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MODULE 2: DEVELOPING THE BUSINESS PLAN

The entrepreneurial process consists of finding, evaluating, and developing business opportunities.

It is not a straightforward or “smooth-sailing” process because it is about creating something new by overcoming challenges.

THE ENTREPRENEURIAL PROCESS COVERS 4 PHASES:

1. 1st phase- is to identify and evaluate the opportunity 

2. 2nd phase- is to develop a business plan

3. 3rd phase- is to determine the resources required

4. 4th phase or the final phase- is to manage or implement the enterprise

NOTE: Although these phases flow in this order, no stage is dealt with in isolation with other phases or is completed before the activities in other phases

IDENTIFY AND DEVELOP THE BUSINESS OPPORTUNITY (PHASE 1)-

The entrepreneur must be alert to business possibilities that may come from various resources such as from friends, acquaintances, family members, social media, consumers, business associates, technical experts, government agencies, or even from individuals whom you don’t know and just met accidentally

DEVELOP A BUSINESS PLAN

 (PHASE 2)- You need to prepare a good business plan to secure the defined opportunity. Writing a good business plan requires careful thinking and analysis. A good business plan is essential to developing the opportunity, determining the resources required, obtaining the resources, and, ultimately, managing the chosen venture

DETERMINE THE RESOURCES REQUIRED (PHASE 3)- Determine the resources you need to address the opportunity. You need to acquire those resources in a timely manner, also taking into account the quality and costs involved. To do this, you must identify alternative sources for your suppliers that will enable you to compare their offers and get the best possible deal

MANAGE OR IMPLEMENT THE ENTERPRISE (PHASE 4)- After acquiring the required resources you are now ready to implement the business plan. In operating your business, you need to sharpen your management skills by ensuring that your plans are carried out in an effective and timely manner. You need to solve operational and human-related problems that you encounter in your business 

IDENTIFYING BUSINESS OPPORTUNITIES

 In business, a potential market refers to a specific need or problem of a group of people in which an entrepreneur recognizes as a business opportunity. Entrepreneurs develop a mindset of recognizing and seizing business opportunities because not all persons can recognize a business opportunity even if it is right in front of them. Sometimes, even if they see a potential opportunity, not all take a decisive action to create a business out of it.

BUSINESS OPPORTUNITY- refers to a specific need or a problem where one can take action to make a profit (or create social impact in the case of social entrepreneurship)

TWO MAIN APPROACHES FOR OPPORTUNITY IDENTIFICATION

THERE ARE 2 APPROACHES FOR IDENTIFYING BUSINESS OPPORTUNITIES:

1. Finding approach

2. Developing Approach or Building Approach

FINDING APPROACH- Involves scanning the environment for information to provide ideas for starting up a business. It is commonly used for identifying opportunities because you rely on available information to guide your business ideas. This approach assumes that business opportunities exist “outside” of the entrepreneur. In using this approach, you need to gather information from the external environment related to business and economic trends

MACRO ENVIRONMENTAL FACTORS- are those that generally affect the overall economy and state of business

MICRO ENVIRONMENTAL FACTORS- Directly affect specific types of industries 

6 MACRO AND MICRO ENVIRONMENTAL FACTORS THAT GUIDE IN IDENTIFYING BUSINESS OPPORTUNITIES

BUILDING APPROACH- Another approach to opportunity identification is the building approach. This involves creating a business opportunity that does not exist in the environment. This approach assumes that opportunities are within the entrepreneur as an individual. Unlike the finding approach, the building approach understands that key information is either non-existent or incomplete in guiding business decisions. This approach also gathers information from the environment, but in uses them to create something unique

SCREENING BUSINESS OPPORTUNITIES TO SELECT THE BUSINESS VENTURE

OPPORTUNITY SCREENING- Is the process of assessing potential business opportunities and selecting the best opportunity to invest in. A compelling business opportunity must be viable and doable

VIABILITY- Means that the business has the ability to start, grow and survive. For an opportunity to be viable, the business must have the capacity to generate value. 

ECONOMIC VALUE- The common form of value in an enterprise. In the case of a commercial enterprise, economic value is most important— it must generate profits.

Social enterprise, its social value is most important (for instance, helping the poor, protecting the environment, caring for animals), which means that attaining profits mat be a lesser priority

You need to create a framework or guide to help you evaluate the attractiveness of several business options.

FRAMEWORK- Is called an opportunity attractiveness matrix, which is a set of criteria for screening and selecting the business to invest in

FOLLOWING CRITERIA FOR YOUR OPPORTUNITY ATTRACTIVENESS MATRIX TO ASSESS THE VIABILITY OF YOUR BUSINESS OPPORTUNITY

1. ALIGNMENT WITH PERSONAL VALUES, INTERESTS, RESOURCES- If the business concept is aligned with your values (your guiding principles in life) abilities, (tasks you perform quite well). Passion (what drives your energy), interests (activities you find exciting or enjoyable) and family or friends support (your social network)

2. MARKET POTENTIAL- If there are enough costumers who will buy your product or service that will earn a profit so that the business can run continuously

3. OPERATING POTENTIAL- If the process, methods, technology are available for the product or service 

4. FINANCIAL POTENTIAL-  If the business will generate a profit — expected revenues would be at least enough to cover expenditure costs; if the working capital required is minimum and can be met

5. THREAT FROM COMPETITORS- If the presence or sudden moves of competitors would not severely threaten your business

6. POTENTIAL DAMAGE FROM UNFORSEEN RISKS-  If certain 

unforseen events such as those related to wether, security, and public health would not severaly harm your business

OPPORTUNITIES FOR HOME–BASED BUSINESSES

Home-based businesses are becoming popular with the increasing number of individual who are self-employed and working at home. The trend toward home-based businesses has been impacted by several economic and technological developments. Home-based businesses are preferred because of their inherent advantages such as the following: 

1. No need to commute or drive to work

2. Discovery of one’s talents and skills

3. More personal freedom and flexibility in managing work

4. More time to spend with family members at home

5. Lower startup and overhead costs

6. Possibility of deducting expenses for the business use of the home when filing income taxes

DEVELOPING THE BUSINESS PLAN: START WITH THE MARKETING PLAN

BUSINESS PLAN- Is a strategic plan on how you are going to implement your chosen venture to make it successful. It is a written document that describes all the relevant external and internal factors or elements involved in starting a new venture. It covers the main functional areas in managing a business, namely, marketing, operations, organization, and finance. A business plan contains an integration of the marketing plan, operations plan, organization plan, and financial plan.

From an entrepreneurial perspective, the business plan is a road map; it lays out the steps to building your new venture. It will help you articulate where you want the business go. The business plan, therefore,is not merely a document, but a detailed planning process that you undertake before you actually implement your business venture. 

WHY IS THE BUSINESS PLAN IMPORTANT?

1. It helps determine the viability of the venture in the designated market

2. It provides guidance to the entrepreneur in organizing his or her planning activities

3. Serves as an important tool in helping to obtain financing

WHO SHOULD WRITE THE BUSINESS PLAN?

As an entrepreneur, you will be the one to write a business plan. However, for ventures that are large in size and scope, an entrepreneur may wish to consult with external sources such as marketing consultants, lawyers, accountants, graphic designers, and engineers. 

NOTE: Before deciding to hire a consultant, the entrepreneur first makes an objective assessment of his or her own skills to determine the areas that would need external support in completing the business plan

WHO READS THE BUSINESS PLAN?

This would depend on who will find value in reading it.

A business plan is written by considering 3 perspectives:

1. 1st perspective is the origin proponent of the venture—you. As an entrepreneur, you bring your passion, creativity, thinking process, and skills in setting up the business that you desire. You are the best person who can clearly articulate what your venture is all about, your goal, intentions, and the long- term outlook about it

2. 2nd perspective is the marketing side—the costumer. The entrepreneur should not forget that the business plan must be viewed from the interest of costumers. This means that the business should start with a strong costumer orientation

3. 3rd perspective is that the entrepreneur should consider is the investor. In other words, the financial soundness of the business is important. In the case of large ventures, the entrepreneur must show sound financial projections to be able to attract investors who will help expand the business

WHAT IS THE DEPTH AND LEVEL OF DETAIL IN THE BUSINESS PLAN?

The nature, size, and scope of the product or service as a venture will dictate the amount of depth and detail required. As an entrepreneur planning to put up an art gallery shop will need a comprehensive business plan because of the nature  of the skills, crafts, and resources needed to produce the artistic products and market them. In general, the differences in the scope of the business plan will depend on the nature of the business offering, such as whether it is a consumer product, an industrial product, a type of service, or a bundle of services

HOW DO YOU START THE BUSINESS PLAN? 

The business starts by focusing first on the costumers. No business will exist without the costumers. This is why the business plan starts with marketing plan

MARKETING PLAN- Is a plan of strategies that you will use to know your costumers and how to attract them to buy your product or service. In the costumers mind, you must be able to offer something different that would make them buy your product or service and not the competitor’s. Even if you are just starting your business, you must learn the skill of writing a unique selling proposition (USP) 

UNIQUE SELLING PROPOSITION (USP)- Refers to a statement that describes the most compelling attribute of your product or service that sets it apart from your competitors. It carries a  powerful message that will stick in the mind of the costumers about how your product or service stands out 

The purpose of the USP and the VP, therefore, is to clearly communicate to your target costumers how your product or service offering is unique. USP an the VP is to make your marketing strtagies focused, clear, and cosistent to send the message you want to bring across to your target costumers

The USP will lead your marketing and sales efforts so you need to craft it well. The USP answers the following: 

• Why should your costumers choose you over your competitors?

• What makes you different in the mind of the costumers?

The USP is the statement about how unique the product or service is, allowing the costumers to recall it easily. The  USP is usually more concise,direct, and attention-grabbing. Below are good examples of USPs of some Filipino and foreign-owned companies:

Apart from the USP, There’s another way to further convince costumers of the greatness of your product or service—the value proposition (VP) 

VP- is the definitive statement that clearly identifies the benefits or value that a product or service can offer to the costumers. 

Note: Remember that every business is created to provide value 

VALUE- is what the costumers pay for your product or service. 

In creating VP statement, it should answer the following questions from the perspective of the costumer:

• What do I get from buying your product or service?

• What do I lose if I don’t buy your product or service?

IDENTIFYING THE TARGET MARKET

TARGET MARKET-refers to your target customers, or the specific group of persons whom you intend to sell your product or service.The target market compels you to determine your specific customers. 

AS AN ENTREPRENEUR, YOU NEED TO BE GUIDED BY THE FOLLOWING PROCESS OF SEGMENTING AND TARGETING CUSTOMERS: 

Step 1. Decide what general market or industry you wish to pursue.

Step 2. Divide the market into smaller groups based on characteristics of the customer or buying situations.

A. Characteristics of the customer

1. Geographic (e.g., region, province, municipality/city, barangay)

2. Demographic (e.g., age, gender, occupation, education, income)

3. Psychographic (e.g., personality, lifestyle)

B. Buying situation

1. Desired benefits (e.g., product features)

2. Usage (rate of use)

3. Buying conditions (e.g., time available, product purpose)

4. Awareness of buying intention (e.g., awareness of product/service, willingness to buy)

C. Select segment or segments to target

D. Develop a plan for integrating the marketing mix

BEHAVIORAL CHARACTERISTICS

Another important task in knowing your target customers is to determine their extent or the specific areas where they are located, which will give you some estimates of potential buyers. This refers to the market size, which is the total number of potential buyers of a product or service within the target market. Remember that this figure is just an approximation of your potential customers. The market size will help you estimate or calculate the potential total sales revenue that your business may generate.

CONDUCTING A MARKET RESEARCH

MARKET RESEARCH INVOLVES THE GATHERING OF DATA TO DETERMINE VITAL INFORMATION SUCH AS THE FOLLOWING: 

1. who will buy the product or service

2. what is the size of the potential market

3. what price should be charged;

4. what is the most appropriate distribution channel; 

5. what is the most effective promotion strategy to inform and reach potential customers.

AS YOUNG ENTREPRENEURS, YOU NEED TO KNOW THE FOLLOWING STEPS IN DOING A MARKET RESEARCH THAT YOU WILL NEED FOR YOUR NEW VENTURE:

Step 1. Define the purpose or objectives of the market research.

You must be able to define the specific objectives of your market research to clearly outline what you want to accomplish. Examples of these objectives are the following:

a. To find out what people think of the product or service

b. To find out if people would buy it

c. To find out the social background or demographics of potential customers

d. To find out the attitudes (favorable or not favorable) of potential customers about the product or service

e. To determine how much would potential customers be willing to pay for the product or service

f. To determine where would potential customers prefer to purchase the product or service

g. To determine where the potential customers expect to hear about or learn about the product or service

Step 2. Gather data from secondary sources.

SECONDARY SOURCES- are useful in market research and can be freely accessed through the internet, government agencies, business magazines, newspaper articles, and librariing using primary sour my exhaust first all free secondary resources before you conduct data gathering using primary sources. 

Step 3. Gather data from primary sources.

PRIMARY DATA- means new information gathered that may be through the conduct of interviews, focus group discussions (FGDs), observations, experimentation, and networking. For gathering primary data through the conduct of interviews, FGDs, and surveys, you need time to prepare them. For instance, you need to decide on the number of persons who will serve as samples. You also need to create a survey questionnaire as a research instrument.

Step 4. Analyze and interpret the results.

The results of your primary data collection should be evaluated and interpreted in a careful manner. You need to prepare tables to show and analyze the data. You can also compare and contrast the patterns emerging from the data. 

INTERVIEWS-This is a form of person-to-person communication for data gathering that may be done either in face-to-face or virtual conference methods. An interview allows the other person to quickly respond back, ask questions, and explain deeper the ideas or points given. Interviews consume more time due to the depth of questions you can ask. 

FOCUSED GROUP DISCUSSION (FGDs)- This usually involves three of five persons who form a panel where the same set of questions are asked to each member/target customer. This method for gathering information from people is usually preferred due to the busy schedules of business practitioners. The advantage of the FGD is that the panel members know one another's responses to the set of questions that may benefit them individually, and which may also influence their ideas in the succeeding group discussion.

SURVEYS-This method requires preparing a questionnaire that is given to a wider number of respondents/target customers.