customer needs are the named and unnamed needs of customers
when they come in contact with the different business establishments or
when they search for the solutions which businesses provide
(https://www.conductor.com/). In addition, providing superior customer
service means meeting customers’ needs by providing them with the
products and services they want or by providing effective solutions to their
problems (https://simplifytraining.com/). Similarly, innovation comes from
identifying customers’ needs and providing solutions that meet those needs
(Sauro, J.).

Why “Identifying Customer Needs” Matters

(https://simplifytraining.com/)
1. Correctly identifying customers’ needs is essential for
ensuring customer satisfaction and loyalty.
2. Customers have unique needs.
3. Often, customers either aren’t clear about what they need or
they don’t really know what they want.
4. Identifying clients’ needs creates satisfied customers, and
satisfied customers are less likely to have reason to enter into
disputes with the organization or contemplate legal action.
 Key Points (https://simplifytraining.com/)
1. To ensure customer satisfaction, entrepreneurs must
correctly identify customers’ needs.
2. To identify needs, entrepreneurs must both listen and ask the
right questions.
3. After identifying needs, always check for additional or related
needs.
4. As an entrepreneur, use your knowledge and experience to
identify and present the right products, services, and solutions
to meet your customers’ needs.
How to Meet the Needs of Customers
(https://www.conductor.com/)
1. Identify what the customers need through keyword research,
focus groups, or social listening.
2. Distribute the information to relevant stakeholders in the
organization.
3. Craft product features or create content that speaks to the
customer’s needs.
4. Collect customer feedback in order to meet their expectations.

Self-Check No. 4

I. MAKE MEANING- INTERNET ASSSISTED ACTIVITY

DIRECTIONS: Give the meaning of the following word/phrase in each item.
You may use the internet to help you define the given word/phrase. Write
your answer in the space provided.
1. Consumption ________________________________________________________
2. Acquisition___________________________________________________________
3. Customer loyalty _____________________________________________________
4. Customer satisfaction_________________________________________________
5. Customer service______________________________________________________
6. Customer feedback ___________________________________________________
7. Stakeholders__________________________________________________________
8. Expenditures _________________________________________________________
9. Tangible ______________________________________________________________
10.Intangible ____________________________________________________________

II. DIRECTIONS: Read and analyze the statements below about “Product or
Service”. Determine whether the statement is TRUE OR FALSE. Write TRUE
if the statement is correct and write FALSE if otherwise. Write your answer
in the space provided.

____________1. Products do not carry an element of service.

____________2. A service is the result of the application of skills and expertise
towards an identified need.
____________3. A service isn't something you can try out before you pay for it.
____________4. All products are countable, touchable, and visible, a
consumer can assess its durability by examining it.
____________5. Products are tangible and discernible items that the
organization produces.
____________6. Products and services can both be perishable.
____________7. Service is associated with physical items.
____________8. A product is an offering that derives value from intangible
elements.
____________9. A product may be capable of being reused for a certain time.
____________10. Service has no connection with the sale of products.
 Answer Key No. 4
I. Make meaning
1. Consumption - the amount of something that people and other entities
use.
2. Acquisition - taking possession of an asset by purchase.
3. Customer loyalty - indicates the extent to which customers are devoted to
a company’s products or services.
4. Customer satisfaction - measures how well the expectations of a customer
concerning a product or service provided by your company have been met.
5. Customer service - meeting the needs and desires of any customer.
6. Customer feedback - is information provided by clients about whether
they are satisfied or dissatisfied with a product or service.
7. Stakeholders - is a party that has an interest in a company and can either
affect or be affected by the business.
8. Expenditures - funds used by a business to attain new assets, improve
existing ones, or reduce a liability.
9. Tangible - capable of being perceived especially by the sense of touch
10. Intangible _ unable to be touched or grasped; not having physical
presence.

II.True or False
1. F 6. T
2. T 7. F
3. T 8. F
4. F 9. T
5. T 10.F

Task Sheet No. 4

I. Write your idea on the situation below. As would-be Entrepreneur, you
are tasked to identify at least 3 products or services which can be related to
your dreamed business. Focus on how you will meet the needs of your target
market especially in this time of COVID – 19 Pandemic. In each product or
service give at least 3 reasons why you are proposing these products or
services. Write your answer in the space provided.

II. Criss Cross Puzzle. Read and analyze the clues below and write the
correct word on the blocks across and down.

Products or services that will meet the need

Across
2 - measures how well the expectations of a customer concerning a product
or service provided by a company have been met.
4 - taking possession of an asset by purchase.
7 - is a party that has an interest in a company and can either affect or be
affected by the business.
9 - the amount of something that people and other entities use.
10 - is information provided by clients about whether they are satisfied or
dissatisfied with a product or service.
Down
1- funds used by a business to attain new assets, improve existing ones, or
reduce a liability.
3 - unable to be touched or grasped; not having physical presence.
5 - indicates the extent to which customers are devoted to a company’s
products or services.
6 - meeting the needs and desires of any customer.
8 - capable of being perceived especially by the sense of touch

Information Sheet No. 5

 The 4Ms of Production in Relation to the Business Opportunity

After going through this topic, you are expected to:

a. Be able to have an understanding of the 4Ms of Operations;
b. describe each of the 4Ms in relation to the business opportunity;
c. develop an effective product description; and
d. be able to create own product example and test it

If Sales is the engine that powers Auto Salvage yards then Production
is the drive train that gets us where we are going. Production is both
reactive and proactive almost simultaneously. It reacts to what is sold today
and must meet the expectations set by the sales team; also, it must
anticipate what most likely will be needed in the near future. The key for
production is to have procedures and processes that can accomplish both.
Operations Management then controls the implementation of the business
plan. Once our procedures are set up to maximize efficiency, it is time to
train the production staff on their individual responsibilities centered on the
4Ms of Production.
So, what are the 4Ms of Production? It is the Method, Manpower,
Machine and Materials. They are also called as the four critical domains,
usually associated to manufacturing. These four are also related to business
opportunities since most business is tied to manufacturing also. The
businessman per se should look all four into account.
4Ms of Production

Let’s take a look at each one:

1. Methods - suggest the process of combining raw materials and how
these are going to be transformed using the other factor inputs of
production. This resource input is also called technology or
techniques of production since it prescribes the intensity in the use of
factor inputs.
If labor is abundant and cheap in the locality, the firm might
use
more labor-intensive techniques. This only means that they will use
labor more than other factor inputs. However, if labor is expensive and
capital is cheap the firm or company may implement a capital-
intensive technology. This means that will use more capital compare
to the other factor inputs.
Ex. Now in the production of pandesal, the mixing of ingredients
will use manual labor intensively as applied by small bakeries.
On the other hand, large bakeries in urban areas will use
modern baking equipment and utensils that are capital
intensive.
2. Manpower - – the right human resources who will handle certain
business operations. It is one of the highest cost of operating the
business, but also the most instrumental to its success.
- It does not only include labor or muscular power nut also
intellectual,
creative abilities and other qualities of individuals that can contribute
to the production.
As the business grows, the entrepreneurs should hire qualified
employees that can handle operational functions even without his
 assistance, so that he will be free from daily activities and can focus
on thinking of new strategies and functions of the business.

Ex. In the production of pandesal, manpower resources include the

baker, and his assistants who will implement the recipe using the
available equipment, and technology. The manager, sales clerks, and
janitors are also part of the manpower of the bakery

3. Machine – technology used in efficiently operating the business. It

was also described as the “best friend” of manpower in producing
goods and offering services. Machines are not limited only to physical
equipment but can also pertain to new technologies. It also represents
all manmade physical capital used in the production process. Aside
from machines the tools, durable equipment, and the physical plant
are also part of it. Without machines, business operations will be too
unmanageable, costly and with low quality.

Ex. In the production of our pandesal, the machinery comprises

the oven, baking utensils and the bakery itself.

4. Materials – to be used in creating a product or performing a service,

which includes supply chain management

Ex. In the process of producing pandesal, we need several

materials that serve as intermediate inputs which include flour,
sugar, butter, eggs, salt and other ingredients.
•Make sure that your supplier of raw materials should have
consistent and have sufficient number of supplies that can
accommodate the demand of your company
•The selection of the supplier depends on how they will not cause
interruptions in the production of goods and serving customers.

Materials Requisitioning Options

Manufacturing own products or offer services – if this is the case
entrepreneurs need to prepare huge capital for the materials,
machines and manpower which we all know will cause the company a
greater risk. However, through these entrepreneurs can closely
monitor the quality of his product and can build his own name
overtime making his own brand identity.

Outsourcing of manufacturing or service activities to a third party

 – this is the process where a company appoint a third-party
manufacturer to do the manufacturing operations of the business.
Expertise wise, these third party companies have more experience and
can handle manufacturing products tailored to the entrepreneur’s
needs at a lower cost. It also saves the entrepreneur from buying
expensive machineries, but has it also has its risk such as: Profit
shared with the third party, they run out of supply, when the
outsource party closes its business and if they produced sub-standard
products.
When outsourcing the entrepreneur must protect its product
through a trademark or a patent and a noncompeting or
nondisclosure agreement.

•Patent – the right to protect the entrepreneur regarding

the product or service.
•Trademark – a sign or symbol that helps to distinguish
the product from the others
•Nondisclosure Agreement – states that the third party
will be given full access to any confidential information
provided that it should be disclosed to anyone else.

Purchasing own products or services from present suppliers –this

is where entrepreneurs purchased finished products from
manufacturer or offering the services of another company. The
company can save the cost of the machines and manpower. However,
the entrepreneur cannot own the brand name of the product or
service and the manufacturer is not restricted to sell to the
entrepreneur’s competitors.

Traditionally, these are the crucial four (4) domains of production

where one cannot function properly without the other. However, allow me to
add another M in this list.
Money – it is a financial resource used to purchase all the resources
needed by the firm for its operation. The owners of the company
contribute seed money for the initial operations of the firm. It is also
needed to purchase raw materials, pay salaries of the workers and
managers and durable equipment needed for the company.

In the economic analysis of production, the resource inputs

mentioned above are grouped into two major categories – intermediate
inputs and factor inputs.
 Intermediate inputs – are semi-processed materials that need further
transformation to produce a finished product. They are also called raw
materials or materials.
Factor inputs – are the transforming inputs that will process the
intermediate inputs into finished products. They are also called
productive inputs because of their transforming properties. This
includes labor (manpower), capital (machinery), land and technology
(method).

While money does not have a direct participation in the physical

transformation of the intermediate inputs, it is very crucial in the
production process. As mentioned earlier, we use it to purchase materials,
pay workers’ salaries and wages and even the machineries we use.
Now that we already know how important 4Ms are in the business
process together with the 7Ps of marketing mix, we can definitely make the
Ayalas or even the Lopezes run for their money right? We should only need
to understand and know how to entice our prospective buyers to buy our
products.
How will we do that? Definitely through an effective product
description, you can guarantee that they will hit that “add to cart” button in
an instant. Product description is one of the important aspects of selling,
you have to visualize what your target market will patronize and would like
to have. Here’s the 3 Rules to Visualize a Product Descriptions That Sell.
1. Know who your target audience is – you might want to highlight
the things that might interest your potential buyers. You can
actually do this by knowing what specific demographics you are
going to cater. Is it for teens? Young professionals or Seniors. By
knowing such you will have a specified goal to achieve once you roll
your product.
2. Focus on the Product Benefits – know the difference between
product features and benefits. A product feature is a factual
statement about the product that provides technical information. A
product benefit, on the other hand, tells how the product can
improve the buyer’s life. If you are the customer, I know you will
choose the latter. However, you can always convert the features
into benefits.
3. Use good product images – aside from the description, a quality
image will do the trick. Why? Because 63% of customers think that
a product image is more important than the description or even the
reviews. So, an important aspect of your product description is
actually in the photo itself. Quality photos will show the customer
 all of the key features about your product. They will also allow the
customer to imagine having this product in her life.

Once you already have a clear vision of what should be the description
of your product. We can now create our own prototype.
What is Prototype?
You have visualized a great product. You can imagine how this
particular product will make a change and how it will be a great help to
make our life easier. However, what we have in mind is sometimes a lot
difficult to explain so we create a mock-up of what the final product will look
like, that is a prototype. A Prototype is an initial creation of a product that
shows the basics of what product will look like, what it will do and how it
will work. However, it is not meant to be the final version as there will be
lots to improve.
Prototype example

Advantages of Prototypes:
1. Creating prototype gives you the opportunity to test and refine the
functionality of your design.
2. It makes it possible to test the performance and quality of the materials.
3. It will help you describe your products more effectively with potential
buyers.
4. It will encourage others to treat you more seriously.
 Self-Check No. 5
I. Multiple Choice. Choose the letter of the best answer. Write the chosen letter on
a separate sheet of paper.
1. The Kitchen Therapy wanted to help her customers to distinguish her product
from the other pastry shop. What do they need to do to accomplish such?
a. Use of Trademark c. Bribe the people
b. Advertise d. Give brochures
2. Melinda wanted to use tools that will lessen their burden in doing manual
work. What production factor will she look at?
a. Method c. Machine
b. Manpower d. Materials
3. Machines are considered as the “best-friend of the _______________ in producing
goods and offering services.
a. Method c. Machine
b. Manpower d. Materials
4. Which of the following is NOT included in the factor inputs of production?
a. Land and Technology c. Labor
b. Money d. Raw Materials
5. Food Overboard agreed to give Cravings by Kaye a full access to any
confidential information of the company, provided that they will not disclose it
to anyone else. What type of agreement do they have?
a. Prenuptial c. Bill of Sale
b. Property d. Nondisclosure
6. It is the M where one should look at one’s ability, intellect and creative ideas.
a. Material c. Manpower
b. Money d. Method
7. When looking for a supplier one must consider the following except for one.
a. People c. Cost
b. Availability d. Quality of the product
8. It is considered as the most important factor in the production.
a. Labor c. Raw Material
b. Land and Technology d. Capital
9. What does the equipment represents?
a. Manpower c. Material
b. Method d. Machine
10.Which among the following talks about the process of the production?
a. Manpower c. Material
b. Method d. Machine
Modified True or False. Write TRUE if the statement is correct if FALSE underline
and correct the word that make it false.
____________ 11. The 4Ms of production cannot function properly if one of the M’s is
not included.
____________ 12. A product prototype is the final product that you will sell in the
market.
____________ 13. In manufacturing own products or offer services, an entrepreneur
must prepare a huge amount of capital for the expenses.
____________ 14. Outsourcing a third-party manufacturer have a lot of risk involve
as
well as advantages.
____________ 15. A good product description can double the sales.
 Answer Key No. 5
I.
1. A 6. C 11. True
2. C 7. A 12. False
3. B 8. A 13. True
4. B 9. D 14. True
5. D 10. B 15. True
 Task Sheet No. 5
Suppose that you are going to put up a new business venture, how will you
plan to do your operations? What Method will you use? Who will you hire for
a specific task? Will you use Machineries? How about the materials? Fill the
boxes below on how will you apply what you have learned regarding the 4Ms
of production/operation. Explain your
answers.
 Information Sheet No. 6
The Supply Chain and the Recruitment Process in Relation
to the Business Enterprise
Learning Outcome/s:
After going through this module, you are expected to:
a. Select potential suppliers of raw materials and other inputs necessary
for the production of the product or service;
b. discuss the Supply chain in relation to the business enterprise; and
c. identify the process on how to recruit qualified people for one’s
business
enterprise
The Supply Chain and the Recruitment Process in Relation to the
Business Enterprise
Parts of the 4Ms of Production is the Methods and Manpower. In this
lesson we will dig deeper what are the process that are included in the
manufacturing flow by learning on how to select a potential supplier of the
company’s raw materials and differentiating value chain from the supply
chain in relation to the business enterprise. We will also talk about the
recruitment process a business enterprise apply to be able to hire the
qualified manpower.
Why do we need to know how to select a potential supplier? This is
actually crucial when it comes to business, because choosing the right
supplier involves much more than scanning a series of price list. There are a
lot of factors to consider such as value for money, reliability and service.
How you weigh up the importance of these different factors will be based on
your business' priorities and strategy.
A strategic approach to choosing suppliers can also help you to
understand how your own potential customers weigh up their purchasing
decisions.
This guide illustrates a step-by-step approach you can follow that
should help you make the right choices. It will help you decide what you
need in a supplier, identify potential suppliers and choose your supplier.
1. Thinking strategically when selecting suppliers. Have a supplier
that can match your business needs or much better exceeds it. It is
also better to have a choice of sources so when one lets you down you
can have a backup.
2. What you should look for in a supplier. Your supplier should be
reliable, consistent with the quality of supplies, value for money, have
strong service and communication, financially secured, and have a
strong partnership approach.
3. Identifying potential suppliers through variety of channels. It is
best to build a shortlist of possible suppliers through;
a) recommendations;
 b) directories;
c) trade associations;
d) business advisors;
e) exhibitions; and
f) trade press
4. Choosing a supplier. When considering the firms on your shortlist,
ask yourself the following questions:
• Can these suppliers deliver what you want, when you want it?
• Are they financially secure?
• How long have they been established?
• Do you know anyone who has used and can recommend them?
• Are they on any approved supplier lists from trade associations or
government?
Do some research and try to slim your list down to no more
than four or five candidates. It's a waste of time for you and the
potential supplier if you approach them when there's little chance of
them fulfilling your requirements.
5. Getting the right supplier for your business by knowing your
needs. Get a quotation, and compare them between potential
suppliers. Remember that price isn’t everything. Spend time on
research and ask around about them, if it isn’t too much you can also
do credit check. Make sure you agree on service levels before you start
and don’t buy from too many suppliers, but don’t have just a single
one.

Now that we have selected our suppliers, we can now go to the

distribution process. Every business organization is part of at least one
supply chain. This time we will differentiate the value chain from the supply
chain.
The term value chain refers to the process in which businesses receive
raw materials, add value to them through production, manufacturing, and
other processes to create a finished product, and then sell the finished
product to consumers. A supply chain represents the steps it takes to get
the product or service to the customer, often dealing with manufacturer and
aftermarket parts.
 While a supply chain involves all parties in fulfilling a customer request
and leading to customer satisfaction, a value chain is a set of interrelated
activities a company uses to create a competitive advantage.
Thus, both are important in a business enterprise setting for it to be
successful. Supply chains are sometimes referred to as value chains
because they reflect the concept that value is added as goods and services
progress through the chain.
As the business grows, the entrepreneurs should hire a qualified
employee that can handle operational functions, so that he or she will be
free from daily activities and thus can focus on the strategic and
management functions of the business.
The following our guide on how company selects the right human
resources who will handle certain business operations.
A. Job Description – enumerates the duties and responsibilities of
the potential employee, including the scope, limitations and terms and
conditions of employment. Parts of the job description includes:
•Job title, Compensation and benefits, Duties, Responsibilities and
accountabilities and Work schedules.
B. Employee Qualification – this includes the criteria of the company
to hire a particular person, such as:
• Educational background, Work experience, Specific skill or
knowledge and Work attitude

C. Preparatory Selection of Job Applicants – After the job

description and employee qualifications are finalized by the
entrepreneur, he or she now preselects a set of candidates for the
position required. However, once the business is already sizeable and
established the entrepreneur can hire a Human Resource Department
(HRD) that will handle the selection.
D. Selection of Job Applicants – Screening and picking the most
qualified and most suited candidate for the job. The preliminary
screening is through qualifications. Usually, they conduct qualifying
exams in Math, English and Logic, Qualitative Exams or Psychology
test and an interview for the short listed candidates.
Remember that in an interview the entrepreneur promotes the
business to the candidate while the candidate sells himself or herself
by citing his or her work experience or educational background.
E. Job Offer – Once the entrepreneur has been convinced already of
the job credentials and the interview answers of the candidate, the job
contract is now prepared. A Job contract generally summarizes the
terms and conditions of the candidate’s employment with the business.

F. Employment Development – Training people is one of the biggest

investments of an entrepreneur or a businessman. Entrepreneurs
should devise a strategy on how to keep employees satisfied working
in the company.
Training tools for employees
1. Employee Orientation 6. Further Training
2. On-the-Job Training (OJT) 7. Online Learning Programs
3. Buddy System 8. Internal Training Programs
4. Mentor-Mentee Program 9. International or Local
5. Succession Plan Symposia, seminnars, etc.

Strategies for Employee Management

1. Competitive Salary Package – includes guaranteed bonuses,
performance bonuses, commissions and other monetary incentives.
2. Non-monetary benefits – medical coverage, leave credits, decent
job titles, flexible work schedules, awards and recognitions,
transparency and fairness in performance evaluation, channels where
employees can provide constructive feedback without the risk of being
fired.
3. Additional benefits – annual trips, work from home opportunities,
scholarships, transportation and communication allowances, free
meals and drinks, fitness programs, sports programs, and other work
life balance programs.
Employee training and development is a major thrust of every
entrepreneur because employees are the best assets of a business
enterprise.
 Self-Check No. 6

I. Multiple Choice. Choose the letter of the best answer. Write the chosen
letter on a separate sheet of paper.
1. The Kitchen Therapy wanted to choose their supplier for their restaurant,
the following are to be considered except for one.
a. Consistency c. Reliability
b. Lazy d. Value for money
2. _____ is the process of searching for prospective employees and
stimulating
them to apply for jobs in the organization.
a. Advertising c. Recruitment
b. Networking d. Selection
3. _______ is concerned with the problem of introducing or orienting a new
employee to the organization.
a. Induction c. Recruitment
b. Interviewing d. Selection
4. The process of eliminating unsuitable candidates is called _________.
a. Induction c. Recruitment
b. Interviewing d. Selection
5. Which of the following helps the managers with the information required
to
make good human resources decisions?
a. Industrial relations c. Recruitment
b. Performance Appraisal d. Selection
6. The process of selection of employees is usually influenced by _______.
a. Principles and programs c. Strategies and objectives
b. Rules and regulations d. None of the above
7. Which of the following is used to measure the various characteristics of
the
candidate?
a. Attitude test c. Proficiency test
b. Physical test d. Psychological test
8. When the candidate is put to hardship during interview, it is called_____.
a. In-depth interview c. Preliminary interview
b. Patterned interview d. Stress interview
9. Which of the following orders is followed in a typical selection process?
a. Application form, test and/or interview, reference check and physical
examination
b. Physical examination, test and/or interview, application form and
reference check
c. Reference check, application form, test and/or interview and physical
examination
d. Test and/or interview, application form, reference check and physical
examination
10. Identify the test that acts as an instrument to discover the inherent
ability of a
candidate.
a. Aptitude c. Physical
b. Attitude d. Proficiency
True or False. Write TRUE if the statement is correct and FALSE if it is
wrong
____________ 11. A company's supply chain involves the flow of materials
and information from suppliers, through production, to the end users.
____________12. In supply chain organizations, functions must operate
independently of each other.
____________ 13. Every business organization is part of at least one supply
chain.
____________ 14. The materials in the supply chain flow toward the end of
the chain, while the information and the pesos move toward the beginning of
the
chain.
____________ 15. Supply chains are sometimes referred to as value chains
because they reflect the concept that value is added as goods and services
progress through the chain.

Answer Key No. 6

I.
1. B
2. C
3. A
4. D
5. B
6. C
7. D
8. D
A 9.
10. A
11. True
12. False
13. True
14. False
15. True

Task Sheet No. 6

We will do a role playing of the recruitment and selection process. Hand over
your Personal data sheet or bio-data that you have written in a separate
piece of paper. You are to apply as an Accountant, suppose that I am asking
you the following questions during an interview. Answer them briefly as you
would during your interview. You can use a separate sheet of paper.
1. Tell me about yourself.
_____________________________________________________________________
_____________________________________________________________________
 _____________________________________________________________________
_____________________________________________
2. What is your greatest strength/weakness?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_________________________________________________
3. Why do you want this job?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________
4. Why should we hire you?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
______________________________________
5. What are your goals for the future?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_______________________________
 Information Sheet No. 7
Business Implementation

Learning Outcome/s:
After going through the module, you are expected to:
a. Implement the business plan;
b. Define the business model; and
c. Identify the four core areas of a business model
Introduction to Business Implementation
What is a Business Plan?
The business plan is a written document prepared by the
entrepreneur that describes all the relevant external and internal elements
involved in starting a new venture. It is often an integration of functional
plans such as marketing, finance, manufacturing, and human resources.
Who should write the Business Plan?
The business plan should be prepared by the entrepreneur; however,
he or she may consult with many other sources in its preparation. Lawyers,
accountants, marketing consultants, and engineers are useful in the
preparation of the plan.
Who reads the Business Plan?
The business plan may be read by employees, investors, bankers,
venture capitalists, suppliers, customers, advisors, and consultants. Who is
expected to read the plan can often affect its actual content and focus?
Since each of these groups reads the plan for different purposes, the
entrepreneur must be prepared to address all their issues and concerns. In
some ways, the business plan must try to satisfy the needs of everyone,
whereas in the actual marketplace the entrepreneur’s product will be trying
to meet the needs of selected groups of customers.
However, there are probably three perspectives that should be
considered in preparing the plan. First is the perspective of the
entrepreneur, who understands better than anyone else the creativity and
technology involved in the new venture. The entrepreneur must be able to
clearly articulate what the venture is all about. Second is the marketing
perspective. Too often, an entrepreneur will consider only the product or
technology and not whether someone would buy it. Entrepreneurs must try
to view their business through the eyes of their customer. Third, the
entrepreneur should try to view his or her business through the eyes of the
investor. Sound financial projections are required; if the entrepreneur does
not have the skills to prepare this information, then outside sources can be
of assistance.
The business plan is valuable to the entrepreneur, potential investors,
or even new personnel, who are trying to familiarize themselves with the
venture, its goals, and objectives.
The business plan is important to these people because:
• It helps determine the viability of the venture in a designated market.
• It provides guidance to the entrepreneur in organizing his or her
planning activities.
• It serves as an important tool in helping to obtain financing.

What is A Business Model?

A business model is a conceptual framework that describes how a
company creates, delivers, and extracts value. It includes a network of
activities and resources to create a sustainable and scalable business that
delivers value to target customers. Business models help entrepreneurs
generate value and scale. They do this in several ways: by fulfilling unmet
needs in an existing market, by delivering existing products and services to
existing customers with unique differentiation, and by serving customers in
new markets.
A business model is not the same as a business plan, although
people often confuse the two. A business plan is a formal document that
provides background and financial information about the company, outlines
your goals for the business, and describes how you intend to reach them. A
business plan supports the business model and explains the steps
necessary to attain the business model’s goals.

The Four Parts of a Business Model

The Offering
The first part of the business model is the offering, which identifies
what you are offering to a particular customer segment, the value generated
for those customers, and how you will reach and communicate with them.
The offering includes the customer value proposition (CVP), which
describes exactly what products or services your business offers and sells to
customers. It explains how you can help customers do something more
inexpensively, easily, effectively, or quickly than before.
Customers
Customers include the people who populate the segments of a market
that your offering is serving. Entrepreneurs typically can’t serve everyone in
a market, so you have to choose whom best to target. In addition, you have
to determine how you will reach those segments and how you will maintain
a relationship with the customer. This led to defining a target market that
included mostly young, health-conscious professionals, college students,
and older teens, as well as moms-to-be and new moms.
Infrastructure
 The infrastructure generally includes all the resources (people,
technology, products, suppliers, partners, facilities, cash, etc.) that an
entrepreneur must have in order to deliver the CVP. For example, when
Anna Haupt and Terese Alstin wanted to make their idea for the invisible
bicycle helmet become a reality, they enlisted investors, cycling experts,
designers, suppliers, and retailers to support the creation, promotion, and
sales of the product.

Financial Viability
Financial viability defines the revenue and cost structures a
business needs to meet its operating expenses and financial obligations:
How much will it cost to deliver the offering to our customers? For example,
when the founders of Parlor Skis, failed to get their skis into brick-and-
mortar stores, they had to ensure that their custom-made skis were still
profitable by being sold primarily online. People often make a mistake in
thinking that the business model is just about revenue and costs, but a
business model is more than a financial model. It has to describe more than
how you intend to make money; it needs to explain why a customer would
give you money in the first place and what’s in it for the customer. This is
where the CVP comes in.

Writing the Business Plan

The business plan could take hundreds of hours to prepare,
depending on the experience and knowledge of the entrepreneur as well as
the purpose it is intended to serve. It should be comprehensive enough to
give any potential investor a complete picture and understanding of the new
venture, and it should help the entrepreneur clarify his or her thinking
about the business.
The outline for a business plan is illustrated below. This outline is
only meant to be a guide. As we discussed earlier in this chapter, the
entrepreneur should be aware that each business plan may be different
depending on the purpose of the plan and who will be reading it. However,
most of the items in this outline are critical elements in a general plan and
should be addressed by the entrepreneur.
A Very Good Business Plan
The next step for the entrepreneur is to have a very good business
plan. It is a wise thing to do in order to chart the course of the business
properly and to focus the efforts of the entrepreneur.
The purposes of the business plan are:
1. Entice partners, investors, and bankers to fund a business venture.
2. Communicate what the enterprise is all about, what market it
wants to serve.
3. Show what financial returns it could muster.
The business plan should contain important information about the following:
• The business itself;
• The organizers;
• The management and technical people;
• The financial structure;
• Its market potential;
• Its target market;
• Its projected sales, expenses, and profits; and
• Its probable risks.
The business plan should begin with business concept and the vision
for the enterprise in the next three to five years.
It should proceed to an enumeration of business objectives, key result
areas, and performance indicator. An overall enterprise strategy should then
be articulated to show how the performance could be attained.
Next, the business plan should contain an executive summary of the
following:
1. The organizers and the key people behind the nosiness and why these
people have the resources, talents, skills, and technology to achieve success;
2. The market being targeted and why there is enough market potential to
justify the business;
3. How the business will be operated and organized, including all
outsourcing,
subcontracting, franchising, and licensing agreements;
4. The products or services to be offered and why they are right for the
market;
5. The investment capital required for the business and what exactly it
would be used for;
6. The technology, the technical expertise, the equipment, and material
suppliers to be utilized;
7. The capital structure (short- and long-term debt, stockholders’ equity) of
the business;
8. The operating budget, financial projections (income statement, balance
sheet, cash flow), and return on investment prospects; and
9. The risks in the business and the contingency measures to counterpart
them.

Organizing and Structuring the Enterprise

The Business Plan must be able to estimate the capital required by the
enterprise.
The capital required would be dictated by the investment in the assets of the
enterprise. These assets are composed of the following:
1. The current assets, which are short-lived assets. They are composed of
cash, inventory, accounts receivables, and other current assets.
2. The long-lived or fixed assets. They are composed of property, plant,
and
equipment.
3. The other assets. They are composed of organizational and pre-operating
expenses, interest rate, therefore, is the obvious choice of the manager when
asked to make a decision.
The assets of the enterprise are financed by its liabilities. These liabilities
are
composed of:
• Current liabilities such as suppliers’ credit and other short-term credit;
• Long term debt; and
• Owner’s equity

Sole proprietorship
The simplest and easiest enterprise to organize. The owner or the
entrepreneur has sole control over the enterprise. He or she reaps all the
profits and, also, all the losses. But he or she will also incur all the risk.
The following are clearances that must be obtained to secure a mayor’s
permit or municipal license before they can operate in a locality.
• Barangay clearance
• Fire safety clearance
• Certificate of electrical inspection
• Certificate of occupancy
• Department of Trade and Industry (DTI) certificate
• Lease contract if space is leased
• Locational clearance
There may be additional requirements depending on the type of
business and the ordinances issued by the concerned local government.
Partnership
If two or more persons bind themselves into a contract to contribute money,
property, and expertise in a common venture with the intention of dividing
the profits among themselves, then they would have entered into a
partnership.

• General partnership
Is composed of partners who are liable individually and collectively to all
those who have claims against them.
• A limited partnership
Consist of partners who have limited liabilities while others in the
partnership have unlimited liabilities. A limited partner is not personally
liable for all the obligations of the partnership beyond his or her prorated
capital contribution to the partnership.

• A limited partnership
Consist of partners who have limited liabilities while others in the
partnership have unlimited liabilities. A limited partner is not personally
liable for all the obligations of the partnership beyond his or her prorated
capital contribution to the partnership.
 The partnership should obtain all the required government clearances,
permits, and licenses. It should get:
• A bank certificate of deposit on the money contributions of the partners;
and
• The approval for its partnership name from the Department of Trade and
Industry.

Corporation
The third form of business organization. Like the partnership, the
corporation also has a separate legal personality quite distinct from the
investors who contributed money to the enterprise.
Four Types of Corporation:
1. Stock Corporation. This type issues capital stocks divided into shares
(or proportions of the total capital). The corporation is authorized to raise
capital that has a corresponding number of shares.
2. Non-Stock Non-Profit Corporation. This is organized to carry out a
purpose or purposes other than generating profits for investors. All the
surpluses (or profit equivalents) generated by the corporation are not
distributed to the funders in the form of dividends. Rather, they are plowed
back into the corporation or the foundation to contribute further to the
attainment of its mission.
3. Close Corporation. This has articles of incorporation that limit the
ownership of issued stocks to at most 20 persons. There are strict
restrictions on the transfer of stocks. The stocks cannot be listed in any
stock exchange nor can any public offering of shares be made.
4. Corporation Sole. It is a special form of corporation allowed by law,
usually associated with the clergy. The Corporation Sole is a trusteeship
that is set up for the purpose of administering and managing the affairs,
property, and temporalities of a church or group of clergies.
 Self-Check No. 7
I. Choose the letter of the best answer.
1. It is a written document that describes in detail how a business is going
to
achieve its goals.
a. Business Certificates
b. Business Plan
c. Enterprise
d. Company
2. It is another word for a for-profit business or company, but it is most
often
associated with entrepreneurial ventures.
a. Benchmark
b. Franchise
c. Enterprise
d. Corporation
3. It is calculated as total revenue less total expenses.
a. Profit
b. Asset
c. Financial forecast
d. Revenue
4. It is a short statement of why an organization exists, what its overall goal
is.
a. Vision statement
b. Business Plan
c. Income Statement
d. Mission Statement
5. It is a sum of money provided to a company to further its business
objectives.
a. Liabilities
b. Income
c. Capital investment
d. Expenditures
6. It is an estimation of revenue and expenses over a specified future period
of
time and is utilized by governments.
a. Budget
b. Profit
c. Cash
d. Income
7. The one who places capital into a project or business with the intent of
making
a profit from the initial placing of capital.
a. Entrepreneur
b. Manager
c. Investor
d. Customer
8. These are resources that your business owns or leases that provide
economic
value.
a. Assets
b. Budget
c. Expenses
d. None of the above
9. It is based on a marketing concept which can be adopted by an
organization as
a strategy for business expansion.
a. Organization
b. Marketing
c. Franchising
d. None of the above
10. It is a term for financial assets, such as funds held in deposit accounts
and/or
funds obtained from special financing sources.
a. Salary
b. Income
c. Net-profit
d. Capital
 Answer Key No. 7
I.Multiple Choice
1. B. Business Plan
2. C. Enterprise
3. A. Profit
4. D. Mission Statement
5. C. Capital Investment
6. A. Budget
7. C. Investors
8. A. Assets
9. C. Franchising
10. D. Capital

Task Sheet No. 7

Read the business story below and make a reaction for two sets of
long bond papers. The Font style would be Century Gothic and 12
would the font size. Normal spacing should be used. Margin: Left=1”,
right= .75”, top=1”, and bottom=.75”. Failure in following direction will
have corresponding deductions of overall score.

A softball teammate tells you about a new product he has heard about
that substitutes for chewing tobacco. You have recently sold your business in
California and you are looking for some opportunities to invest your money in an
interesting start-up. As a longtime athlete in high school and college, you have
continued to play softball in local leagues and would love to entertain some way
to invest in a product that would involve professional athletes. Would you
consider investing in the new product?

We all watch baseball players that are often chewing tobacco and
constantly spitting, much to the dismay of viewing audiences. Pat Pezet and Matt
Canepa have a solution to the chewing tobacco problem as well as a great
substitute for those who need a caffeine boost and do not have the ability to
make a cup of coffee. Their innovation is chewable flavored coffee pouches that
contain about as much caffeine as a quarter cup of coffee as well as a small
amount of vitamins. They come in two flavors: mint chocolate and mocha.
Canepa and Pezet were both amateur and minor league baseball players and
were finishing their degrees at California Polytechnic State University when one
night while working on an economic project, they decided to stuff wads of coffee
grinds in their mouths instead of making a pot of coffee. The caffeine “kicked in”
and they both decided that they might be on to something.

After this discovery, the two friends won a couple of business plan
competitions that netted them funds and interest from investors who heard their
presentation. In 2009, with their business plan and initial funding, they launched
Grinds. As a rollout, they targeted minor and major league baseball players with
Grinds as a substitute for chewing tobacco. Word of mouth quickly elevated their
success such that a number of players have become testimonials for the product.
Recently, the company has been featured on ESPN, NESN, and Fox Business.

Since its inception, the company has shown increased growth in sales and
revenue. With limited funds, they have utilized social networks such as Twitter
and Facebook to get the word out about their product. They are considering FDA
approval since the product is considered a supplement. Other options are to
increase the flavors offered and to consider other channels of distribution such as
retail stores.

Source: Adapted from www.getgrinds.com; www.twitter.com/

getGRINDS; www.facebook.com/getGRINDS; and “Grinding
It Out,” by Matt Villano, Entrepreneur (September 2011), p. 21.
 Information Sheet No. 8
Preparing, Analyzing, and Forecasting Financial Statements

Learning Outcome/s:

After going through the module, you are expected to:

a. Forecast the revenues of the business;
b. Create projected (pro forma) financial statements;
c. Understand the basic financial statements through ratio analysis;
and
d. Explain how to interpret financial ratios

Basic Financial Statements

The basic financial reports that measure a company’s financial
position: the balance sheet, the income statement, and the statement
of cash flows. The level of financial sophistication among small business
owners may not be high, but the extent of financial reporting among small
businesses is.

The Balance Sheet

The balance sheet takes a “snapshot” of a business’s financial

position, providing owners with an estimate of its worth on a given date. Its
two major sections show the assets the business owns and the claims
creditors and owners have against those assets. The balance sheet is usually
prepared on the last day of the month.

The balance sheet is built on the fundamental accounting equation:

Assets = Liabilities + Owner’s equity. Any increase or decrease on one side
of the equation must be offset by an increase or decrease on the other side,
hence the name balance sheet. It provides a baseline from which to measure
future changes in assets, liabilities, and equity. The first section of the
balance sheet lists the company’s assets (valued at cost, not actual
market value) and shows the total value of everything the business owns.
Current assets consist of cash and items to be converted into cash within
one year or within the normal operating cycle of the company, whichever is
longer, such as accounts receivable and inventory. Fixed assets are those
acquired for long-term use in the business. Intangible assets include items
such as goodwill, copyrights, and patents that, although valuable, are not
tangible. that come due after one year. This section of the balance sheet also
shows the owner’s equity, the value of the owner’s investment in the
business. It is the balancing factor on the balance sheet, representing all of
the owner’s capital contributions to the business plus all accumulated (or
retained) earnings not distributed to the owner(s). The second section
shows the business’s liabilities—the creditors’ claims against the
company’s assets. Current liabilities are those debts that must be paid
within one year or within the normal operating cycle of the company,
whichever is longer, and long-term liabilities are those that come due after
one year. This section of the balance sheet also shows the owner’s equity,
the value of the owner’s investment in the business. It is the balancing
factor on the balance sheet, representing all of the owner’s capital
contributions to the business plus all accumulated (or retained) earnings
not distributed to the owner(s).

The Income Statement

The income statement (also called the profit-and-loss statement)
compares expenses against revenue over a certain period of time to show the
firm’s net income (or loss).
The Statement of Cash Flows
The statement of cash flows show the changes in a company’s working
capital from the beginning of the accounting period by listing both the
sources of funds and the uses of those funds. Many small businesses never
need to prepare such a statement; instead, they rely on a cash budget, a
less formal managerial tool that tracks the flow of cash into and out of a
company over time. Sometimes, however, creditors, lenders, investors, or
business buyers may require this information.
To prepare the statement, owners must assemble the balance sheet
and the income statement summarizing the present year’s operations. They
begin with the company’s net income for the period (from the income
statement). Then they add the sources of the company’s funds: borrowed
funds, owner contributions, decreases in accounts receivable, increases in
accounts payable, decreases in inventory, depreciation, and any others.
Depreciation is listed as a source of funds because it is a noncash expense
that has already been deducted as a cost of doing business. Because the
owner has already paid for the item being depreciated, however, its
depreciation is a source of funds. Next the owner subtracts the uses of these
funds: plant and equipment purchases, dividends to owners, repayment of
debt, increases in accounts receivable, decreases in accounts payable,
increases in inventory, and so on. The difference between the total sources
and the total uses is the increase or decrease in working capital. By
investigating the changes in their companies’ working capital and the
reasons for them, owners can create a more practical financial action plan
for the future of the enterprise.
These financial statements are more than just complex documents
used only by accountants and financial officers. When used in conjunction
with the analytical tools described in the following sections, they can help
entrepreneurs to map a firm’s financial future and actively plan for profit.
Mere preparation of these statements is not enough, however; owners and
employees must understand and use the information contained in them to
make the business more effective and efficient.

Forecasting Financial Statements

• Income Statement Forecasting

There is usually a very close relationship between Sales and Cost of
Sales (or Cost of Goods Sold). Many Companies, in determining their selling
prices, conveniently add a specific percentage mark-up or margin to the
Cost of Sales, thus establishing a predictable ratio between the two items. If
an enterprise decides to slap a hundred percent mark-up on its Cost of
Sales, the Sales figure will double the Cost of Sales. As a percentage, Cost of
Sales will, therefore, be fifty percent of Sales.

-The Sales Figures are converted to 100.0% over those three years to
get a common size picture. Next, the Cost of Sales is divided by the Sales
figure to get a percentage or ratio of Cost of Sales to Sales. After deriving the
percentage or ratios, one can make a fearless forecast of what the Cost of
Sales percentage will be in the coming years. The Sales Forecast for the next
two years can be set to approximate the growth trend of the last three years.
Since Sales grew by 10% from 2011 to 2012 and by 10% from 2012 to 2013,
the financial forecaster can reasonably assume a sales growth of 10% per
annum in the next two years.

The sales forecast for the year 2014 is, thus, Php 1,331.00 and for the
year 2015, the forecast can be set at Php 1,464.00
-The forecast for the Cost of Sales percentage is 70% of sales for the years
2014 and 2015 as given in table 1. This percentage is merely an average of
the percentages for the last three years (2011 to 2013). One can conceivably
use the latest Cost of Sales percentage (2013) to reflect the most current
scenario. The next step is to apply the 70.0% percentage to the Sales
Forecast for the years 2014 and 2015 to get the Cost of Sales peso value
forecast for those two years.

• Balance Sheet Forecasting

Forecasting what the Balance Sheet of an enterprise will look like in
the future depends a lot on the future Sales. The Current Assets of the
balance Sheet include Cash, Marketable Securities, Accounts Receivables,
Inventories (Raw Materials, Work-in-Process, and Finished Goods), and
other current Assets. Assets in the Balance Sheet must always equal
liabilities and owners’ equity. However, in financial forecasting, most
probably, the respective totals of Assets and Liabilities plus Owners’ Equity
will not be the same in the initial attempt to construct a forecasted or Pro
Forma Balance Sheet.

Table 2. Pro-Forma Balance Sheet As of Year Ending December 31, 2012

and
December 31, 2013 (In Thousand Pesos)
 Table 2 provides an example of a Pro-Forma Balance Sheet with
explanatory notes on the side to indicate the assumptions used by the
forecaster.

-Since there would be additional long-term loan to finance the

additional Fixed Assets, interest expenses would go up. This means that the
forecaster would have to adjust the Pro-Forma Income Statement previously
made as shown in Table 3. Since the Net Income After Taxes would go down
from Php 6,000 to Php 5,400, there would be a need to increase loans by
Php 600 in order to balance the Balance Sheet.
• Funds Flow Forecasting
To forecast the Funds Flow, the financial forecaster should compute
for
the increase or decrease in the different items found in the Assets and
Liabilities columns, when comparing the actual or previous year’s Balance
Sheet and the Pro Forma Balance Sheet. Decreases in Assets and increases
in Liabilities are sources of funds, while increases in Assets and Decreases
in
Liabilities are uses of funds.

Table 4. Cash Position Forecast using Sources and Uses of Funds

-The Funds Forecast is also called the Cash Position Forecast as can be seen
in Table 4. Starting from the beginning cash balance, the forecaster adds the
Sources Funds to obtain Cash Available. From there, the Uses of Funds are
subtracted in order to obtain the Net Cash Position (Ending cash Position)

Table 5. Adjusted cash Position Forecast

-The Forecaster should adjust the reduction in the Net Fixed Assets account
caused by the increase in additional Accumulated Depreciation form the
previous year to the forecasted year.
-if one assumes that the Additional Accumulated Depreciation is Php 200,
then this means that the Depreciation Expenses for the year is also Php 200.
Table 5. Reflects these adjustments. Other adjustments have to be made
because of the accrual method used.

• Cash Flow Forecasting

 The entrepreneur or finance manager is concerned about the
enterprise’s survival on a day-to-day basis as well as its long-term
sustainability. Cash is a precious commodity that will make the enterprise
live on and on. It is crucial, therefore, to monitor and budget the enterprise’s
cash position on a daily, weekly, monthly, and yearly basis.

Table 6. ACME Enterprises Actual and Projected Income Statements (In

Pesos)

-Take the example of ACME Enterprises in Table 6. It has a policy and

actually
experiences a 30-day sales collection period. It purchases the raw materials
and pays for the labor costs and outlays for overhead expenses in cash one
month before they recognized as Cost of sales. In other words, ACME’s
products must be produced one month before they get sold. Most (80%) of
the Selling, General, and Administrative (SGA) Expenses are paid in cash
during the operating month. However, 20% is paid one month later.

-Interest expenses on long term debt are paid on June 30 and December 31.
The amortization of principal payments is also paid on the same dates. Half
of the taxes for the previous year’s income is paid on April 30 while the other
half is paid on July 31.

-Income Taxes are pegged at 25% of Net Income before Taxes. Beginning
Cash
Balance as January 1, 2012 is Php 25,000.

• Using Financial Forecast to Evaluate Business Investment Decisions

The Income and Cash payback period was introduced as a method to
evaluate business investments. The construction and forecasting of
Financial Statements would help the entrepreneur get a firmer grip on the
viability of his or her enterprise.
Self-Check No. 8
I. CORRECT THE SENTENCES: Identify the word that makes the
sentence incorrect and write down the correct one.
1. Market prices tend to be relatively high in a very competitive business.
2. After forecasting Sales and Cost of Sales, the Gross profit figures can be
derived by adding the Cost of Sales from Sales.
3. The financial forecaster can go through each Operating Expense item and
determine how it will behave in the future as Sales rise.
4. Once all the Operating Expenses are computed, they should be summed
up. The total is then added from the Gross Profit forecasted in order to
derive
Operating Profit.
5. Once Current Liabilities must be individually looked up. Prepaid
insurance, for example, can be determined by examining how much
premium will be required to insure the company’s properties for the coming
year.

2. How can planning through Financial Statement be useful for the

entrepreneur?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
______________________________________________________________

II. COMPLETE THE SENTENCES: Choose the correct word or phrase

from the box to complete each sentence.

1. Whenever we talk about the __________________________, assets must

always equal liabilities and owner’s equity.
2. ______________________________ comprise feasibility studies, enterprise
promotion activities, pre-operating expenses, and other set-up costs.
3. ____________________ is the premium paid by the enterprise for an asset or
share of stock whose book value is lower than the purchase or acquisition
price.
4. ____________________ are payments to holders of an invention or
technology
5. Forecasting _________________________ requires an assessment of the
enterprise’s future requirements for land, building, machinery, equipment,
furniture, fixtures, and other long-lasting assets.
6. If the Cash goes below the minimum balance, the forecaster can cover the
cash shortfall by obtaining more loans or by liquidating
_________________________ into cash.
7. Marketable Securities can be the repository of excess cash. It can be
drawn
down or reduced if the _______________________________ falls below the
minimum required.
8. The ___________________________ may also decide to collect all of the
Advances and not give any more of such Advances to employees, in which
case the advances to Employees becomes zero for the next year.
9. The construction and forecasting of Financial Statements would help the
_____________________ get a firmer grip on the viability of his or her
enterprise.
10.To determine the _________________________, the forecaster has to refer to
the depreciation schedules calculated by the enterprise’s accountants for
each fixed asset.
 Answer Key No. 8

I. CORRECT THE SENTENCES

1. Low - High
2. Subtracting - Adding
3. Forecaster - Accountant
4. Subtracted - Added
5. Assets - Liabilities

II. COMPLETE THE SENTENCES

1. Balance Sheet
2. Organizational Expenses
3.Goodwill
4. Patents
5. Fixed Assets
6. Marketable Securities
7. Cash Balance
8. Enterprise
9. Entrepreneur
10. Depreciation Expenses
 Task Sheet No. 8

I. Use the following scenario to fill out the Monthly Cash Flow
Statement Worksheet.

You pay a 7,500 You receive your You pay rent of You pay your
Car payment monthly gross 22,500 per month medical
salary of 100,000. insurance
of 3,750 a month
You pay your You pay your car You pay for Your Your monthly
renter's insurance insurance of Php monthly utilities are due.
of 1,000 7,500 groceries 10,000 You owe 6,250
Your monthly bill It's your mother's Taxes come out You go to a
for gasoline birthday. You of your movie
comes in and purchase a 2,500 paycheck with a friend that
must pay 3,750 present Federal Tax 7,500 cost 500.
State tax 2,500
Social security
10,000
You put 5,000 You hit a pothole You go out to You find the
into and have a flat dinner with perfect outfit for
savings for a tire. You must friends. Your bill is your date this
vacation at the pay 1,250 weekend. You
beach 3,750 for a new pay
one 5,000 for the
outfit
 Information Sheet No. 9

Identifying Profit or loss to Generate the Overall Report on

the Activity of the Business

What is Profit and Loss?

A person engages in business primarily for profit or return on
investments. Profit is the difference between the amount invested and the
monetary gain from the investment.
There are cases when losses are increased in business instead of
realizing the desired profit. LOSS is the deduction in the value of
investments.
The Income Statement is the financial statement that shows if a
business is earning a profit or incurring a loss.
In interpreting the income statement, you should be aware of the
following terms and formulas:

GROSS means the total amount without any deductions.

NET is the remaining amount after the deductions.
NET SALES are obtained when refunds are deducted from the gross sales.
RETURNS, ALLOWANCES, and DISCOUNTS are payments made to
customers for returned merchandise, defective goods and for pricing
adjustments.
Gross profit = Net Sales – Cost of goods sold
Net Sales = Gross sales – Refund and allowances
Net Profit = Gross profit – Operating expenses

The Cost of Goods Sold or Buying price refers to the actual amount paid
for articles bought including the buying expenses.
The Inventory is an itemized list of goods at hand.
The Gross Profit is equal to net sales less cost of goods sold.
The Net Profit is the amount obtained when all the selling expenses are
deducted from gross profit.
The Operating or Expenses Overhead are the expenses incurred during the
selling of the product such as wages or salaries, water and electric bills,
rental, transportation, and commissions.

Formulas:
Available Goods = Beginning Inventory + Purchases
Cost of Goods Sold = Available Goods – Ending Inventory

There are cases when losses are increased in business instead of

realizing the desired profit. LOSS is the deduction in the value of
investments.

To understand more of these formulas, let’s apply them in these

examples:

1. On May 1, the merchandise inventory of Kesten Tires and Battery Supply

was P165,256.13 and its purchases after that date amounted to
P110,901.45. On July 31, the store inventory was P98,542.63. How much
goods were sold?

Solution:
Beginning Inventory P 165,256.13
Add Purchase 110,901.45
Goods for Sale P 276,157.58
Less Ending Inventory 98,542.63
Cost of Goods Sold P 177,614.95

2.The total sales of Kristin Angel Department Store during the month of
December were P5,976.12. The cost of goods during the month was
P2,324,080.25. The expenses were as follows: salaries and wages
P170,910.83; rent P350,000; light and water bills P418,265.34;
miscellaneous expenses P120,450.25; and some of the merchandise amount
to P1,480,980. Find the (a) gross profit (b) operating expenses, and (c) net
profit for the month of December.

Solution:
Gross Sales P 5,976,418.12
Less Sales Returns 1,480,980.00
Net Sales P 4,495,438.12
Less Cost of Goods Sold 2,324,080.25
Gross Profit P 2,171,357.87 (a)
Less Operating Expenses
Salaries and wages P 170,910.83
Rent 350,000.00
Light and wages 418,265.34
Miscellaneous expenses 120,450.25
Total Expense 1,059,626.42 (b)
 Net Profit P1,111,731.45 (c)
3. Paul Jackson’s report from sales of car accessories and spare parts for
the month of April was P 168,234.50, cost of goods sold P 118,097.12, sales
returned P 5,596, salaries P8,960.35, rental P15,000, light and water bills
P14,950.20, and miscellaneous expenses P12,680.36. Find (a) gross profit
and (b) net profit or loss.

Solution:

Net sales P 168,234.50

Less Cost of Goods Sold 118,097.12
Gross Profit P 50,137.38
Less Operating Expenses
Sales returns P 5,596.00
Salaries 8,960.35
Rental 15,000.00
Light and water 14,950.20
Miscellaneous 12,680.36
Total Expenses 57,776.91
Loss (P 7,049.50)

To generate the report of a business activity, this format for the

income statement is used:
 Self-Check No. 9

I.Fill in the boxes

1.Itemized list of goods at hand

2. Beginning inventory + Purchases

3. Obtained when refunds are deducted from the gross sales

4. Cost of Goods Sold = Available Goods – ________________

5. Means the total amount without any deductions

6. The deduction in the value of investments

7. This is the amount obtained when all the selling expenses are deducted
from gross profit.

8. This is the financial statement that shows if a business is earning a profit

or incurring a loss.

9. This is the different between the amount earned and the amount spent in
buying, operating or producing something.

10. Are the expenses incurred during the selling of the product such as
wages or salaries
 Answer Key No. 9

I.

1. Inventory
2. Available goods
3. Net sales
4. Ending inventory
5. Gross
6. Loss
7. Net profit
8. Income statement
9. Profit
10. Operating
 Task Sheet No. 9

Compute the following problems.

Problem #1: A computer store bought 15 laptops worth P20,500 each in

Japan. They paid P4,500 each for freight charges and 12% sales tax for
every laptop sold in the Philippines. Determine the gross profit if the
computers were sold for P60,200.00 each.

Problem #2: On June 30, 2020, PSA Trading Co. has the following
information: revenue from sales is P98,760; sales return is P35,500; cost of
goods sold is P8,490; salaries cost P 14,600; rent is P8,000; light and water
expenses are P7,550 and miscellaneous expenses are P9,520.Generate an
income statement and find:

a. Gross Profit
b. Net Profit or Loss

Problem #3: AMA cooperative store had the following activities for year
ended 2021: gross sales amounting to P94,653, the cost of goods sold was
P48,923, the operating expenses were, P8,723.15, and refunds for defective
goods amounted to P26,497.15.
Generate an income statement and find:

a. Net Sales
b. Gross Profit
c. Net Profit
 Sheet Information No. 10

Performing Bookkeeping Tasks

Learning Outcome/s:

After going through this lesson, you are expected to:

a. define and identify the roles of a bookkeeper;
b. learn the tasks performed by a bookkeeper;
c. determine the basics of bookkeeping;
d. know the importance of a bookkeeper; and
e. understand the benefits of having a good bookkeeping system for a
business

What is a Bookkeeper?

A bookkeeper is an employee of a small to mid-size entity that

performs the processing and recording of the day-to-day financial operations
of a business.
After the bookkeeper records transactions, the accountant or the
business owner will review the bookkeeper’s work and make the required
adjusting entries before the company's financial statements are finalized.
The method of using debit and credit to record a transaction is called
the double - entry bookkeeping. This is invented by the Father of Modern
Accounting Luca Pacioli in the fourteenth century. This is the bookkeeping
system used up to this day.
To understand the double-bookkeeping system, here is an example
below:
You purchased a brand new P30,000 laptop for your recently-opened meat
shop business.

Under double-entry accounting, you would make two entries: you trade one
asset (cash) for another asset (laptop). So, you have to adjust both the cash
and laptop accounts in your books.

Under double-entry accounting, every debit always has an equal

corresponding credit, which keeps the following equation in balance. Always
keep this in mind:

Assets = Liabilities + Equity

Accountants call this the accounting equation, and it’s the foundation
of double-entry bookkeeping. If at any point this equation is out of balance,
that means the bookkeeper has made a mistake somewhere along the way.

In this example, only the assets side of the equation is affected: your
assets (cash) decrease by P30,000 and your laptop assets increase by
P30,000, and the equation remains balanced.

Let’s try another example. Let’s say you just bought P20,000 of meat
inventory on credit.

In this case, the asset that has increased in value is your Inventory.
Because you bought the inventory on credit, your accounts payable account
also increases by P20,000.

Let’s take a look at the accounting equation again:

Assets = Liabilities + Equity

In this case, assets (+P20,000 in inventory) and liabilities (+P20,000) are

both affected. Both sides of the equation increase by P20,000, and the
equation remains balanced.
Last example: how do you record accounts receivable under this accounting
method?

When you send an invoice to a client after finishing a sale of P5,000 that
costs P4,000, you would “debit” accounts receivable and “credit” the sales
account.

Then, record the cost of the sale which is P4,000 by a “debit” to purchases
and “credit” the inventory.

After the client pays you, you would then debit your cash account, and
credit
accounts receivable.
 Self-Check No. 10

I. Multiple Choice. Choose the letter of the best answer. Write the
chosen letter on a separate sheet of paper.

1. Which is not an asset?

a. cash
b. inventory
c. loans payable
d. vehicle
2. Who is the Father of Modern Accounting?
a. Luca Paciolli
b. Lucca Pacioli
c. Luca Pacioli
d. Luca Pacilli
3. The bookkeeping system used up to today is called ____________.
a. Single-bookkeeping
b. Debit-credit bookkeeping
c. Double-line bookkeeping
d. Double-entry bookkeeping
4. If you purchased a land in account,
a. Liabilities increase, assets decrease
b. Liabilities decrease, assets increase
c. No effect
d. Assets increase, liabilities increase
5. The accounting equation is defined as
a. Assets = Liabilities - Equity
b. Assets = Liabilities + Equity
c. Assets + Liabilities = Equity
d. Assets + Liabilities - Equity
6. What is the nationality of the Father of Modern Accounting?
a. Italian
b. Russian
c. French
d. British
7. Which is an equity account?
a. Loan payable
b. Inventory
c. Petty cash
d. Owner’s drawings
8. Which is a liability account?
a. Loan payable
b. Inventory
c. Petty cash
d. Owner’s drawings
9. A current asset is defined as any asset which can reasonably be expected
to be
sold, consumed, or exhausted through the normal operations of a business
within the current fiscal year or operating cycle. Which of the following is a
current asset?
a. Land
b. Inventory
c. Vehicle
d. Machinery
10.Noncurrent liabilities, also known as long-term liabilities, are obligations
listed
on the balance sheet not due for more than a year. Which of the following is
a noncurrent liability?
a. Accounts payable
b. Tax payable
c. Notes payable due for 18 months
d. Interest payable
11.You purchased inventory worth P5,000, paying P2,500 cash and the
other half
on account. Which of the following is correct?
a. Liabilities increase by P5,000
b. Cash decrease by P5,000
c. Inventory increase by P2,500
d. Cash decrease by P2,500
12.You borrowed P50,000 cash from the bank to finance your startup
business.
Which of the following is correct?
a. Cash increase by P50,000
b. Equity increase by P50,000
c. There is no effect for liabilities
d. Cash decrease by P50,000
13.You sold land for P50,000, receiving payment of P35,000 cash and the
balance
in account. Which of the following is correct?
a. Cash increase by P35,000
b. Equity increase by P15,000
c. Accounts payable increase by P15,000
d. Liabilities increase by P15,000
14.Anita bought supplies in account for P8,000. Which of the following is
incorrect?
a. Accounts payable increase by P8,000
b. No effect on cash
c. No effect on liabilities
d. Supplies increase by P8,000
15.Bea invests on a new machinery worth P80,000, paying P50,000 in cash
and
balance in account. Which of the following is incorrect?
a. Accounts payable increase by P30,000
b. Accounts receivable increase by P30,000
c. Cash decrease by P50,000
d. Machinery increase by P80,000

Answer Key No. 10

I.

1. C
2. C
3. D
4. D
5. B
6. A
7. D
8. A
9. B
10. C
11. D
12. A
13. A
14. C
15. B
 Task Sheet No. 10

I.Journalize the following transactions

After working as a bookkeeper for Mae’s RTW business, she refers you
to another client and her good friend, Crystal. She owns a gadgets shop and
needs your help to keep her company books updated.

Here are the January transactions for her business: Jan 1 Bought
new machineries worth P80,000 in account.

Jan 5 Purchased P50,000 worth of computer parts inventory, paying

P20,000 cash the balance in account.

Jan 9 Paid P5,000 cash for interest from a bank loan.

Jan 17 Sold two machineries for a total of P9,000 in cash.

Jan 19 Sold P20,000 worth of computer parts for P35,000 in cash.

Jan 25 Purchased new machinery for P10,000 in account.

Jan 29 Sold P10,000 worth of computer parts for P20,000 in account.

References: