THE ENTREPRENEURIAL MIND FINALS
By Fraulein Lorraine Young & Elena Marie Abante, BSN 2C
MODULE 3, LESSON 1: THE ENTREPRENEUR AND HIS RESOURCES
Businesses can raise capital in either of two ways: debt, or equity.
Debt is when a business borrows money and has an obligation to
pay money back over time with interest, e.g., a loan.
Equity is when money is invested into the company in exchange
for ownership rights,
e.g., founders investing their own money in a start-up.
Early-stage businesses rarely raise money by incurring debt
because it is unclear whether or not the company will be able to
pay back any borrowed money. With this in mind, it is critical for
owners of early-stage start-ups to know where they can find
sources of equity funding, in addition to their own investment. For
one to get start-up capital, they have to exhibit a high level of
personal initiative.
Most common sources of Avenues for finding Starting Capital to
get your business up and running.
This can be done in three ways;
1. Self. This is when one decides to personally finance their
business idea. The individual will look carefully into their idea and
see areas that will bring money to the business. Many times these
areas are not so obvious so the entrepreneur's mind seeks for
funding beyond a defined box.
Self-financing is the number-one form of financing used by most
business start-ups. This includes using your own money to invest
directly in the business and using your personal assets as collateral
for outside funding.
Personal Savings Using your own savings is that there’s no cost
apart from the lost opportunity to earn interest, but of course you
need to consider the risk if things go wrong (more on that later).
And unless you’re very rich, relying only on your savings may not
be enough to fund a business, especially as it grows larger. If you
have a healthy balance in your savings account, this is the most
obvious source to draw on. Thousands of business owners have
also tapped their retirement funds.Utilizing underutilized assets
are things with fixed costs that are not being used as much as they
could be. They are important because they can be used more and
from their owner’s perspective all additional usage is free. Money
rounds or “Paluwagan” and Maximizing benefits from suppliers.
2. Informal Sector This is mainly though the social networks one
has made through friends, family, and colleagues at work places or
people in one’s neighbourhood. These different networks can
provide capital to an individual based on not only their belief in
the business idea but also the trust they have gained over a period
of time. They include among others business angels, co-operative
societies and maximizing benefits from suppliers.
Family, Friends and others Are common grounds for early-stage
source of pre-seed and seed financing. When businessman seeks
capital from these sources most or all of the investors in the
business have some close personal connection to the founders for
or for worse.
Business Angels
Angel Investor groups are collective angel networks that share
information about potential investment opportunities for other
angels.
Money Lenders
A person whose business is lending money to others who pay
interest
3. Formal Sector
This is the most difficult of the different sources since it requires a
lot of skill, persistence and a certain level of accomplishment in
society. The formal institutions will ordinarily give more money to
any start up compared to informal sector and self-funding.
However, trends show that their money is encumbered with issues
like collateral/security, past performance financial reports and also
very high interest rates. In the Philippines, the formal sector
involves among others; Banks loans, venture capitalists, leasing
companies, micro credit institutions, overdraft facilities, and
government loans. Financial Institutions & Government Programs
A. From Financial Institutions
Is responsible for the supply of money to the market through the
transfer of funds from investors to the business in the form of
loans, deposits and investments
Overdraft facilities
An overdraft facility is a credit agreement made with a bank that
allows an account holder to use or withdraw more money than
they have in their account up to the approved limit. The
sanctioned overdraft limit and the interest charge will vary based
on the nature of the asset offered as collateral.
Leasing
A contract outlining the terms under which one party agrees to
rent property owned by another party.
Venture Capitalists
Is a private equity investor that provides capital to businesses
exhibiting high growth potential in exchange for an equity stake.
Bank Loans
Small business loans is granted to entrepreneurs and aspiring
entrepreneurs to help them start or expand business
Mortgages
Are loans distributed by banks to allow consumers to buy homes
they can’t pay for upfront.
Micro-credit institutions
Are organizations that provide loans to low-income clients
including micro companies and the self employed, which rationally
lack access to mainstream sources of finance from banking
institutions .Fund small entrepreneurs in developing countries.
These entrepreneurs run what are known as micro-enterprise.
a. From Government Programs
A grant is a sum of money given to an individual or businesses
both financially, in the form of grants, and through access to
expert advice, information and services
The above 3 ways for funding a start-up are great place to start
and bring the most success to the majority of businesses.
For many, the decision about whether or not is the right time to
start a business comes down to funding. There are quite few
different ways that you can go about funding a start-up, but not all
are created equal. You may have a wonderful business idea that
you have perfected, but it won’t mean much if you don’t have the
funding in place to not only make your business happen, but allow
it to succeed.
One wrong move when it comes to finances and you could be
back to square one. It is important to analyse all angles of your
business and your future goals and then analyse each type of
funding opportunity so that you make sure you’re starting business
off on the right foot.
THE 6 PRINCIPLES OF ACTION
Exploit Bootstrapping Possibilities!
Exploit bootstrapping possibilities. What probable sources do you
know of? Do not limit your options and be as creative as you can
be when exploring startup capital sources.
Raise Funds From The Right Sources
Analyze the cost of capital from different sources. Use capital
budgeting techniques like Return on Investment to determine if
the cost of capital is commensurate with your desired rate of
return. Determine credibility of your capital source
Make Progress While You Wait. Sometimes investors will ask you
to stay in touch and keep them abreast of your progress. This may
sounds like a blow-off but it's not. If you report back to them in a
few months that you've finished your product better or landed a
few big customers, they may then decide to invest.
Be Sure That The Money Hatches Money. Do not use funds
acquired to start up a business to do something else, like buy car,
take friends out to a party, pay school fees etc. It is not ethical and
will result in economic constraints like failure to pay up your
obligations when they fall due.
Pay Yourself A Salary And Use The Profits For Re-Investment.
Your business and your personal needs are two separate entities.
Cash outflows from the business should not be cash inflows to
satisfy your personal needs. Include in your operational costs, how
much you will take home (salary) and use that to cater for your
personal needs. Any profits from the business must be
re-invested.
Take Feedback. If you talk to investors, you'll get feedback on your
business idea. If you hear the same thing a few times, take those
comments seriously. Keep Your Eye on the Prize. Don't let looking
for money stop you from pursuing your business idea. If you spend
all your time begging for money, you may not make any progress.
If you hear the same thing a few times, take those comments
seriously. Smart entrepreneurs are agile and adapt quickly. It's a
great idea to have one of your partners in the business focus on
fundraising while the other partners focus on growing the
business
Other Conditions That Enhance Finding Starting Capital
Finding start-up capital is a major challenge to any entrepreneur.
However, some entrepreneurs stand a bigger chance to find
start-up capital than others. These entrepreneurs may be favoured
by their prevailing conditions. These could include among others:
Education background, Economic conditions, Cultural and social
norms, & Novelty of ideas;
Educational Background
Although education has an influence on someone to find start-up
capital, it may not hold in developing countries. However, we
should not down play the influence education has on someone’s
ability to not only understood but also to expedite the various
sources. The difference in developing countries may be explained
by the fact that most of the funds are acquired from the informal
sector. (GEM Uganda, 2003)
Economic Conditions
In most countries regardless of GDP per capita, people involved in
business start-ups are currently employed elsewhere. (GEM, 2004)
This implies that the fact that these people earn salary, then, it is
much easier for them to set aside part of their income as savings
that can later be translated into start-up capital. Also, given the
fact that they are employed, then it means they have a number of
networks from friends and colleagues at work. This automatically
improves on their opportunities for finding start-up capital.
Although GEM, 2003 & 2004 showed that the Philippines was one
of the most entrepreneurial countries in the world. The nature of
business start-ups was inferior to the start-ups in the developed
economies. This implies that when the country’s economic
conditions are not favourable then the nature of start-ups will not
be that very competitive. Issues like the interest rates, taxes, GDP
per capita, inflation, unemployment, etc. determine the economic
conditions.
Cultural and Social Norms
Cultural support is positively linked with the amount of
entrepreneurial activity (GEM, 2004). In economies where the
entrepreneurial mindset is fuelled, the chances of getting start-up
capital also increase. This could mean that the society while
fuelling entrepreneurship will avail the entrepreneurs with a
variety of option in which they can source funds.
Novelty Of Idea
There are increasing opportunities for new firms employing new
technologies to displace less efficient incumbents (GEM, 2004).
>Knowledge and Research are widely recognized as being the key
to the future. One can easily find funding for a new idea compared
to one who is replicating the idea.
EVALUATING STARTING CAPITAL OPTIONS
The Risk / Return Trade-Off
This is the principle that potential return rises with an increase in
risk.
>Low levels of uncertainty (low risk) are associated with low
potential returns, whereas high levels of uncertainty (high risk) are
associated with high potential returns.
> According to the risk-return trade-off, invested money can
render higher profits only if it is subject to the possibility of being
lost.
Types of Risk
When most people think of "risk" they think of loss. However,
there are many kinds of risk.
Capital Risk: Losing your invested money.
Inflationary Risk: Investment's rate of return doesn't keep pace
with inflation rate.
Interest Rate Risk: A drop in an investment's interest rate.
Market Risk: Selling an investment at an unfavourable price.
Liquidity Risk: Limitations on the availability of funds for a specific
period of time.
Legislative Risk: Changes in tax laws may make certain
investments less advantageous.
Default Risk: The failure of the institution where an investment is
made. Because of the risk-return trade-off, you must be aware of
your personal risk tolerance when choosing investments for your
portfolio.
Taking on some risk is the price of achieving returns; therefore, if
you want to make money, you can't cut out all risk. The goal
instead is to find an appropriate balance - one that generates
some profit, but still allows you to sleep at night. Risk comes in
many forms, but when talking about the risk-return trade off, the
primary measure of risk is volatility, or the degree to which an
investment fluctuates in price. Different asset categories are
subject to different levels of price fluctuation.
CAPITAL BUDGETING
Capital budgeting (or investment appraisal) is the planning process
used to determine whether a firm's long investment such as new
machinery, replacement machinery, new plants, new products,
and research and development projects are worth pursuing.
Capital Budgeting Process: This is the planning process used to
determine whether a firm's long term investment such as new
machinery, replacement machinery, new plants, new products,
and research and development projects are worth pursuing. Many
formal methods are used in capital budgeting such as: Return on
Investment (ROI) this is a measure of cash (or potential cash)
generated by an investment, or the cash lost due to the
investment and the payback period.
Return on investment is a rate of profit or income (realized or
unrealized). The return is sometimes adjusted for taxes consume a
significant portion of profits or income. Taxes are an expense
which may or may not be considered when calculating ROI.
Similarly, a return may be adjusted for inflation to better indicate
its true value in purchasing power.
ROI is a measure of cash (or potential cash) generated by an
investment, or the cash lost due to the investment. It measures
the cash flow or income stream from the investment to the
investor. Cash flow to the investor can be in the form of profit,
interest, dividends, or capital gain/loss. Capital gain/loss occurs
when the market value or resale value of the investment increases
of decreases. Cash flow here does not include the return of
invested capital.
ROI = PROFIT/INVESTMENT x 100
MODULE 3, LESSON 2: THE ENTREPRENEUR MANAGING
RESOURCES
Working Capital refers to all the current assets (debtors, cash,
inventories and near cash assets) that can be used to meet day to
day obligations of the business. However it is important for an
entrepreneur to determine the net working capital, the difference
between and organization’s current assets and its current
liabilities.
> Managing working capital involves taking various decisions and
actions on the current assets and current liabilities as shown in
the figure below, e.g. deciding to buy inventory in cash or on
credit.
Working capital cycle is a “Merry go around”
i.e. a never-ending cycle of activities and events.
Time and money are crucial: This links directly with the cash
operating cycle, i.e. how long it takes to get cash after producing a
good or providing a service. When you use borrowed money (bank
overdraft) to finance working capital, then it will attract interest,
which will strain the business financially. Collection of debtors
faster releases cash from the cycle while slow collection ties up
cash. Better credit terms from creditors in terms of duration and
amount will increase the cash resources. Faster moving inventory
will free up cash while slow moving inventory will consume cash.
Managing of working capital ensures profitability and liquidity.
Profitability means: The situation in which a company, product,
etc. is producing a profit.
Liquidity: The state of having enough money or assets to pay any
money that is owed.
The major elements in the working capital cycle: cash, inventory,
receivables and payables.
Each of these elements has a dimension (extent) of time and
money which are crucial in managing working capital. Therefore
this cycle links directly with the cash operating cycle that is, how
long it takes to get cash after producing a good or providing a
service. When you use borrowed money (bank overdraft) to
finance working capital, then it will attract interest which will
strain the business financially. If you can get money to move faster
around the cycle or reduce the amount of money tied up then the
business will generate more cash or it will need to borrow less
money to fund working capital. When the business collects
receivables (debtors) faster than cash is released from the cycle.
However, slow collection of debtors ties up cash. Better credit
terms from creditors (suppliers) in terms of duration and amount
will increase the cash resources. Faster moving inventory will free
up cash while slow moving inventory will consume cash.
>The purpose of managing working capital is, Liquidity; to ensure
that the business is able to meet its day to day obligations as they
fall due.
Profitability objective; instead of the business holding idle current
assets, such assets are invested to generate returns for the
entrepreneurs.
Components of Working Capital
Current assets
• Debtors (receivables)
• Stocks (inventories)
• Cash (on hand & in bank) Current liabilities
• Creditors (payables)
Management of Debtors (Receivables)
The purpose of managing debtors is to obtain payment from
customers as fast as possible. And improve the cash flows as you
minimize the risk of bad debts and not being paid at all.
Measures to manage debtors develop cash discount system to
encourage cash sales (add discount on price, make sure your
costs are covered).
(1) Obtain up-front deposits and schedule payments.
(2) Strict credit check for new customers.
(3) Agree on a set of credit control procedures such as issuing
sales invoices, producing customer statements of outstanding
balances (credit policy).
(4) Credit policy should be clearly understood by employees,
suppliers and customers.
(5)Establish credit limits for each customer and stick to them and
continuously review these limits.
(6) Keep very constant contacts with your larger
debtors.
(7)Invoice promptly and clearly to avoid delayed payments.
(8) Charge penalties on overdue payments. Record the credit sales
/ customers.
Reasons why Businesses fail to collect their Money from Debtors
Wrong credit judgment of the debtor. Poor collection procedures
e.g. cumbersome procedures may cause customers to delay
payment. Negligence in the enforcement of credit terms. Slow
issue of invoices or debtor’s statements. Errors in invoices or
debtor’s statements. Customer dissatisfaction.
Debtors’ Collection Period
Average length of time required to collect debtors.
>A lower number of days is desirable and more efficient. The
longer the customer owes the business money, the greater the
chance that it will never get paid (bad debt). Debtors due over 30
days (unless within agreed credit terms) should generally demand
immediate attention. Send them reminders and if this fails seek
legal advice or court action for debtors that are not willing to pay.
Management of Payables (Creditors)
Management of creditors and suppliers is just as important as the
management of your debtors. The Purpose of managing Payables
is to negotiate with suppliers for longer credit periods in which to
pay business expenses.
Measures to manage Creditors
(1) Record all the credit purchases/suppliers.
(2) Monitor the creditor’s due dates.
(3) Pay the creditors as agreed to maintain trust.
Creditors’ Payment Period
If you pay your creditors more rapidly than you are paid by your
customers, you will need a high level of working capital. Average
length of time required to pay creditors. A longer period is
desirable for the business to operate effectively (see order flow in
the Operations Plan).
Management of Inventories (Stock)
>to ensure availability of optimal stock levels which: Allows
uninterrupted production, reduces the investment in inventory /
stocks.
>Minimize reordering costs. Stock consists of raw materials, work
in progress and finished goods.
Importance of inventory management
>to reduce excessive stocks which can place a heavy burden on
the cash resources of a business
>to minimize lost sales, delays for customers which may result
from insufficient stocks.
Ways of Inventory Management
Carry out stock counts. Know how quickly overall stock is moving.
Review the effectiveness of existing purchasing and inventory
systems. Establish the stock turnover period for all major items of
stock. Sell off outdated or slow moving stock faster. Review
security procedures to ensure that no stock is stolen. Ensure
effective use of storage facilities.
Stock Turnover Period
Average number of day’s stock is held in the business before a
sale. The shorter this period the better because some stock is
perishable and obsolete. A longer period implies that
management is unable to sell existing stocks. Average
stock-holding periods will be influenced by the nature of the
business e.g. a fruit shop might turn over its entire stock every few
days while a clothes business would be much slower.
Optimal Level of Stock
Identify the fast and slow moving stock to get the best (optimum)
stock levels for each category so as to minimize the cash tied up in
stocks.
Factors that determine optimum stock levels: What are the
projected sales of each product? How widely available are raw
materials, components etc.? How long does it take for delivery by
suppliers? Can you remove slow movers from your product range
without compromising sales? Identify market factors that affect
sales, e.g. weather e.t.c.?
Management of Cash
Cash is the oxygen that enables a business to survive and prosper
and is the primary indicator of business health. Business may
survive for a short time without sales or profits but without cash it
may collapse or die.
Measures for good cash management;
1. Knowing when, where, and how your cash needs will occur.
2. Keeping good relationships with bankers, other creditors, family
and friends.
BUDGETING
A budget is numerical representation of an action plan for a
specified time period. It is a planned outcome of the future. The
aim is to make total income for a given period greater than the
total expenses in order to improve profitability. Businesses usually
prepare a budget for a financial year but can also be prepared
monthly, weekly or daily to make the process manageable and
feasible.
> Budgeting plays a key role in business and is important for all
businesses whether large or small.
Importance of Budget
1. It is required by investors and funders
2. It helps in the management of business in meeting the objective
of the business.
3. It helps in identifying problems before they occur such as the
need for more finances.
4. It improves decision making, increases motivation of employees
because they have to meet targets.
5. It is a tool for monitoring performance of the business
Steps for Preparing the Budget
The first step is to prepare your budget identify your business
objectives, determine the period of budgeting whether yearly
monthly, weekly or daily. Estimate your sales and your expenses
and put them together you will come up with your budgeting.
Format of Income & Expenditure Budget
Table shows the sample format of Income & Expenditure
highlighting the income and expenses monthly you can use this
table in your daily life to identify if per day how much is your
expense. Or use this when you start your business.
Potential Expenses
Below are the potential expenses when you engage in business.
Direct Expenses
Raw materials Salaries & wages Delivery / transport
Indirect Expenses
Prints & stationary
Postage
Advertising License fees / tax Insurances Rent Professional fees
(e.g., accountant, attorney) Security Motor vehicle (insurance,
licenses, petrol) Savings Repairs / Maintenance Loan interests
Power & supplies (Electricity, gas, water, heat) Bank fees
Telephone / mobile / fax
Variance Analysis
Variance is difference between the budgeted and actual figures.
Analysis means computing the variances and determining the
source of those variances.the causes of variances are changes in
interest rates, fluctuations in demand, calculation errors and
changes in plans
1. CASH BOOK 2. DEBTOR’S BOOK 3. CREDITOR’S BOOK 4.
INVENTORY BOOK 5. INCOME AND EXPENSES
> These are the key basic books you MUST have to record all your
business transactions.
KEY ACTION PRINCIPLE:
Separate Business from Private Transactions!
To be able to determine business profits:
1. Remember: the owner and the business are two separate
entities.
2. Separate private transactions (like paying fees, buying food for
home use, etc)
3. Pay yourself a salary. This enables you to cater for your private
transactions.
4. Resist from using business money for private transactions.
MODULE 3, LESSON 3: THE ENTREPRENEUR TRACKING HIS
RESOURCES
➢An Introduction to Bookkeeping
Keeping records of:
a. What is BOUGHT, SOLD, OWED, and OWNED.
b. Records of money IN, money OUT, and what is LEFT (In minus
OUT)
Note: Maintaining documents, which are the source of
information about the business, is critically important.
WHY SHOULD ENTREPRENEURS KEEP BOOKS?
1. Monitor the progress of your business
2. Identify sources of receipts
3. Keep track of expenses
4. Prepare your financial statements
5. Tax assessment
6. Facilitate credit transactions
• COMMONLY USED DOCUMENTS
The following documents are commonly used in business
transactions. The details from these documents like document
number, date and time, amount, etc. are recorded in a book.
➢ Receipts ➢ Invoices ➢ Payment slips ➢ Checks
➢ Purchase orders ➢ Delivery notes ➢ Bank slip
To properly record your transactions in the book, you must:
a. COLLECT ALL documents (receipts, invoices, etc.) for every
transaction.
b. If you don’t get any receipts or invoices after a transaction, you
MUST have a list of items purchased indicating the date, items and
amount. This serves as a document for purchases.
c. SEPARATE the kinds of documents where possible for easy
access. (Example: Folder A for Receipts and Folder B for Purchase
Orders)
d. Place or pile them in a CHRONOLOGICAL ORDER. (A good
practice is to arrange alphabetically “Documents from” or by date)
e. DO NOT LEAVE loose documents lying around.
f. Keep all your documents in a SECURE PLACE - by filing in a
cabinet.
KEEP KEY SEPARATE BOOKS
To start recording your transactions, you should have five (5) hard
cover books with the following labels:
A. CASH BOOK
This is the book in which you will record all the cash money that
COMES IN and GOES OUT.
It helps you answer the following questions:
➢ How much were my receipts this day/week/month/year?
(MONEY COMES IN)
➢ How much were my payments this day/week/month/year?
(MONEY GOES OUT)
➢ How much cash do I have at hand this day/week/month/year?
(WHAT IS LEFT)
➢ Which month posted higher receipts?
➢ Which month posted higher payments?
> In Cash Book, record transactions that is received or paid in cash
only.
SIMPLE CASH BOOK FORMAT : It captures the date, details and
amount received of the business transaction (either from receipts
or payments).
KEY POINTS:
1. Record only the cash receipts and payments related to the
business in this book. Buying and selling on credit will be recorded
in a separate book.
2. Record the receipts and payments in the chronological order of
occurrence and on a daily basis. 3. Total up the figures at the close
of the day on a daily basis. These figures enable you determine
the day’s cash at hand.
CASH CONTROL TIPS
1. Write all money that comes in and goes out immediately in your
cash book.
2. Count your cash when the day begins and again when the day
ends.
3. Write in the cash book only the items that are paid for in cash.
Buying and selling on credit will be recorded in a separate book.
4. You can calculate the balance regularly. That is, cash left every
day, every week or every month, whenever it is most convenient
for your business. Remember the previous balance should always
be written at the start of a new page.
5. Bank your cash every day
Credit Transaction
- Buying or selling on credit means you obtain the item now but
you don’t need to pay in
cash right now.
> SELLING ON CREDIT
Always transact on cash basis to avoid complications of collecting
debt. But if you have to sell on credit, keep the following rules:
✓ Only sell on credit to regular customers who you are sure will
pay you back on time.
✓ Demand a deposit.
✓ Keep records of the people to whom you sell on credit.
✓ Always keep sufficient cash money to buy new stock.
B. DEBTOR’S BOOK
This book is used to record the sales on credit.
➢ Key points:
✓ Get the book labeled “debtors’ book”.
✓ Allocate a page to individual debtors.
✓ Record all your credit sale immediately.
✓ Compute total credit sales on a daily basis.
✓ Give the debtors defined and clear credit terms.
✓ Keep checking the debtors figures weekly or monthly.
✓ Follow up the debtors promptly.
HOW YOU DO IT?
➢ Every time a customer buys something on credit, you write
down the date, the goods and the part payment.
➢ Every time the customer repays or pays part of the debt, you
record it under amount received.
➢ After each amount received, you have to adjust the balance to
see whether the customer has paid all his debts or whether he still
has to repay you some amount.
➢ Request the customer to sign or make a thumbprint each time
she buys on credit or repays you.
Note: If an Official Receipt is present in the transaction, write the
OR # in the details
> BUYING ON CREDIT
Buying on credit may help you in your business in the following
cases:
- to buy stock in a season when it is cheap (like fish, cassava),
preserve and store it and sell it when the prices are high.
- to enable you to buy cheaper in bulk (like raw materials).
- to cover seasonal high expenses (like fuel).
C. CREDITOR’S BOOK
Use a creditors’ book to record all credit purchases or accrued
expenses. How?
➢ Key points to note:
✓ Get the book labeled “creditors’ book”.
✓ Allocate a page to individual creditors.
✓ Record all your credit purchases and other expenses
immediately.
✓ Compute total credit purchases and other expenses on a daily
basis.
✓ Keep checking the creditors’ figures weekly or monthly, to
assure that they are maintained at a low level as possible
HOW YOU DO IT?
➢ Every time YOU buy something on credit, you write down the
date, the goods and the partial payment.
➢ Every time YOU repay or pay part of the debt, you record it
under amount paid.
➢ After each amount paid, you have to adjust the balance to see
whether you paid all your debts or whether you still have to repay
some amount.
➢ Sign or make a thumbprint each time you buy on credit or
repay.
Note: If a document is present in the transaction, write the
document used and its document # in the details.
- KEY POINTS TO REMEMBER
✓ Keep one page in the credit book for each person buying
regularly on credit.
✓ If you are always buying on credit from the same supplier, you
should also keep one page for each supplier in the book.
✓ When a particular customer/supplier page is full you continue
the record on the next available free page.
✓ If you do not have regular customers or suppliers, then you
should enter each transaction as it occurs on a day to day basis.
Then you will have to add an extra column for the names of the
different people
PRODUCTS/ SERVICES COSTING
To effectively cost your products you should:
✓ List the components that make up your product (e.g. raw
materials). Attach costs to them.
✓ Identify other cost elements (e.g. transport, taxes). Attach costs
to them.
✓ Aggregate all the costs involved in having a ready-to sell
product(s) / service
• Types of Cost: VARIABLE COST AND FIXED COST
Variable cost – company’s costs which vary with the volume of
production.
Fixed cost – company’s costs which do not vary with the volume of
production. It remains the same regardless of whether goods or
services are produced or not.
PRICING
To price your product or service. Here are the following tips:
1. Convert only the variable costs into unit cost. Leave the fixed
cost.
2. Mark-up your product or service.
(Price = [Unit Cost + (Unit Cost x Markup Percentage)])
> To set a price, the basic method is “cost-based pricing”. In
cost-based pricing, marking up is widely used to price a product or
service.
INVENTORY
➢ Define as the goods available for sale and raw materials used to
produce goods available for sale. This is also called as “stocks”.
D. INVENTORY BOOK
➢ This is the book used to keep records of your inventory.
HOW TO KEEP RECORDS FOR INVENTORY? WHY KEEP RECORDS
FOR INVENTORY?
➢ Inventory is composed of homogeneous type of stocks. Each
item of type of stock must have separate leaf to represent the
inventory. Keeping tracks of the stocks guides you to identify
which stocks sells fast and which sells slow. It also identifies
remaining quantity of stocks and help you decide which stocks to
be reordered.
➢ Key Points:
• Each type of stock is one inventory. One leaf for each inventory.
• Every transaction - purchase and sale of stocks, must be
recorded in the book. Small size but voluminous number of stocks
can be recorded in a summary every end of the day.
• Column A is for purchase transactions
• Column B is for recording sale but based on the cost of items
sold. The sale record based on price is recorded in Income and
Expenditure Book under in “Income” column.
• For every transaction, complete the row of the details need, at
least the date, description, quantity, amount and balance.
How to record in Inventory Book?
- one leaflet per inventory
- Then record the transactions per product.
E. INCOME AND EXPENDITURE BOOK
1. INCOME : money that is:
a. Received as a result of the normal business activities of an
individual or a business.
b. Earned from business sales (chapati) or offers of service
(collecting someone’s rubbish).
> Remember that there are cash and credit incomes.
IMPORTANCE OF RECORDING INCOME
Helps you answer the following questions:
• What are your sales items / sources of income?
• How much sales did I make this day / week / month / year?
• Did I achieve my set sales target?
• Which month posted higher sales?
• Which of the items sales frequently?
KEY POINTS :
For effective keeping of income records, you should do the
following:
✓ Record all your incomes immediately, for cash sales record in
the cash book, and for the credit sales record in the debtor’s book.
✓ Record the sales transaction in the chronological order of
occurrence and on a daily basis.
✓ Total up the figures at the close of the day on a daily basis.
These figures enable you determine the day’s sales/income.
HOW TO COMPUTE FOR TOTAL SALES OR INCOME?
You need to extract total income from the cash book and the
debtors’ book. This figure will be used to compute profits made.
1. Get the book labeled ‘Income and Expenditure Book’.
> Extract the cash sales for the day.
> Extract the credit sales for the day.
> Add the two totals to get the total income for the day.
> Compute the daily figures.
2. At the end of the month, obtain the total sales figure. This is the
amount to use when computing the profits for the month.
> INCOME less EXPENSES = PROFIT
✓ Total up the figures at the close of the day on a daily basis.
These figures enable you determine the day’s expenditure
HOW TO COMPUTE FOR TOTAL EXPENDITURES?
You need to extract total operating expenses (only those expenses
incurred in running the business) from THE cash book and the
creditors’ book. This figure will be used to compute profits made.
1. Get the book labeled as the “Income and Expenditure Book”!
On a fresh page next to the day’s income page:
> Extract the cash expenses (including purchases) for the day.
> Extract the credit expenses (including purchases) for the day.
> Add the above totals to get the total expenditurefor the day.
> Compute the daily figures.
2. At the end of the month, obtain the total expenditure figure.
This is the amount to use when computing the profits for the
month.
PROFIT OR LOSS
Profit is the financial gain, especially the difference between the
amount earned and the amount spent in buying, operating or
producing something.
- means that your money from sales is more than the money
spent in production r running the business.
Loss is the financial damage, especially the difference between the
amount earned and the amount spent in buying, operating or
producing something.
- means that you spend more money on producing or buying your
goods than you receive from selling the goods
> How do you compute for profit or loss
PROFIT/LOSS = INCOME less EXPENSES
If income is greater than the expense, the result is PROFIT. If
income is lesser than the expense, the result is LOSS.
• KEY POINTS
To be able to compute whether you made a profit or loss, do the
following:
a. Compute total income (sales).
b. Compute total expenses.
c. Deduct the expenses from the income. (Income – expenses =
Profit or Loss)
WHAT IS SAVING?
Saving (income not spent or postponed consumption)
2. EXPENDITURE
➢ Refers to any costs incurred in any form, it can be capital
expenditure (purchase of fixed assets) or revenue expenditure
(costs incurred in running the business).
➢ Our focus here is the revenue expenditure.
Remember to sum up cash expenses and credit expenses to get
total expenses.
YOU NEED TO SAVE MONEY - Develop a saving culture. Reasons:
✓ Expand your business.
✓ Replacement and repairs.
✓ Prepare for unforeseeable events e.g. changes in prices of fuel,
commodities, tax rise and strikes that affect the business as a
whole.
IMPORTANCE OF RECORDING EXPENDITURE
Helps you answer the following questions:
• What are my business expenditure items?
• How much were my expenditures this day/week/month/year?
• Which month posted higher expenditures?
• Which expenses are frequently incurred?
• ASSET REGISTER
➢ This is a book used to record fixed assets that are used to
facilitate business operations. These are items that are used in
operating the business for periods over one year.
➢ Examples include furniture and fittings, computers, motor
vehicle, buildings, machines and so on
KEY POINTS - For effective keeping of expenditure records, you
should do the following:
✓ Record only the expenses related to running of your business.
Exclude private expenses.
✓ Record the expenses in the chronological order of occurrence
and on a daily basis.
DEPRECIATION OF FIXED ASSETS
When fixed assets have been used over time, they wear out and
decline in value. This decline in value as a result of wearing out is
referred to as depreciation.
Reasons for providing for depreciation:
• Reduce on tax liability
• Provide true and fair value of assets
• Plan for maintenance and replacement
HOW TO COMPUTE DEPRECIATION?
A simple way to compute depreciation would be by
going through the following steps:
o Determine the cost of the asset (e.g pick up) at the time of
purchase.
o Estimate how much the asset would cost at the end of that
particular financial period.
o Determine the difference – this difference is the depreciation
amount for the year.
o Depreciation = (cost – resale value)/estimated useful life
> One Depreciation Schedule Form per Fixed Asset
• FINANCIAL POSITION – BALANCE SHEET
➢ It is a financial statement that reports company’s ASSETS,
LIABILITIES, and EQUITY.
Assets = what your business OWNED
Liabilities = what your business OWED
Equity = what your business OWNED after paying off the liabilities
> BALANCE SHEET FORMULA: ASSETS = LIABILITIES + EQUITY
• KEY POINTS
✓ Obtain summaries from the business books.
✓ Classify your information into assets, liabilities and capital.
Assets: business resources e.g. cars, machines, furniture, land,
building, stock, cah etc.
Liabilities: business debts, loans, creditors
Capital: owner’s funds invested in the business; capital, profits
Note:
> Current assets means assets are expected to be converted into
cash within one year while current liabilities are expected to be
paid within one year.
> Non-current assets are long term investments (with value more
than a year) while non-current liabilities are long term obligations
(due for more than a year).
DEFINITION OF TERMS
Asset - Something that an entity has acquired or purchased, and
that has money value.
(Current) Assets - An asset such as cash, raw materials, parts, or
products that are still being made, which a company will use up or
sell during the same year.
(Fixed) Assets - A long-term tangible piece of property that a firm
owns and uses in its operations to generate income. Fixed assets
are not expected to be consumed or converted into cash within a
year.
Balance sheet - A condensed statement that shows the financial
position of an entity on a specified date.
Business Angels - Individuals who use their personal wealth to
provide capital to start-up and early-stage businesses in return for
a share of the company’s equity.
Boot Strapping - Refers to a self-starting process that is supposed
to proceed without external input. Bootstrapping means less or no
money has to be borrowed to start a business.
Capital - Money invested in a business to generate income.
Cash - At hand & in bank: Ready money. For accounting purposes,
cash includes money in hand, petty cash, bank account balance,
customer checks, and marketable securities.
Creditors (payables) - People who are owed money by the
business.
Debtors (receivables) - People and organizations that owe the
business money.
Depreciation - Reduction in the value of an asset over time.
Equity - The difference between the value of the assets and the
value of the liabilities.
(Less) Drawings - Withdrawal of owners’ capital or other assets for
personal business.
Liabilities - Liability refers to the state of being responsible for
something, and this term can refer to any money or service owed
to another party.
(Current) Liabilities - Obligations arising in the normal course of a
business and due for payment within a year.
(Long-term) Liabilities - Financial obligations of a company that are
due after a year or more.
Financial Year - Any annual period at the end of which a firm's
accounts are closed.
Liability - Liability refers to the state of being responsible for
something, and this term can refer to any money or service owed
to another party.
Liquidity - The state of having enough money or assets to pay any
money that is owed.
Negotiation - The process of discussing something with someone
in order to reach an agreement.
Persuasion - To make someone do or believe something by giving
them a good reason to do it.
Profitability - The situation in which a company, product, etc. is
producing a profit.
Return on Investment - A performance measure used to evaluate
the efficiency of an investment or to compare the efficiency of a
number of different investments.
Stock (inventories) - The total amount of goods or the amount of a
particular type of goods available in a shop.
Turnover Period - Ratio showing how many times a company‘s
inventory is sold and replaced over a period of time.
Venture Capitalists - Investor, who provides capital to start-up
ventures or supports small companies that wish to, expand.
MODULE 4, LESSON 1: PERSUASION AND NEGOTIATION
Rational and Logical Persuasion- Wins the mind!
You need to provide logical, rationale arguments and strong
evidence for the feasibility of the idea. This can be done by
pointing out the benefits of your suggestion to the person you are
persuading. You need to show excellent knowledge on the product
or service. Thus, show that you are an expert. Exercise authority in
order to prove your trustworthiness, credibility, and competence
And, because extreme messages provoke backlashes, always
present two-sided information by
(a) presenting potential pitfalls and
(b) demonstrating how you will deal with them
Emotional Persuasion- Win the hearts!
Use vivid descriptions, metaphors, and personal stories to connect
on an emotional level. Stress common ground and common
interests and similarities between you and the person you are
trying to persuade. Show enthusiasm in your own idea and
confidence. Create a positive atmosphere by showing emotions
and giving compliments (if appropriate). Lastly, in dealing with
customers and potential investors, always make sure to don a
professional appearance.
Understanding the Other - Read the person you’re talking to in
order to formulate the persuasion tactic you’re going to use!
> Observe reactions and assess the body language to understand
the person’s attitude towards your idea.
> Focus on areas of agreement.
> Demonstrate your expertise and cite experts.
> Stress that you are looking for a win-win situation.
> Identify benefits the other would value.
> Keep it simple and present only three compelling points.
Read the person to adapt your persuasion tactics. Is the other
uninterested? Stress your credibility. Keep your message simple
and straight. Create an emotional bond by stressing common
interests. Is the other skeptical or resisting? Express understanding
of their concerns. Let the other challenge you and show that the
concerns are uncalled-for.
Persuasion and Negotiation Tactics
Ask questions and let the other person persuade himself!
> Ask leading or rhetorical questions to let him/her feel that s/he
made the decision him/herself.
> Ask informative questions to get feedback.
Bargaining Tactics
Use bargaining tactics & avoid being a victim of them!
1. Door-in-the-face
- Making an extreme request and follow it up with a more
reasonable one.
2. That’s-not-all-folks
- Increasing the offer or reducing the costs (Buy 1 get 2, Formerly
1 peso, now 75 cents). We feel a pressure to behave consistently.
3. Foot-in-the-door
- Starting with a small request, continuing with bigger requests.
4. Low-balling
-Inducements that are withdrawn after a commitment is made.
How to Increase Credibility for Long-Term Relationships?
1. Establish Trust!
Tell both sides of the story (the best, most likely, worst scenarios).
Deliver your promises and commitments. Listen to others’
concerns and take them seriously. Show that you have other
people’s interests in mind.
2. Show Expertise!
Gather all information relevant for your idea (from knowledgeable
people, official statistics and reports and business journals). Get
information that supports or even contradicts your idea to be well
prepared for discussions. Get first-hand experience (talk to
potential customers) and sow your credentials.
Remember that credibility is the sum of trust and expertise.
MODULE 4, LESSON 2: NETWORKING
A big social network can help you to access the following
resources:
> financial capital / cash; other resources such as equipment,
facilities, etc.
> information, advice, and ideas
> reputation (prominent strategic alliance partners)
> encouragement / (emotional) support when facing problems.
Example of social network
- family members, relatives, friends
- top managers at buyer firms (distributors)
- small business dev’t centers
- start-up colleagues/entrepreneurs etc.
The 5-Links-to-the-President Principle
We know almost everybody through intermediaries.
> Individuals or companies that behave as middlemen between
parties for investment deals, business deals, negotiations,
insurances etc.
EXAMPLE:
You to 1) your father to 2) the colleague of your father to 3) his
wife to 4) the sister of the bodyguard of the president to 5) the
president.
HOW TO GET IN CONTACT WITH THESE PEOPLE?
Who knows the president?
Who knows a person who knows the president personally?
Who knows other very important persons (VIPs), celebrities,
influential people?
Who knows a person personally?
Who knows VIPs or the like?
Taking a short-cut to the president is through super-connectors.
Super-connectors are people with relationships to many other
people.
How to Maintain Relationships?
This is by building a trustworthy relationship.
Reliability and credibility: Fulfill your obligations and deliver on
your promises and commitments.
Listen to others’ concerns and take them seriously.
Actively and Persistently Enlarging the Social Network
What contacts might be helpful for you right now? Who else might
be helpful? What non-obvious people might be helpful? Who will
you contact? How, when and where can you approach them?
What else can you do to approach them / what will you do if your
first plan fails?
Networking: The Principles of Action
> build a broad social network.
> Let as many people as possible know that you are starting a
business.
> Tell the people about your idea and the industry you are in.
MODULE 4, LESSON 3: WRITING A BUSINESS PLAN
Business Plan
- pinpoints your business destination
- road map because it describes how you intend to get there.
- minimizes the possibility of failure and maximizes the likelihood
of success.
- converts pipe dreams into realities by forcing you to carefully
think about the specifics of your business.
- sells out your business to stakeholders.
- enables thinking through policies, procedures and strategies that
will enable the business to achieve its objectives.
1. COMPANY DESCRIPTION
What are the basic details of your business? Company name,
address, and location. Form of ownership and legal status. Date
when the company was founded. Development stage of the
business (startup or expanding). Benefits of your business to the
country
A. Company Vision-Mission
> Vision
What is your aspiration? What do you want to achieve with your
company? State the main advantages and the benefits of your
product or service for the customer. Explain in 7 words or fewer
what you want to achieve.
> Mission
How do you want to achieve your Vision? Translate your Vision
into actions what you are going to do in order make the Vision
come true.
B. Company Objectives
Where do you want your business to be in one year? Describe the
goals of your company. State what you want to achieve for your
company. Give also progress markers along the way to goal
achievement to indicate how you want to accomplish your
company goals.
C. Company Team
Who are the key people on your management team? What
management positions do you need to fill in the near future?
What is the staff’s pay structure like? What is the organization
structure like?
Information about the management team is very important for
potential capital providers. It is said that venture capitalists
support a mediocre business idea run by first-class entrepreneurs
rather than a firstclass business idea run by mediocre
entrepreneurs.
2. PRODUCT DESCRIPTION
- Competitive advantages can be all new product or service,
lowest price, highest quality, and fastest delivery
3. CUSTOMER ANALYSIS
> Primary Target Customers
- Who is your primary target customer? You must do a
segmentation and describe your target group in detail. If your
primary is the end consumer use the following attributes: age,
gender, location, and income level.
> Important Product or Service Attributes
- What are the customers’ needs and wants? List the product or
service attributes or features that are most important for your
customers. Important attributes can be quality, price, design, and
branding.
4. COMPETITORS ANALYSIS
> Direct and Indirect Competitors
- Who is directly and indirectly competing with you? Provide
details of your direct customers – that is customers who offer the
same product or service. Give their names, products / services and
their special features (what makes them unique?) prices, location,
promotion strategies Give the same details for indirect
competitors – that is competitors that offer substitute products or
services
5. INDUSTRY ANALYSIS
> The Target Industry
- What industry or market are you going to enter? Define the
industry and be concrete about your specific niche.
> Market Size
– What is the size of your market regarding revenues?
> Trends and Future Developments
- What will be future trends and developments in your market?
State whether the market will grow, shrink, or remain stagnant in
future and give references for your assessment. State other major
forces that may affect future development.
6. BUSINESS STRATEGY
Derive goals and actions plans from the Strengths, Weaknesses,
Opportunities, and Threats (SWOT)-analysis. State what you have
“to do” to prepare for the future. The SWOT-analysis will help you
to take actions to survive and grow in your industry.
7. OPERATIONS PLAN
- how and where are your products produced?
> Input Factors - What materials and equipment do you need for
your business? These includes raw materials, equipment,
premises.
> Responsible Actors / Staff - If you have personnel, who is
responsible for what?
> Production Processes - How is your product or service
produced?
> Outputs and Performance Indicators - What is your final product
/ service?
> Product / Service Delivery - How you are going to deliver your
product / service?
> Quality Control - How will you ensure quality control in your
operations / production process? What standards will you put in
place?
> Potential Problems and Preventive Measures - What problems
may hinder the production process? What are your back-up plans
to keep the production process going?
8. MARKETING PLAN
Marketing comprehends more than advertising.
AIM: attract customers through a variety of means at a profit.
> Pricing Strategy
- Apart from quality, price is most often the most important issue
for customers to base their purchase decision on.
> Product Strategy - How do you differentiate your product from
your competitors? List your competitive advantages.
> Distribution and Sales Strategy - How will the product or service
reach the customers (e.g., via retail outlets, wholesalers, sales
force, direct via web, mail order, or catalog, independent
representatives, etc.)?
> Promotion & Advertising Strategy - What can be a campaign that
is not costly, but customers will respond to?
9. FINANCIAL PLAN
a. investment plan- Start-up Investment
b. financing plan – debt vs. equity, projected Profit and loss
statement, and balance sheet.
Critical Risk
> Critical Risks in the Pre-Launch Phase
- What are critical risks that might hinder the start-up of your
business?
Critical Risks in the Post-Launch Phase
What might be risks that you will face when you are running your
business?
ü less customer interest than expected
ü competitor actions and retaliation
ü operating expenses and financing
ü changes in the environment (such as changes in technology,
government regulations, economy, trends, etc.).
10. DEVELOPMENT PLAN
- overview of the work that remains to be completed before you
can launch your business.
MODULE 4, LESSON 4: REGISTERING A BUSINESS
The future of a small business is affected by legal decisions that
must be made early in the start-up process. The most important of
these choices is the legal form of business organization that owner
chooses. When you start a business, you must decide on a legal
structure for it. Usually you will choose either a sole
proprietorship, a partnership, a limited liability company (LLC), a
corporation or a cooperative. There is no right or wrong choice
that fits everyone. Your job is to understand how each legal
structure works and then pick the one that best meets your needs.
Ways to Organize Your Business
The choice of type of business is important because it
can determine: the cost of registering and starting a business, the
procedure for registering and starting a business, the financial risk
a business takes, the way decisions are made in the business, the
liability of the owner(s), the continuity of the business, and the
taxation of business profits.
Common Legal Forms of Business
However, this initial decision may not be final. Not only may the
business grow and alter its operations over time, but financial and
tax situations may modify the advantages and disadvantages of
the various legal forms of organization.
One of the first decisions an entrepreneur must make is to
determine the form of legal organization of the enterprise.
Most likely, the form of the business you would choose is one of
the following: Sole Proprietorship, Partnership, Corporation, and
Cooperative.
Sole Proprietorship – is the most popular legal form of
organization, accounting for a greater percent of all businesses.
Because most of them are small businesses employing only the
entrepreneur, most people tend to equate small businesses with
sole proprietorships.
Advantages: autonomy and self direction, business income
reported as the owner's personal income, fringe benefits
supported by business, simple to start and administer, and
inexpensive as a form of business.
Disadvantages: unlimited legal liability for business, unlimited
liability for financial debts, credit an extension of owner’s personal
collateral and financial strength, and access to external resources
limited.
Partnership - If two or more people decide to run a business
together, they can form a partnership. There is an upper limit to
how many partners there can be in a partnership, with some
countries allowing only up to two and others allowing up to
twenty (20).
Advantages: partners provide combined action, and interest,
business income reported as partner’s personal income, partners
have strong profile for obtaining debt financing, extra benefits
supported by business, partners have expanded network of
contacts for accessing resources, and simple and inexpensive to
start.
Disadvantages: unlimited legal liabilities for business by all
partners, jointly and severally, unlimited liability for financial debts
by all partners, jointly and severally, entrepreneurs must share
authority and cooperate in making decisions, business ends with
death or withdrawal of any partner, infusions of equity difficulty
without adding more partners, partners accountable to one
another, often resulting in conflict.
Corporation - is a business entity that is owned by its
shareholder(s), who elect a board of directors to oversee the
organization’s activities.
- The corporation is liable for the actions and finances of the
business – the shareholders are not.
- Corporations can be for-profit, as businesses are, or
not-for-profit, as charitable organizations typically are.
Advantages: providing liability protection for its owners, who are
called shareholders, easier time to raise money by selling shares,
corporate profits are taxed, but at a lower rate than the personal
income tax rate individuals pay.
Disadvantages: corporations are complex and expensive to set up,
once established, corporations spend significant sums of money to
stay on top of changing business regulations and timely filing of
paperwork, corporations pay state, and sometimes local taxes on
profits, unlike Limited Liability Corporations, the corporation pays
taxes on dividends paid to shareholders, who then pay taxes on
that income themselves.
Cooperative - is an autonomous and duly registered association of
persons, with a common bond of interest, who have voluntarily
joined together to achieve their social, economic and cultural
needs and aspirations by making equitable contributions to the
capital required, patronizing their products and services and
accepting a fair share of risks and benefits of the undertaking in
accordance with the universally accepted cooperative principles.
- The future of a small business is affected by legal decisions that
must be made early in the startup process. It is critical that
would-be entrepreneurs not make the mistake of neglecting the
legal aspects of their ventures.
The legal questions faced by entrepreneurs fall into two major
categories:
1. What legal form of organization should I have – sole
proprietorship, partnership, or corporation?
2. What laws do I need to comply with – licensing, taxes,
employee protection, intellectual property protection,
and environmental protection?
Process of Registering Business in the Philippines
If your legal form of business organization is sole proprietorship
you need to get the registration of your business name at the
Department of Trade and Industry (DTI). For partnerships and
corporations, you need to register first at the Securities and
Exchange Commission (SEC). For cooperative, you need to register
at the Cooperative Development Authority (CDA). After that, you
will get your business permit and license at respective local
government unit (LGU) where your business is located. The LGU
will give you the specific requirements for securing the permit and
license. But you need to comply also the mandatory registration
from the Social Security System (SSS), and Home Development
Mutual Fund (HMDF) or PAG-IBIG, Bureau of Internal Revenue
(BIR), and Phil Health Corporation (PHIC). Moeover, you are
required to also register to other agencies such Department of
Environmental and Natural Resources (DENR), Department of
Tourism (DOT), and others. This is depending on the type of your
business you like to venture in. Below is the registration process.
“The Entrepreneur always searches for change, responds
to it, and exploit as an opportunity”. - Peter Drucker
DEFINITION OF TERMS
Persuasion - To make someone do or believe something by
giving them a good reason to do it.
Negotiation - The process of discussing something with
someone to reach an agreement.
Networking - The process of meeting and talking to a lot of
people, esp. to get information that can help you.
Social Media - Websites and computer programs that
allow people to communicate and share information on
the internet using a computer or mobile phone.
Business Plan - is a written document that describes in
detail how a business—usually a new one—is going to
achieve its goals and lays out a written plan from a
marketing, financial and operational viewpoint.