COURSE:
Foods II-- Enterprise
ESSENTIAL
STANDARD:
4.0
30%
C2
Understand the Roadmap to
Food Entrepreneurship.
OBJECTIVE:
4.01
5%
C2
Understand opportunity.
CONTENT OUTLINE
A. Entrepreneur
a. Characteristics
i. Inquisitive
ii. Creative
iii. Persistent
iv. Responsible
v. Goal-oriented
vi. Independent
vii. Self-confident
viii. Self-demanding
ix. Action-oriented
b. Skills
i. Communication
ii. Human relations
iii. Problem-solving
iv. Decision-making
v. Basic business
vi. Technical
vii. Math
B. Marketing mix
a. Product
b. Price
c. Place
d. Promotion
C. Market segmentation
a. Geographic
b. Demographic
c. Psychographic
d. Behavioral
D. Forms of business ownership
a. Sole proprietorship
b. Partnership
c. Corporation
E. Franchise businesses
F. Opportunity & Demand
Marketing objectives
FN42 Foods II – Enterprise
ACTIVITES
Required Roadmap Questions:
Mile Marker 1
1. What are you passionate about?
2. What problems have you seen through personal
experience?
3. What product or service could you create?
4. What problem are you solving?
5. Is there demand for your product or service?
Mile Marker 2
1. Take a second look at your chosen opportunity. Is
it viable?
2. Does it satisfy an unmet need?
3. Who would be willing to buy it and what price
would they pay?
4. Can you meet the market demand, if demand
meets your expectations?
5. What are the problems of taking this product or
service to scale?
Project Based Learning:
Review the Food Entrepreneurship Project Matrix (in
appendix). Select the project(s) you would like to
present to your students as their assignment.
Conduct phase 1 of the projects while teaching
content. Draw connections between the project and
content. Use required questions as discussion
starters, reflective writing prompts, or homework as
students complete project requirements. Use the
FCCLA 5-Step Planning Process, regardless of the
project you or your students select.
Invite a local entrepreneur as a guest speaker. Have
students generate questions before the guest
speakers’ arrival.
Have student research young entrepreneurs or
famous entrepreneurs in foods and foods-related
fields. What skills helped them to become
W 2004, Updated SU 2014
Page 1
successful? What was their product/service? How did
they promote it? Present their findings using
technology or a written report.
Have students complete skills inventories to evaluate
their own ability to be an entrepreneur.
Creativity, Innovation and Problem Solving Activity
(Appendix Activity).
FN42 Foods II – Enterprise
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OBJECTIVE:
4.01
C2
Understand Opportunity.
MATERIALS & RESOURCES
Primary Resource
Youth Entrepreneurship Alliance. (2012). Roadmap for Teaching Entrepreneurship. http://www.entreed.org/
Supplemental Resources
Johnson & Wales Curriculum Committee. (2002). Culinary essentials. New York, NY:
Glencoe/McGraw-Hill.
Labensky, Sarah and Hause, Alan. (1998). On cooking-3rd edition. Upper Saddle River, NJ: Prentice
Hall.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
1. Upper Saddle, NJ: Prentice Hall PTR.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
2. Upper Saddle, NJ: Prentice Hall PTR.
Website Resources
www.entrepreneur.com
http://www.entre-ed.org/
www.fcclainc.org
http://www.alexslemonade.org/
www.greatamericanbakesale.org
FN42 Foods II – Enterprise
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COURSE:
Foods II—Enterprise
ESSENTIAL
STANDARD:
4.0
30%
C2
Understand the Roadmap to
Food Entrepreneurship.
OBJECTIVES:
4.02
7%
C2
Understand test feasibility and
accessing information.
CONTENT OUTLINE
ACTIVITES
A. Financing
a. Start-up costs
b. Continuing costs
i. Fixed costs
ii. Variable costs
B. Entrepreneurial Characteristics to obtain
funding (six C’s of credit).
a. Character
b. Capacity
c. Capital
d. Collateral
e. Conditions
f. Coverage
C. Sales
a. Sales forecast
b. Contingency funds
D. Financial Statements
a. Cash flow statement
b. Balance sheet
c. Income statement
E. Wages vs. salaries
F. Pricing
a. Calculating mark-up
b. Break-even point
G. Distribution
H. Product Development
a. Prototype
b. Quality control
c. Product standards
I. Feasibility analysis
Required Roadmap Questions:
Mile Marker 3
1. What’s included in the test of your
product/service?
2. Where will you find materials and labor for your
product/service?
3. Can you make a prototype for your product or
service?
4. What are the total costs of making your prototype
and samples (include labor)?
5. Can you get testimonials for your product or
service?
6. Where would you go to test the feasibility of your
product/service?
7. Is there evidence or data supporting the long-term
viability of your idea?
Mile Marker 4
1. What information do you need to solve your
problem?
2. What resources are available? (i.e. newspapers,
library references, internet research)
3. What industry information do you need such as
state and local regulations, target market
numbers, costs of components, available
suppliers, etc.?
4. How can you effectively analyze this information
and turn it into something useful to aid in your
business?
Project Based Learning:
Conduct phase 2 of the project(s) while teaching
content. Draw connections between the project and
content. Use required questions as discussion
starters, reflective writing prompts, or homework as
students complete project requirements.
Use Shark Tank clips to introduce students to
FN42 Foods II – Enterprise
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evaluating feasibility. Try to find clips that feature
younger contestants or a food-product. Use a
worksheet to pinpoint ideas for focus.
Invite guest speakers from the health department,
Small Business Administration (SBA), bank loan
officer, Chamber of Commerce, etc. to discuss
navigating how to start a business and foodservice or
food-production regulations.
Have students design a prototype food product,
prepare in lab, and conduct markup cost analysis.
Invite a local chain restaurant owner to share how
their company establishes and maintains quality
standards of the food they sell.
Use students, school staff, and community members
to test products, conduct focus groups, and collect
survey data. Have students analyze the data
collected, and then propose and justify changes to the
original prototype/formula. Engage students with
technology to aid in the process via Google Docs and
web-based survey sites.
Research regulations for their type of business.
Including, but not limited to, building and fire codes,
Department of Health inspections and regulations,
employment laws and regulations, etc.
Have students present their product/service to their
peers to collect feedback and suggestions for
improvement.
Require students to compile a database or list of
potential vendors for the ingredients, equipment, and
supplies they will need.
Have students compile a database or list to calculate
their start-up costs. Include initial inventory,
consultations, equipment, land/building, etc.
Just WHAT is PROFIT? (Appendix Activity)
FN42 Foods II – Enterprise
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OBJECTIVE:
4.02
C2
Understand Opportunity.
MATERIALS & RESOURCES
Primary Resource
Youth Entrepreneurship Alliance. (2012). Roadmap for Teaching Entrepreneurship. http://www.entreed.org/
Supplemental Resources
Johnson & Wales Curriculum Committee. (2002). Culinary essentials. New York, NY:
Glencoe/McGraw-Hill.
Labensky, Sarah and Hause, Alan. (1998). On cooking-3rd edition. Upper Saddle River, NJ: Prentice
Hall.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
1. Upper Saddle, NJ: Prentice Hall PTR.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
2. Upper Saddle, NJ: Prentice Hall PTR.
Website Resources
www.fcclainc.org
www.entrepreneur.com
http://www.entre-ed.org/
http://www.smallbizdaily.com/
http://www.entrepreneurship.org/Resource-Center.aspx
FN42 Foods II – Enterprise
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COURSE:
Foods II—Enterprise
ESSENTIAL
STANDARD:
4.0
30%
C2
Understand the Roadmap to
Food Entrepreneurship.
OBJECTIVES:
4.03
4%
C1
Recognize the importance of
community outreach.
CONTENT OUTLINE
ACTIVITES
A. Sources of Financing
a. Banks
i. Secured vs. unsecured
loans
b. Family & friends
c. Personal funds
d. Venture capitalists
e. Private investors
B. Business plan
C. Support Organizations
a. Federal Resources
i. Small Business
Administration (SBA)
ii. Service Corps of Retired
Executives
iii. Small Business Institute
(SBI)
iv. United States Department of
Commerce
v. Federal Trade Commission
(FTC)
vi. Internal Revenue Service
(IRS)
vii. Small Business
Development Center
b. State Resources
i. Department of Development
ii. Department of Labor
iii. Workers’ Compensation
Board
iv. Department of Agriculture &
Consumer Protection
v. Office of the Secretary of
State
Required Roadmap Questions:
Mile Marker 5
1. Where can you find people with needed expertise?
2. Who do you know who has business experience, or
who can connect you with people who do?
3. Are there organizations or individuals in the
community who could help you arrange financing for
your business?
4. Are there community organizations or outside groups
you can become a member of to help further develop
your entrepreneurial venture?
Project Based Learning:
Conduct phase 3 of the project(s) while teaching
content. Draw connections between the project and
content. Use required questions as discussion
starters, reflective writing prompts, or homework as
students complete project requirements.
Review the steps in setting price handout. (See
handout in appendix)
Research the various community organizations that
support small businesses. (See handout in appendix)
Invite representatives from the various support
organizations to serve as guest speakers or project
evaluators.
c. Local Resources
i. Chamber of Commerce
ii. Colleges, universities,
FN42 Foods II – Enterprise
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technical schools
iii. Licensing and permit offices
iv. County Health Departments
v. County Extension Services
d. Professional services
i. Attorneys
ii. Accountants
iii. Insurance Agents
D. Vendors
E. Sales Quota
F. Pricing
a. Promotional
b. Fixed
c. Markup
d. Odd/even pricing
e. Psychological
f. Unit pricing
g. Prestige
FN42 Foods II – Enterprise
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OBJECTIVE:
4.03
C1
Recognize the importance of
community outreach.
MATERIALS & RESOURCES
Primary Resource
Youth Entrepreneurship Alliance. (2012). Roadmap for Teaching Entrepreneurship. http://www.entreed.org/
Supplemental Resources
Johnson & Wales Curriculum Committee. (2002). Culinary essentials. New York, NY:
Glencoe/McGraw-Hill.
Labensky, Sarah and Hause, Alan. (1998). On cooking-3rd edition. Upper Saddle River, NJ: Prentice
Hall.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
1. Upper Saddle, NJ: Prentice Hall PTR.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
2. Upper Saddle, NJ: Prentice Hall PTR.
Website Resources
www.fcclainc.org
www.entrepreneur.com
http://www.entre-ed.org/
http://www.smallbizdaily.com/
http://www.entrepreneurship.org/Resource-Center.aspx
FN42 Foods II – Enterprise
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COURSE:
Foods II—Enterprise
ESSENTIAL
STANDARD:
4.0
30%
C2
Understand the Roadmap to
Food Entrepreneurship.
OBJECTIVES:
4.04
8%
C2
Understand marketplace
experience.
CONTENT OUTLINE
ACTIVITES
A. Risk
a. Types
i. Human risk
ii. Economic risk
iii. Natural risk
iv. Risk transfer
b. Risk Management
i. Avoidance
ii. Control
iii. Retention
iv. Transfer (i.e.- property
insurance)
B. Evaluating Your Business
a. Financials
b. Marketing
c. Operations
d. Standards
C. Employee complaints
D. Promotion
a. Advertising
b. Public relations
E. Financial plan
F. Opportunity cost
Required Roadmap Questions:
Mile Marker 6
1. How are you going to test your business idea?
(i.e. work with real customers?)
2. What do you have to do to prepare to get the idea
out in the marketplace?
3. What problems did you encounter in testing your
idea?
4. Are there things you would do differently if you
had it to do again?
Project Based Learning:
Conduct phase 4 of the project(s) while teaching
content. Draw connections between the project and
content. Use required questions as discussion
starters, reflective writing prompts, or homework as
students complete project requirements.
Lecture using 4.04 PowerPoint- Risk
Have students design and create various promotional
materials to attract their target market/customers.
Discuss how the internet and social media have
impacted foodservice promotion.
Design and create a sample menu with prices and
menu descriptions.
PROMOTION BASICS (Appendix activity)
PROFITS COME FROM TAKING BUSINESS RISKS
(Appendix activity)
FN42 Foods II – Enterprise
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OBJECTIVE:
4.04
C2
Understand marketplace
experience.
MATERIALS & RESOURCES
Primary Resource
Youth Entrepreneurship Alliance. (2012). Roadmap for Teaching Entrepreneurship. http://www.entreed.org/
Supplemental Resources
Johnson & Wales Curriculum Committee. (2002). Culinary essentials. New York, NY:
Glencoe/McGraw-Hill.
Labensky, Sarah and Hause, Alan. (1998). On cooking-3rd edition. Upper Saddle River, NJ: Prentice
Hall.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
1. Upper Saddle, NJ: Prentice Hall PTR.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
2. Upper Saddle, NJ: Prentice Hall PTR.
Website Resources
www.fcclainc.org
www.entrepreneur.com
http://www.entre-ed.org/
http://www.smallbizdaily.com/
FN42 Foods II – Enterprise
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COURSE:
Foods II—Enterprise
ESSENTIAL
STANDARD:
4.0
30%
C2
Understand the Roadmap to
Food Entrepreneurship.
OBJECTIVES:
4.05
6%
C2
Understand future directions.
CONTENT OUTLINE
A. Advantages/Disadvantages of:
a. Corporations
b. Franchises
c. Sole Proprietorship
B. Future of the foodservice industry
a. Projections
b. Trends
C. Post-project considerations
a. Buying an existing business
b. Portfolios
c. Capacity
d. Start-up costs
i. Consultations
ii. Initial inventory
e. Reflection on project
ACTIVITES
Required Roadmap Questions:
Mile Marker 7
1. What went better or worse than expected when
you exposed your business to market forces?
2. How do you feel about becoming an entrepreneur
in the future?
3. Form this experience would you choose to
continue to develop this idea as a future
business? Why or why not?
4. If you have decided that you do not have an
affinity to entrepreneurship how can you use what
you learned from this experience?
5. What other experiences will advance your
knowledge so that you can take your
entrepreneurial venture to the next level?
6. How did it feel to take a chance on creating your
own wealth?
7. What are the top things you have learned using
the mile markers to better help you move
forward?
Project Based Learning:
Conduct phase 5 of the project(s) while teaching
content. Draw connections between the project and
content. Use required questions as discussion
starters, reflective writing prompts, or homework as
students complete project requirements.
Lecture using 4.05 PowerPoint- Compare Forms of
Business Ownership
Have students develop a Profit & Loss statement to
determine how much money was made, if any for
their project.
Have students conduct a Strengths, Weaknesses,
Opportunities, Threats (SWOT) analysis of the
project.
FN42 Foods II – Enterprise
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Use Roadmap questions to have students write a
final, overall reflection on their project.
OBJECTIVE:
4.05
C2
Understand future directions.
MATERIALS & RESOURCES
Primary Resource
Youth Entrepreneurship Alliance. (2012). Roadmap for Teaching Entrepreneurship. http://www.entreed.org/
Supplemental Resources
Johnson & Wales Curriculum Committee. (2002). Culinary essentials. New York, NY:
Glencoe/McGraw-Hill.
Labensky, Sarah and Hause, Alan. (1998). On cooking-3rd edition. Upper Saddle River, NJ: Prentice
Hall.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
1. Upper Saddle, NJ: Prentice Hall PTR.
NRA Education Foundation. (2010). Foundations of Restaurant Management & Culinary Arts: Level
2. Upper Saddle, NJ: Prentice Hall PTR.
Website Resources
www.fcclainc.org
www.entrepreneur.com
http://www.entre-ed.org/
http://www.smallbizdaily.com/
FN42 Foods II – Enterprise
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Appendix 4.00
FN42 Foods II – Enterprise
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Course Materials for the Roadmap to Foods Entrepreneurship
In order to offer the most appropriate course materials to students, NC CTE has
adopted The Roadmap for Entrepreneurship from the Youth Entrepreneurship Alliance
and the Consortium for Entrepreneurship Education.
The instructional materials for this Essential Standard supplement the information found
in the Adobe Acrobat document titled Roadmap to Food Entrepreneurship in the course
materials folder.
We encourage teachers to read the Roadmap document and understand the nature of
the entrepreneurial discovery process. The entire Essential Standard is focused on
encouraged students to learn about and discover entrepreneurship on their own. The
Roadmap to Entrepreneurship is an approach to help participants of all ages assume
the responsibility of learning about entrepreneurship for their own personal success
(Learning by Doing).
The primary instructional method should focus students’ attention on an
entrepreneurship project, which should be executed if possible. As students are guided
through the mile markers, teachers facilitate learning by asking questions and
encouraging students to investigate and problem-solve. Direct instruction, which covers
the material in the outline, should be efficient and minimal.
Instead of packaging information for students to memorize about entrepreneurship,
asking them to address the inevitable questions of an entrepreneurial venture of their
own, seek their own answers, share their findings with others, and try out the resulting
ideas to see if they can be successful is a far better way to encourage students to think,
make decisions, and learn.
YEA developed the Roadmap to guide students through 7 mile markers in
entrepreneurship education and is designed to make each participant create their own
ideas, learn about their ideas, put the ideas into practice at an appropriate level for their
age and education levels, and learn about themselves as a result.
Through a structured as a series of questions, the teachers can guide students through
the process of beginning a business, reaching each mile marker, all the time
recognizing that there is no single recipe for success.
FN42 Foods II – Enterprise
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Using the Checklist for Performance Assessment on Mile Markers.
These checklists are designed to assist students, groups, and teachers in assessing student
progress as they navigate the ideation and entrepreneurial thought process and the Road Map
to Food Entrepreneurship. Each checklist contains three levels of student achievement:

Advanced: Student successfully responded to the required questions and all of the
“plus” questions.
 Proficient: Student Successfully responded to the required questions and many of the
key “plus“ questions.
 Progressing: Students successfully responded to the required questions and several,
basic “plus” questions.
Each checklist also contains a checklist for students, groups, and teachers to mark when a
student has successfully answered a question.
Students should check each “S” box as a tool for self-evaluation and reflection.
Groups should check each “G” box as they discuss and evaluate each other’s’ work.
Ultimately, teachers should check each “T” box as the student successfully answers
each question.
FN42 Foods II – Enterprise
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Food Entrepreneurship Project Matrix
Sample
Projects/Methods
FCCLA Food
Innovations STAR
Event
(CTSO Integration)
http://www.fcclainc.org/co
ntent/star-eventdescriptions/
FCCLA
Entrepreneurship
STAR Event
(CTSO Integration)
http://www.fcclainc.org/co
ntent/star-eventdescriptions/
Catering Event
(Work-Based Learning)
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
4.01
4.02
4.03
4.04
4.05
Review event rules
and annual topic (on
website). Brainstorm
and develop original
prototype formula.
Conduct focus groups
and adjust formula.
Design 3-D packaging
model. List
equipment.
Develop nutrition
label, product
Create project
summary; safety and
display. Prepare
sanitation polices; and Presentation.
pricing.
Review event rules
(on website).
Determine business
concept;
Develop the business
description; supplies
and equipment;
budget; funding for
business.
Develop laws,
regulations, and
codes section; facility;
organizational chart.
Develop advertising
and recruitment;
personnel
management. Finish
portfolio and works
cited/bibliography.
Deliver presentation
to mock board of 3
investors. Reflect.
Meet with client to
determine needs.
Analyze needs of
client and preferences
of guests (target
market). Determine
budget.
Develop prototype
menu and samples for
client to taste.
Analyze feedback and
finalize menu. List
equipment and
supplies needed for
event.
Develop safety and
sanitation precautions
(HACCP plan). List
the cost of ingredients
and determine markup and pricing.
Identify potential risks,
and devise strategies
to avoid them.
Purchase ingredients
and supplies.
Execute the catering
event. Develop a
financial statement of
expenditures and
income to evaluate
profit. Reflect.
Develop prototype
recipe(s), test, and
refine. Identify
supplies, equipment,
“start-up costs,”
budget.
Identify resources to
assist with securing
supplies, equipment,
and ingredients.
Determine pricing.
Develop promotional
campaign. Identify
potential risks, and
devise strategies to
avoid them. Purchase
ingredients and
supplies.
Execute the event.
Determine profit.
Donate funds to
Alex’s Lemonade
Stand. Reflect.
Identify resources to
assist with securing
supplies, equipment,
and ingredients.
Determine pricing.
Develop promotional
campaign. Identify
potential risks, and
devise strategies to
avoid them. Purchase
ingredients and
supplies.
Execute the event.
Determine profit.
Donate funds to No
Kid Hungry. Reflect.
Discuss nonprofitentrepreneurship.
Research ALS and
(Service-Learning)
cancer research.
http://www.alexslemonade
Determine target
.org/
market and event
Free fundraising kit
date. Establish
available to teacher.
fundraising goal.
Great American Bake Discuss nonprofitSale (No Kid Hungry) entrepreneurship.
Research NKH & food
(Service-Learning)
http://gabs.nokidhungry.org/s security. Determine
ite/PageServer?pagename=G
target market and
ABS_homepage
event date. Establish
fundraising goal.
FN42 Foods II – Enterprise
Alex’s Lemonade
Stand (ALS)
Develop prototype
recipe(s), test, and
refine. Identify
supplies, equipment,
“start-up costs,”
budget.
W 2004, Updated SU 2014
Deliver presentation
to a mock board of 3
investors. Reflect.
Page 17
FCCLA Planning Process
Summary Page Template
(Space modifications are allowed, as needed)
IDENTIFY CONCERNS
SET A GOAL
FORM A PLAN (WHO, WHAT, WHEN, WHERE, HOW, COST, RESOURCES, AND EVALUATION)
ACT
FOLLOW UP
FN42 Foods II -- Enterprise
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Checklist for Performance Assessment on Mile Marker 1
ADVANCED
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. What are you passionate about?
2. What problems have you seen through personal experience?
3. What product or service could you create?
4. What problem are you solving?
5. Is there demand for your product or service?
PLUS Questions:
S G T
1: What is an entrepreneur?
2: Do you personally know any entrepreneurs?
3: Why might you want to be an entrepreneur?
4: What different kinds of entrepreneurs are there?
5: What are some ways to reach potential customers?
6: How much money does it cost to start a business?
7: Where could I get the money to start a business?
8: Is there a market for what you would like to offer?
9: What businesses could you start that would interest each of the following
groups?
fellow students/colleagues
people in your community
parents of students
mothers that work all day
people at a special event
people you can reach on the Internet
newspaper readers
what are some other niches you can name?
10: What are the important characteristics of each of these target markets?
11: What are the problems or risks in trying to reach each of these groups?
12: How would you get your message out to each of these target groups?
13: What location would be important for these different types of business?
14: What business and/or personal skills do you have that would help you run a
business?
15: Is there a new innovation that builds on products in the marketplace already?
FN42 Foods II -- Enterprise
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16: What is there about your solution that attracts potential customers?
17: What business would you absolutely love to create?
18: What would you need to do to try out this type of business?
19: What kind of help would you need to test your business idea?
PROFICIENT
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. What are you passionate about?
2. What problems have you seen through personal experience?
3. What product or service could you create?
4. What problem are you solving?
5. Is there demand for your product or service?
S G T PLUS Questions:
1. Do you personally know any entrepreneurs?
2. Why might you want to be an entrepreneur?
3. What different kinds of entrepreneurs are there?
4. What are some ways to reach potential customers?
5. How much money does it cost to start a business?
6. Where could I get the money to start a business?
7. Is there a market for what you would like to offer?
8. What businesses could you start that would interest each of the following
groups?
fellow students/colleagues
people in your community parents of students
mothers that work all day
people at a special event
people you can reach on the Internet
newspaper readers
what are some other niches you can name?
9. What are the important characteristics of each of these target markets?
10. What are the problems or risks in trying to reach each of these groups?
11. How would you get your message out to each of these target groups?
PROGRESSING
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
FN42 Foods II -- Enterprise
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G = Group and T = Teacher)
S G T REQUIRED Questions:
1. What are you passionate about?
2. What problems have you seen through personal experience?
3. What product or service could you create?
4. What problem are you solving?
5. Is there demand for your product or service?
S G T PLUS Questions:
1. What is an entrepreneur?
2. Do you personally know any entrepreneurs?
3. Why might you want to be an entrepreneur?
4. What different kinds of entrepreneurs are there?
5. What are some ways to reach potential customers?
6. How much money does it cost to start a business?
FN42 Foods II -- Enterprise
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Checklist for Performance Assessment on Mile Marker 2
ADVANCED
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. Take a second look at your chosen opportunity. Is it viable?
2. Does it satisfy an unmet need?
3. Who would be willing to buy it and what price would they pay?
4. Can you meet the market demand, if demand meets your expectations?
5. What are the problems of taking this product or service to scale?
S G T
PLUS Questions:
1. Describe the business idea you would like to try.
2. What problem does it solve for potential customers?
3. Is this a solution that consumers will like and why?
4. Is this a new innovation or a modification of existing products/services?
5. How do you make use of technology for your idea?
6. Is this the latest technology available?
7. What is the most likely target market for your product/service?
8. What is there about your solution that attracts your target market?
9. What are the basic costs for producing your product? List individual items.
10. What price would you recommend selling this product for, and why?
11. How does this compare to similar products/services?
12. What is the general name for your product or solution?
13. What are three options for your brand name? Prioritize and explain the
meaning and benefits of each.
14. How would you choose to get your sample product known for purposes of your
small test market?
15. Does your product/service require instructions? If yes, what are they?
PROFICIENT
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T REQUIRED Questions:
1. Take a second look at your chosen opportunity. Is it viable?
2. Does it satisfy an unmet need?
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3. Who would be willing to buy it and what price would they pay?
4. Can you meet the market demand, if demand meets your expectations?
5. What are the problems of taking this product or service to scale?
S G T PLUS Questions:
1. Describe the business idea you would like to try.
2. What problem does it solve for potential customers?
3. Is this a solution that consumers will like and why?
4. Is this a new innovation or a modification of existing products/services?
5. What is the most likely target market for your product/service?
6. What is there about your solution that attracts your target market?
7. What are the basic costs for producing your product? List individual items.
8. What price would you recommend selling this product for, and why?
9. What is the general name for your product or solution?
10. How would you choose to get your sample product known for purposes of your
small test market?
11. Does your product/service require instructions? If yes, what are they?
PROGRESSING
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T REQUIRED Questions:
1. Take a second look at your chosen opportunity. Is it viable?
2. Does it satisfy an unmet need?
3. Who would be willing to buy it and what price would they pay?
4. Can you meet the market demand, if demand meets your expectations?
5. What are the problems of taking this product or service to scale?
S G T PLUS Questions:
1. Describe the business idea you would like to try.
2. What problem does it solve for potential customers?
3. Is this a solution that consumers will like and why?
4. Is this a new innovation or a modification of existing products/services?
5. What is the most likely target market for your product/service?
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4.01 KEY TERMS
1. Behavioral segmentation: Dividing markets by identifying common responses to products and product
features
2. Demographic segmentation: Dividing markets by characteristics people have in common such as age,
gender, family size, income, or occupation
3. Corporation: A form of business organization where stock is sold to investors; it is chartered by a state
and legally operates apart from its owners
4. Entrepreneur: An individual who undertakes the risk associated with creating, organizing, and owning a
business
5. Franchise: A legal agreement that gives an individual the right to market a company’s products or services
in a particular area
6. Geographic segmentation: Dividing markets by where customers are located
7. Marketing: The process of planning and executing the conception, pricing, promotion, and distribution of
ideas, goods, and services to create exchanges that satisfy customer wants and needs
8. Marketing objectives: Goals related to the business’ product, pricing, promotion, and place
9. Market segmentation: Dividing the total market into smaller, well-defined groups with similar wants and
needs and similar key characteristics
10. Opportunity: An idea that has commercial value
11. Partnership: A form of business ownership in which two or more people share the assets, liabilities, and
profit.
12. Psychographic segmentation: Dividing markets by identifying common interests, attitudes, values,
lifestyle, or personality traits among the individuals that constitute that market
13. Sole proprietorship: A business owned and operated by one person.
14. Target customers: The people most likely to buy a specific product or service.
15. Venture: A business undertaking involving risk
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Creativity, Innovation and Problem Solving
Creativity and Innovation consists of...
 SEEING what everyone else has seen,
 THINKING what no one else has thought, and
 DOING what no one else has dared!"
Innovative thinking is the key to becoming a successful entrepreneur. Whether you actually invent a new
product or process, or you use creativity to find a better way to market existing products or services, you will
need to learn how to think like an inventor.
START WITH THE CUSTOMER OR END USER
The customer is always your first and most important creative challenge. Listen! Try to see the customers'
problems and needs from his or her point of view. Restate the problem and the customers' needs in their
terms until a consensus is reached. Ask not only what the problems are, but what special methods are
presently used to solve them.
Work with the end user or customer. Use fictitious product descriptions to stimulate ideas and discussion.
Remember that effective market research and sales strategy requires just as much creativity, enthusiasm and
perfection as does product development.
IMPORTANCE OF ASKING THE RIGHT QUESTIONS
The problem as first stated is rarely the true problem. Ask at least five times. Always restate the problem as
many ways as you can; change the wording, take different viewpoints, try it in graphical form. Describe the
problem to laymen and also to experts in different fields.
Don't try to learn all the details before deciding on a first approach. Make the second assault on a problem
from a different direction. Transforming one problem into another or studying the inverse problem often
offers new insights. If you don't understand a problem try explaining it to others and listening to yourself.
Test the extremes. If you can't make it better, try making it worse and analyzing what happens. Visualize a
new way to solve your problem.
"Why are we so much better at answering questions than at answering the right questions? Is it because we
are trained at school and university to answer questions that others have asked? If so, should we be trained to
ask questions?" [Or trained to ask the complete set of right questions in the right way?] Trevor Kletz (Analog
Science Fiction, January 1994, p.195)
GETTING GOOD IDEAS FROM EVERYONE AND EVERYWHERE
Asking once is rarely effective; you have to ask many times in many ways. Look at all possible sources of
good ideas: your customers, your competition, your peers, the literature, patents, and your own
subconscious. Give others some examples, this serves both to illustrate what you're talking about and
encourages them to suggest improvements to your ideas.
Tell them also what [you believe] you don't want and which solutions [you believe] won't work. Remember
that breakthrough innovations often come from the outside. Work with high performers in fields related to
your own to identify and adopt their relevant methods, tools and "tricks of the trade". Trade ideas with all.
SEARCH FOR MULTIPLE SOLUTIONS
"Nothing is more dangerous than an idea when it is the only one we have." The first solution found is usually
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inadequate or not the optimum. There is usually more than one acceptable solution. Suspend judgement and
criticism when first collecting ideas. Studying multiple problems jointly often generates unique solutions.
Look for solutions using combinations of ideas from different or evolving technologies. Even if you have
one optimum solution it may be necessary to get patent coverage for all other effective solutions so as to
protect your market.
BRAINSTORMING
In the initial phase of a brainstorming session participants are encouraged to suggest any idea that comes to
their minds. During this initial phase it is a firm rule that none of the participants can criticize or react
negatively to any of the ideas that are proposed. Although a given idea may not be new to some it will be
new to others and provoke new ideas from the group as a whole. The point is to think of as many new ideas
within the group as possible and provoke everyone to think creatively. Following sessions are used to
critique the ideas; selecting, improving, modifying, and combining them to produce the final working
solution. Encourage examination of the problem statement itself. Encourage ideas on improving the
brainstorming process itself.
VALUE OF EXPERIMENTATION, PLAY, EXAGGERATION; PERSISTENCE
Get your hands dirty. Spend some time trying things you "know won't work" or "don't know how they will
work". If you don't fail frequently you aren't trying hard enough and may be missing a lot of good
opportunities. Try Tom Peter's algorithm: "READY, FIRE, AIM." Persist, persist, persist.
As Edison said "invention is 1% inspiration and 99% perspiration [persistipation?]". Be very stubborn about
solving a problem, but be flexible about the definition of the true problem and be very flexible and open
minded about the form of the solution.
PATENT AND PROJECT NOTEBOOKS
Patent notebooks are used to provide legal protection for inventions, but can have many other useful,
complementary functions: a recorder, a reminder, a source of ideas, a means of ensuring project continuity,
and a way to communicate with yourself and within a project group. Clarity and conformance to legal
standards is critical. Other things that should be recorded: sources, questions, what doesn't work, things to
try. A one page summary sheet of the important procedures and checkpoints should be included inside the
front cover of every patent notebook issued.
INNOVATIVE COST REDUCTION
Remember that the real objective is higher profits. Raising the selling price by adding value or retargeting
the market can be an alternative or supplement to cutting costs.
EFFECTIVE USE OF NOTES
Try file cards with text and graphics (diagrams, flow charts, block diagrams, elementary circuits). Keep them
simple and easy to change (use pencil or wipe-off transparencies for overlay). Scramble the cards, lay them
out together in different arrangements. Mark ideas and questions in a way that makes them obvious to a
reader and searchable by a computer.
Richard Feynman, also a Nobel Laureate physicist, believed in getting his hands dirty and doing lots of
experiments, saying "To develop working ideas efficiently, I try to fail as fast as I can".
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Put Yourself in Their Shoes
This activity is designed to help you investigate how
successful entrepreneurs used their thinking skills to create
a better idea than their competition.
Questions Questions Questions!!!
Questions that you ask yourself about your business are
essential to creating new ideas that are different from the
existing way things are done. Questions provoke your mind
to look for answers and ideas. The answers may not pop up
immediately but persistence in asking questions and looking
for answers is essential to creative answers and successful
business ideas.
What are some of the questions you could ask if you want to become an entrepreneur?







What do I know how to do?
How could it be done better?
Who might pay me to do it?
What if I made ?it? smaller? or a whole host of ?what if? possibilities
What do the customers want?
How is the industry changing?
What customers are not being served?
YOUR ASSIGNMENT
There is no limit to the questions that can provoke a great creative idea. In this activity you will find a story
of an entrepreneur and try to think of the questions this entrepreneur must have asked in order to come up
with the idea that made his/her business successful. We recommend you look for these entrepreneurs' stories
on our web page or in one of the following magazines that also have their own web pages:
 INC Magazine http://www.inc.com:80/
 BIZ STARZ Magazine http://www.bizstarz.com
 BLACK ENTERPRISE Magazine http://www.blackenterprise.com
 SUCCESS Magazine http://www.successmagazine.com
 ENTREPRENEUR Magazine http://www.entrepreneurmag.com
 EntrepreNews & Views http://www.entre-ed.org
Prepare a report to share with the class that identifies the entrepreneur and what made the business
successful. Then create and share a list of questions this entrepreneur might have used to provoke his or her
creative thinking. Ask for ideas from the group to add to your list.
Discuss how questions can trigger your mind out of its established ruts to think about new and different ways
to do many things. Use questions to get your brain working in new and different ways to develop ideas of
value.
Other Web Pages Relating to Creativity and Patents
Learn how to think creatively from the works of Edward de Bono, an expert on how to encourage the mind
to get out of the ruts and think new thoughts.
Check out the Delphion Patent Database A complete searchable database of all US Patents from 1971 to the
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present. Hypertext links are provided to referenced patents and publications. You can order copies on-line
either in paper form or on custom CD-ROM (up to 800 patents on each CD).
What a Great IDEA! The book by Chic Thompson about key steps that creative people take. Also learn
about "Killer Phrases" and how to prevent them from inhibiting your creativity.
Try the VistaPrint Page for an extensive list of ideas on creative problem solving, inventions and patents.
Check the MIT Invention Dimension for information on inventions, patents and the annual Lemelson Prize
awards.
Check out this description of the tools of creativity.
Here is a great website for learning how NOT to do good design:
Learn about the USA Patent & Trademark Office., or check out their index to patent subjects. NOTE: Please
let us know if you find other sources of creative thinking information. We enjoy the opportunity to keep
these pages up to date.
Source: EntrepreNews & Views, The Consortium for Entrepreneurship Education, Columbus, OH
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Checklist for Performance Assessment on Mile Marker 3
ADVANCED
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. What’s included in the test of your product or service?
2. Where will you find materials and labor for your product or service?
3. Can you make a prototype for your product or service?
4. What are the total costs of making your prototype and samples (include labor) ?
5. Can you get testimonials for your product or service?
6. Where would you go to test the feasibility of your product or service?
7. Is there evidence or data supporting the long-term viability of your idea?
PLUS Questions:
S G T
1. What steps do you have to follow to put your sample product/service together?
2. What components will you need and where will you get them?
3. What do you have to do to put those components together?
4. What price would you sell your samples for to cover your costs and make a profit?
5. What packaging will you use to help you sell your product? What is the purpose of this
packaging?
6. Where could you go to find the right customers who might be interested in your prototype?
7. What would you say to potential customers to encourage them to purchase your sample?
8. What kind of signs or other promotional materials would you use to help make the sale?
9. What objections might the customer have and how would you answer these objections?
10. What information would you want to get from your customer to help you improve the
product/service?
11. What feedback would you like the customer to give you about your presentation?
12. Did the customer have the same perceptions about your product as you had wished?
PROFICIENT
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. What’s included in the test of your product or service?
2
Where will you find materials and labor for your product or service?
3
Can you make a prototype for your product or service?
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4
What are the total costs of making your prototype and samples (include labor) ?
5.
Can you get testimonials for your product or service?
6
Where would you go to test the feasibility of your product or service?
7
Is there evidence or data supporting the long-term viability of your idea?
S G T PLUS Questions:
1. What steps do you have to follow to put your sample product/service together?
2. What components will you need and where will you get them?
3.
What do you have to do to put those components together?
4. What price would you sell your samples for to cover your costs and make a profit?
5. What packaging will you use to help you sell your product? What is the purpose of this
packaging?
6. Where could you go to find the right customers who might be interested in your prototype?
7. What would you say to potential customers to encourage them to purchase your sample?
8. What kind of signs or other promotional materials would you use to help make the sale?
PROGRESSING
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T REQUIRED Questions:
1. What’s included in the test of your product or service?
2. Where will you find materials and labor for your product or service?
3. Can you make a prototype for your product or service?
4. What are the total costs of making your prototype and samples (include labor) ?
5. Can you get testimonials for your product or service?
6. Where would you go to test the feasibility of your product or service?
7. Is there evidence or data supporting the long-term viability of your idea?
S G T PLUS Questions:
1. What steps do you have to follow to put your sample product/service together?
2. What components will you need and where will you get them?
3.
What do you have to do to put those components together?
4. What price would you sell your samples for to cover your costs and make a profit?
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Checklist for Performance Assessment on Mile Marker 4
ADVANCED
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. What information do you need to solve your problem?
2. What resources are available? (i.e. newspapers, library references, Internet
research)
3. What industry information do you need such as such as state and local
regulations, target market numbers, costs of components, available suppliers,
etc.
4. How can you effectively analyze this information and turn it into something useful
to aid in your business.
5. What information do you need to solve your problem?
PLUS Questions:
S G T
1. Do you feel that you need additional information before taking the risk to sell your
current idea?
2. Make a list of the types of information you need to improve your abilities to
market this product/service on a larger scale?
3. For each type of information identify where you would go and how you would
acquire useful information.
4. What state and local registration forms do you need to be a vendor and/or start a
small business?
5. Where can you find specific quantitative data on your target market?
6. How do you find suppliers for the components of your product?
7. How do you acquire funding to create the product or business you are
considering?
8. How would you identify other people (or middlemen) that would sell your product
and what would be the costs and advantages of this?
9. What should you know about getting patents, copyright, and trademarks?
PROFICIENT
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. What information do you need to solve your problem?
2. What resources are available? (i.e. newspapers, library references, Internet
research)
3. What industry information do you need such as such as state and local
regulations, target market numbers, costs of components, available suppliers,
etc.
4. How can you effectively analyze this information and turn it into something useful
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to aid in your business.
5. What information do you need to solve your problem?
S G T PLUS Questions:
1. Do you feel that you need additional information before taking the risk to sell your
current idea?
2. Make a list of the types of information you need to improve your abilities to
market this product/service on a larger scale?
3. For each type of information identify where you would go and how you would
acquire useful information.
4. What state and local registration forms do you need to be a vendor and/or start a
small business?
5. Where can you find specific quantitative data on your target market?
6. How do you find suppliers for the components of your product?
7. How do you acquire funding to create the product or business you are
considering?
8. Do you feel that you need additional information before taking the risk to sell your
current idea?
9. Make a list of the types of information you need to improve your abilities to
market this product/service on a larger scale?
10. For each type of information identify where you would go and how you would
acquire useful information.
11. What state and local registration forms do you need to be a vendor and/or start a
small business?
PROGRESSING
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T REQUIRED Questions:
1. What information do you need to solve your problem?
2. What resources are available? (i.e. newspapers, library references, Internet
research)
3. What industry information do you need such as such as state and local
regulations, target market numbers, costs of components, available suppliers,
etc.
4. How can you effectively analyze this information and turn it into something useful
to aid in your business.
5. What information do you need to solve your problem?
S G T PLUS Questions:
1. Do you feel that you need additional information before taking the risk to sell your
current idea?
2. Make a list of the types of information you need to improve your abilities to
market this product/service on a larger scale?
3. For each type of information identify where you would go and how you would
acquire useful information.
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4. What state and local registration forms do you need to be a vendor and/or start a
small business?
5. Where can you find specific quantitative data on your target market?
6. How do you find suppliers for the components of your product?
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4.02 KEY TERMS
1. Balance sheet: A financial statement that shows what a business owns, what it owes, and how much it is
worth at a particular time
2. Break-even point: The point at which the money from product sales equals the costs of making and
distributing the product.
3. Capacity: The ability to repay the debt
4. Capital: An entrepreneurial characteristic that demonstrates personal investment in the business venture
5. Cash flow statement: A financial statement that shows the flow of money in and out of the business
6. Contingency funds: Cash that is set aside for unexpected needs of the business
7. Distribution: The process of getting merchandise to the proper locations
8. Feasibility analysis: Process used to test a business idea or concept
9. Income statement: A financial statement that shows the income, expenses, and profit/loss for the business
over a period of time, usually a year
10. Net income: The amount of money left after all costs and expenses have been deducted, considered to be a
company’s profit
11. Packaging: The covering, wrapper, or container in which merchandise is placed for retail sale
12. Price: The amount charged to customers in exchange for goods and services
13. Prototype: a working model of a product, developed before production begins
14. Quality control: The process of making sure that the goods or services produced meet specific standards
15. Sales forecast: an estimate of sales for a specified period
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Just WHAT is PROFIT?
Understanding profit is essential to anyone interested in starting their own business. It is also important for
anyone who works in a business that seeks to make a profit. Much of the misunderstanding about profit is
related to a lack of understanding of the terms used in business that explain financial decisions.
For example, return on investment means the percentage you make each year on the money you invest. If
you put $10,000 in a savings account at the bank you will earn interest...probably around 5-6% per year. If
you put that same $10,000 in stocks you will hope to earn dividends as well as have the value of the stock go
up to give you a return on your investment. Now, if you invest that $10,000 in your business you will hope
to be able to make even more as a return on your investment than just putting it in the bank. In that case you
would expect to make an annual profit that is greater than about $500 (5% of $10,000). After all, the higher
the risk the greater return the entrepreneur would expect for the investment.
Next we need to define profit...or better yet what profit is not.
Profit is not included in the amount of money a business owner pays himself/herself. Many new
entrepreneurs forget to count the costs of their time and take out a regular salary. Or when times are tough
the salary is the first thing they forget.
Profit is not the difference between the costs of the product or service and the price being charged for it. In
addition to the costs of the product sold you must account for thefixed costs that are paid regularly each
month no matter what. These include such items as rent or mortgage payments, utilities, regular salaries,
insurance, etc.
Next you must remember to plan for the variable costs of running the business that fluctuate with the
success of the business and resulting needs for advertising, staffing, supplies, etc. The fixed costs and the
variable costs together are known as overhead. Overhead, as well as the costs of the products sold, is
subtracted from the income from sales before profit can be made.
Finally you must pay taxes out of the income before actually determining your profit from your business.
These include federal, state, and local taxes which are based on a percentage of your income minus
expenses. After all these costs, the owners' profit is what is left.
What are the decisions that affect profit?
For any small business there are many day-to-day decisions that change the possible profit the business
might make. For example consider what each of the following choices might do to your profit:
* Pay employees more
* Hire more employees
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* Buy new furniture
* Buy a new truck
* Find a cheaper source of products
* Increase the advertising budget
* Give your daughter money to buy a new dress
* Select a cheaper long distance phone service
* Remodel your building
All of these decisions increase, or decrease your cost of operations affecting what is left as profit.
When deciding how to price the goods or services to be sold, the owner must take into consideration the
costs of all decisions made. Some decisions will result in higher sales which will more than make up for
increased costs. It is thought that appropriate advertising will do this. Or if you pay your employees more
they may be willing to work harder and increase sales. However, nothing is really sure about these decisions
and their effect on profits.
So business owners often decide to use a percentage of the product costs in determining their selling prices.
The percentage is based on distributing the costs of running the business (overhead) and profits in an equal
manner to all items sold, based on the product costs. This is called markup. Think of markup as the share of
the consumer's price that is necessary to run the business, plus what is left over as return on the owner's
investment. The markup on all the products sold, added together, is designed to cover the costs of running
the business and making a profit.
Business owners use past experience and experience of similar businesses to determine the expected
overhead costs and profit they hope to make. This is called their margin...the amount of money available
after the costs of products sold are deducted from the income from sales. If your sales equal $1 million and
your product costs are $200,000, your margin is $800,000. Remember, this is not your profit. We hope by
now you can explain why this is so. If not, please read this article again.
LET'S PRACTICE MAKING A PROFIT
This is the story of Goodies Gift Shop in its third year of operation in Small Town USA. Amelia Goodies,
the owner, runs the shop with 4 full time employees, 2 part timers and herself. Her sales last year were
$500,000 and her profit was $20,000 after taxes. If her balance sheet shows a net worth of $100,000 can you
tell us what her return on investment was last year?
Balance Sheet ( Year 2)
Current Assets:
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Cash
$ 10,000
Accounts Receivable
$ 15,000
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Inventory
$200,000
Property and Equipment
$100,000
Total Assets
$325,000
Liabilities:
Accounts Payable
$ 80,000
Loan Balance
$145,000
Owners Equity
$ 100,000
Total Liabilities and Equity
$325,000
This year Amelia has projected sales of $600,000 with a margin of $250,000. She has budgeted the
following overhead:
Owner Salary
$35,000
Employee Wages
Rent
100,000
10,000
Advertising
4,200
Supplies
1,000
Telephone
1,000
Other utilities
600
Insurance
2,000
Payroll taxes
30,000
Maintenance
3,700
Legal and other professional
fees
Miscellaneous
500
2,000
Interest on Loan
Total Overhead Expenses
10,000
$200,000
If taxes are 20% of Net Income, what is the planned profit for the year?
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EFFECTS ON PROFIT
The day-to-day decisions for the gift shop and the level of business Amelia is able to maintain will affect this
budget, resulting in many variations of the plan. Discuss with other students the effects the following issues
would have on profit.
1. The employees demand a 10% raise
2. The lease is up on the building and the owner would like to sell her the building for $150,000 or increase
the rent to $15,000.
3. Amelia is considering adding another full time employee for an annual cost of $20,000
4. Insurance coverage is too low and she needs to double it
5. There are new opportunities to advertise in connection with community events that would expand her
advertising budget.
6. She needs to buy a computer to improve her record keeping systems
7. Shoplifting losses force her to increase her markup an extra 5%.
8. Sales in the first six months have been 10% below expectations.
9. Her daughter "borrows" money from the register and does not repay it.
10. She is considering buying a used van for $10,000 and offering free delivery services to her customers.
What advice would you give Amelia about running her business after considering the information you have
been given? What additional information would you like to have in order to discuss this case?
Do you now have a better understanding of PROFIT?
(For more help in answering these questions please refer to the PACE curriculum units
on Pricing, Analyzing Finances, and The Business Plan. Available from The Center on
Education and Training for Employment, The Ohio State University, Columbus, OH
(800-848-4815) (This activity was published in EntrepreNews & Views and is free to
copy for use in the classroom. EntrepreNews & Views is published by the Consortium
for Entrepreneurship Education, Columbus, OH.)
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Checklist for Performance Assessment on Mile Marker 5
ADVANCED
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. Where can you find people with needed expertise?
2. Who do you know who has business experience, or who can connect you with
people who do?
3. Are there organizations or individuals in the community who could help you
arrange financing for your business?
4. Are there community organizations or outside groups you can become a member
of to help further develop your entrepreneurial venture?
PLUS Questions:
S G T
1. Who do you know that has business experience or could connect you to people
that do?
2. Where could you find people with expertise to share related to the chosen product
from the viewpoint of the industry?
3. What advice do you need about startup costs, materials, operating costs, retail
price, distribution process, promotion, packaging, financing, security, etc.?
4. Who could help you with getting patents, copyrights and trademarks?
5. Are there organizations or individuals in the community that would help you
finance your business idea?
6. If you need a detailed business plan to access financing who in the community
could help you develop it?
7. Are there counselors in the education system that could provide advice on
creating your small business?
8. What does the SBA / SCORE / SBDC offer you in your area?
9. Who could help you with professional packaging design, promotional graphics
etc?
10. Who could help you design a professional looking and effective website?
11. What legal assistance do you need and where could you find it?
12. Who would advise you on how to keep your accounting, personnel, and product
records?
13. Is there financial counseling available for your business?
14. Who might help you find facilities that you might need for office space,
manufacturing, shipping, selling, storage etc.?
PROFICIENT
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
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1. Where can you find people with needed expertise?
2. Who do you know who has business experience, or who can connect you with
people who do?
3. Are there organizations or individuals in the community who could help you
arrange financing for your business?
4. Are there community organizations or outside groups you can become a member
of to help further develop your entrepreneurial venture?
S G T PLUS Questions:
1. Who do you know that has business experience or could connect you to people
that do?
2. Where could you find people with expertise to share related to the chosen product
from the viewpoint of the industry?
3. What advice do you need about startup costs, materials, operating costs, retail
price, distribution process, promotion, packaging, financing, security, etc.?
4. Who could help you with getting patents, copyrights and trademarks?
5. Are there organizations or individuals in the community that would help you
finance your business idea?
6. If you need a detailed business plan to access financing who in the community
could help you develop it?
7. Are there counselors in the education system that could provide advice on
creating your small business?
8. What does the SBA / SCORE / SBDC offer you in your area?
9. Who could help you with professional packaging design, promotional graphics
etc?
10. Who could help you design a professional looking and effective website?
11. What legal assistance do you need and where could you find it?
12. Who would advise you on how to keep your accounting, personnel, and product
records?
PROGRESSING
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T REQUIRED Questions:
1. Where can you find people with needed expertise?
2. Who do you know who has business experience, or who can connect you with
people who do?
3. Are there organizations or individuals in the community who could help you
arrange financing for your business?
4. Are there community organizations or outside groups you can become a member
of to help further develop your entrepreneurial venture?
S G T PLUS Questions:
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1. Who do you know that has business experience or could connect you to people
that do?
2. Where could you find people with expertise to share related to the chosen product
from the viewpoint of the industry?
3. What advice do you need about startup costs, materials, operating costs, retail
price, distribution process, promotion, packaging, financing, security, etc.?
4. Who could help you with getting patents, copyrights and trademarks?
5. Are there organizations or individuals in the community that would help you
finance your business idea?
6. If you need a detailed business plan to access financing who in the community
could help you develop it?
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4.03 KEY TERMS
1. Business plan: A proposal that describes a new business. It is presented to potential investors and lenders.
2. Credit unions: Cooperatives formed by labor unions or employees for the benefit of the members
3. Fixed pricing: Pricing technique in which the organization charges the same prices to all customers
regardless of the quantity of the purchase
4. Government agencies: Operated by the government to provide technical assistance, counseling, grants, or
other means of financial assistance at low-interest rates
5. Label: The product’s packaging used to present information to the consumer
6. Markup pricing: Pricing strategy that adds a predetermined percentage to the cost of products
7. Odd/even cent pricing: Based on the principle that prices ending in odd numbers ($5.99) communicate a
bargain and prices ending in even numbers ($6.00) communicate quality. Widely used by retailers.
8. Prestige pricing: Believing that customers equate high price with high quality, this technique sets a higherthan-average price for products in order to communicate quality and status
9. Private investors: Wealthy individuals functioning as non-professional investors who are willing to invest
in local business for financial or emotional reasons and who sometimes prefer to remain anonymous
10. Promotional pricing: involves selling a product at a temporarily lower price in order to attract customers
11. Psychological pricing: Pricing technique based on the belief that customers form their perceptions of
products on price and these perceptions affect customer buying decisions
12. Sales quota: Goal assigned to a sales person for a specific period
13. Secured loan: Borrowed money that must be repaid within one year
14. Unit pricing: Stating the price of a product per unit of standard measure.
15. Unsecured loan: A loan that is not guaranteed by collateral
16. Venture capitalists: Individuals or firms that invest money professionally to make money, expect a large
capital gain, and look for high growth potential
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STEPS IN SETTING PRICE
1.
2.
3.
4.
5.
6.
Determine pricing objectives: Consider your purpose in setting a price for your products. Knowing
whether you want to establish an image for the business (product), increase your market share, maintain
your market share, or increase sales will affect price.
Study costs: Carefully examine all of the costs associated with carrying a product and selling it to
consumers. Price planning must include a comprehensive look at business costs and how to keep them to a
minimum.
Estimate demand. Research industry data and study past sales to estimate demand. If this is a completely
new venture, it may be necessary to find a willing advisor who has a similar business in a nearby city or
community.
Study the competition: While new or small businesses often have a difficult time competing solely on the
basis of price, it is important to know what competitors are charging for products. Determine how you will
respond to competitors’ prices.
Decide on a pricing strategy: Select the strategy that offers the business the greatest potential for profit
then monitor sales and related factors to determine when changes are necessary.
Set your price: Once again, continue to monitor sales, customer reactions, competitor reactions, and
company goals to determine when changes are needed.
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COMMUNITY RESOURCES FOR ASSISTANCE
A. Federal agencies
1. Small Business Administration (SBA): The SBA promotes small business development, helps
businesses secure government contracts, and provides assistance and advice on how small businesses
can increase revenues and profits.
2. Service Corps of Retired Executives (SCORE): A volunteer organization in which retired business
executives share their business experience with small business owners.
3. Small Business Institute (SBI): Free counseling services provided by student teams at many colleges.
4. United States Department of Commerce: The Department of Commerce provides social and economic
statistics for businesses as well as research and support for scientific, engineering, and technological
development. It also issues patents and trademarks, provides assistance to promote economic
development, and encourages minority-run businesses.
5. Federal Trade Commission (FTC): The FTC ensures that business practices in the United States are
fair. It constantly monitors all aspects of business including pricing, competition, credit, and export
trade. It makes and enforces rules that regulate trade and protect consumers.
6. Internal Revenue Service (IRS): The IRS issues federal taxpayer identification numbers to businesses,
distributes publications that explain tax laws, and assists with tax-related questions.
7. Small Business Development Center (SBDC): The SBDC is funded by the federal government and
state governments. Usually located in colleges and universities, these centers provide counseling and
management assistance to small businesses.
B. State resources
1. Department of Development (DOD): Each state has a DOD. This agency administers federal
community development programs. The DOD provides assistance to small and developing businesses
through a Small Business Division and Minority Business Development Division.
2. Workers’ Compensation Board: All business owners who employ workers are required to provide
insurance that gives employees or their survivors benefits in the event of work-related injuries or
deaths. This board works with employers to provide this insurance at reasonable costs.
3. The State Department of Agriculture and Consumer Protection Division: This agency issues permits
for businesses involved in the processing, handling, storage, or distribution of food products. It also
issues permits for public-interest businesses such as day care centers, schools, financial institutions,
and employment agencies.
4. The State Sales and Use Tax Division: This agency issues identification numbers to retail businesses
that collect and remit sales taxes. It also provides instructions for collecting, reporting, and remitting
sales taxes to the state.
5. The State Department of Labor: This agency provides businesses with information regarding
employer responsibilities in relation to unemployment insurance.
6. The Office of the Secretary of State: This office provides general business information in addition to
information and forms used for incorporation. It also provides forms used to register state trademarks
and business names.
C. Local/community resources
1. Chambers of Commerce: The purpose of these organizations is to stimulate local economic growth.
They provide information about the local economy, business trends, and business needs of the
community.
2. Colleges, universities, and technical schools: These educational institutions offer educational training
and research support.
3. Licensing and Permit Offices: These offices offer assistance and support when obtaining business
licenses.
4. County Health Departments: These departments will provide information on local health and safety
regulations.
5. County Extension Services: These agencies are good resources for agricultural businesses.
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D. Professional services
1. Attorneys: Attorneys make sure that business owners follow the proper procedures in all legal aspects
of the business operation. They provide important information about business owners’ rights, the best
legal structure for a business, protecting assets, preventing legal action, obtaining patents and
trademarks, and tax and business legislation.
2. Accountants: Accountants assist business owners in designing and maintaining bookkeeping systems.
They also provide planning and management advice and make recommendations on how to minimize
tax liability.
3. Insurance agents: Insurance agents inform business owners of insurance requirements and regulations.
They help business owners determine how to obtain adequate insurance coverage at the lowest cost.
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Checklist for Performance Assessment on Mile Marker 6
ADVANCED
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. How are you going to test your business? (i.e. work with real customers?)
2. What do you have to do to prepare to get the idea out in the marketplace?
3. What problems did you encounter in testing your idea?
4. Are there things you would do differently if you had to do it again?
PLUS Questions:
S G T
1. Where might you choose to give your product/service a real trial with the market?
2. What is involved with making arrangements to do this?
3. Who have you met along the way that could help you?
4. How many people might you reach and what percent do you think will buy from
you?
5. Are there ways to sell the product without having the product on hand at the site?
6. What are the problems and advantages of just-in-time production?
7. What are the costs of providing the quantity of products needed to meet your
projected sales?
8. How will you handle the customer’s payment?
9. What price would you charge for each product, and what is your resulting
projected income?
10. What happens when you give away free samples or reduce your prices?
11. Can you see a way to increase your income?
12. Did your potential customers really see your product/service as an answer to
something they needed?
13. If you had unsold products, was the price the problem?
14. If you were to do it over again, what would you do to make the experience more
profitable to your pocketbook?
PROFICIENT
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. How are you going to test your business? (i.e. work with real customers?)
2. What do you have to do to prepare to get the idea out in the marketplace?
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3. What problems did you encounter in testing your idea?
4. Are there things you would do differently if you had to do it again?
S G T PLUS Questions:
1. Where might you choose to give your product/service a real trial with the market?
2. What is involved with making arrangements to do this?
3. Who have you met along the way that could help you?
4. How many people might you reach and what percent do you think will buy from
you?
5. Are there ways to sell the product without having the product on hand at the site?
6. What are the problems and advantages of just-in-time production?
7. What are the costs of providing the quantity of products needed to meet your
projected sales?
8. How will you handle the customer’s payment?
9. What price would you charge for each product, and what is your resulting
projected income?
10. What happens when you give away free samples or reduce your prices?
11. Can you see a way to increase your income?
12. Did your potential customers really see your product/service as an answer to
something they needed?
PROGRESSING
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T REQUIRED Questions:
1. How are you going to test your business? (i.e. work with real customers?)
2. What do you have to do to prepare to get the idea out in the marketplace?
3. What problems did you encounter in testing your idea?
4. Are there things you would do differently if you had to do it again?
S G T PLUS Questions:
1. Where might you choose to give your product/service a real trial with the market?
2. What is involved with making arrangements to do this?
3. Who have you met along the way that could help you?
4. How many people might you reach and what percent do you think will buy from
you?
5. Where might you choose to give your product/service a real trial with the market?
6. What is involved with making arrangements to do this?
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4.04 KEY TERMS
1. Advertising: A non-personal promotional message paid for by an identified sponsor utilizing media such
as television, radio, magazines, newspapers, billboards, and direct mail
2. Financial plan: provides projected financial statements
3. Loss: More money going out than coming in
4. Net profit: amount of money that remains when expenses are paid
5. Opportunity cost: When resources are limited, the option that is given up when a consumer chooses one
product/service over another
6. Personal selling: a form of promotion that uses planned, personalized communication in order to influence
customer buying decisions and ensure satisfaction
7. Promotion: Any form of communication a business or organization uses to inform, persuade, or remind
consumers about its products/services
8. Public relations: Any activity designed to create a favorable image toward a business, its products, or its
policies
9. Visual merchandising/display: Coordination of the physical elements of a business or a product to project
the desired image to the consumer
10. Vender: supplier of goods or services to a business
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PROMOTION BASICS
Why do we buy the television we watch, the cars we drive, and even
the toothpaste we use?
We buy them primarily as a result of promotion. Promotion is a part of our daily lives. The clothes
we choose to wear and the food we choose to eat are almost entirely the result of promotion.
WHAT IS PROMOTION?
Promotion is one of the major elements of the marketing mix of the business. Promotion is a form
of persuasive communication, or getting others to do what you want them to do. Its function is that
of informing consumers about a product or service and influencing them to buy that product or
service. There are many different promotional tools that are used by businesses to enhance the
image of the product, such as mailings, speeches, presentations, contests, packaging, films,
catalogs, coupons, posters, and even endorsements by famous people. Promotion is an important
part of a business's strategy in surviving today's competitive marketplace.
ELEMENTS OF THE PROMOTIONAL MIX
To achieve desired sales results, entrepreneurs must consider all forms of promotion and decide
which ones should be used and in what proportion. Naturally, the aim of every small business
owner is to get the most from every dollar spent for promotion. The combination of different forms
of promotion is called the promotional mix. The makeup of the promotional mix varies with the
product being promoted, the nature of the potential customers, the general market conditions, and
the funds available.
Advertising is a non-personal sales message that is paid for by an identified company. It promotes
the company's products, services, or image and is directed toward a mass audience. The fact that
advertising is paid for distinguishes it from free publicity. The non-personal approach of
advertising distinguishes it from personal selling. Advertising media are the channels of
communication used by advertisers to send their messages to potential customers. Advertising
media include radio, television, newspapers, magazines, direct mail, and billboards.
Sales promotion is any sales activity that supplements or coordinates advertising and personal
selling. Sales promotion includes free samples, coupons, contests, and other special incentives
intended to stimulate sales.
Display or visual merchandising is an important part of promotion. It is the display of a product at
or near the point of purchase. Visual merchandising includes attractive window and interior
displays and eye-catching exterior signs.
Public relations is the total process of building goodwill toward a business. One approach to
building public relations is to hire a company to promote the business goals of the owner. The fee is
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usually determined by the amount of time the public relations firm must spend to accomplish the
small business owner's goals.
Publicity is free advertising for the business. For example when a newspaper covers the opening of
a new business, the owner does not pay for it.
Personal selling is the direct effort made by a salesperson to convince a customer to make a
purchase. It is directed toward one person or at a small group through direct communication.
WHAT ARE THE MEDIA OF PROMOTION?
The use of any of the media to promote the small business should be based upon the target market
to be covered. This market is those consumers whom you want to purchase your product or service.
Other considerations include the size and type of audience, the promotion costs, the time or space
available, and the suitability of that medium to the consumers.
The promotional message does need to be repeated several times in order for the buyer to
remember it. In general, it must be run at least six times within the customer's decision period in
order to be most effective in most media presentations. An advertisement place only once on the
radio or television is almost always highly ineffective. Different media provide different
advantages to different types of businesses, though, and you must decide which is best for your
small business.
The newspapers account for approximately 30 percent of all promotional dollars. Newspapers
provide the flexibility, longevity, and graphic presentation necessary and appropriate for many
entrepreneurs with a short lead time. Lead time is the actual time that is required by the medium in
order to schedule your advertisements. Usually newspapers require only five to seven days for this.
Grocery stores, department stores, and fashion clothing stores will often run weekly ads in the local
newspapers, especially since they may not know what items will be on sale until the week before
the event. Newspaper ad space rates are based on the circulation or number of papers sold to the
community. The larger the circulation is, the higher the rates.
The radio is more common for advertising today than ever before. There are over 400 million
radios in use in the United States today. Radios reach a wide array of customers and provide great
flexibility with a short lead time. It is important that any message promoted over the radio be
repeated a number of times. Radio advertising is generally sold in amounts of 15-, 30-, and 60second spots. The 30- and 60-second spots are most popular. Costs will vary according to the time
of day, the size of the listening audience, and the particular station. It is important to remember that
different radio stations attract different target markets.
Television ranks second to local newspapers in terms of promotion dollars. The average person
watches over six hours of television per day, and over 97 percent of all homes in the United States
have television sets. It allows both a visual as well as an audible message. Television advertising is
sold in time units of 10, 20, 30, and 60 seconds. The 30-second television advertisement is the most
common. Rates will vary according to stations as well as to the time of day.
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Magazines provide a very specific audience. They are generally limited to specific topics or
geographical areas. However, there are many nationally distributed magazines that have wide
appeal for the advertising dollar. Unlike radio, television, or even newspapers, magazines last for
long periods of time and are often read by more than one reader. The advertisement will last as long
as the magazine.
Direct mail has grown enormously since its beginning. Direct mail reaches a specific target market
and may even be used in the form of catalogs, letters, postcards, coupons, circulars, price lists, or
business cards. The rate of return in a national direct mail campaign averages 2 to 3 percent.
Directories also provide a specific target market. The most common form of directory is the Yellow
Pages of the local telephone book. The directory provides a long-lasting advertisement, usually
published annually. Often its life expectancy is the longest of any promotional message- a year or
more, or as long as the directory lasts.
Outdoor promotions is an area that is often under-used but still successful. The use of billboards,
buses, and taxies may be developed and effectively used. Outdoor promotions are an excellent way
to reach travelers, often with many repeat readers.
It should be understood, however, that the promotional mix always varies with the product and the
market. The owner of a roadside fruit stand has his own promotional mix - modest though it may be
- which is just as individual as the promotional mix of a large national airline. The mix is rarely the
same for any two businesses or for different time periods in the same business.
Effective use of promotion should be a valuable tool to any small business owner or entrepreneur.
With an increased understanding of the wants and needs of the customers, you will be better able to
supply the goods or services that will increase your profitability.
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ACTIVITIES FOR STUDENTS
1. Identify terms in the Promotion Basics article that are used in promotion and are specific to that
industry. Determine the meanings of these words and practice using them in sentences that
show clear understanding.
2. Compare the promotional methods used by a local small business and a large business (ie. local
pharmacy versus chain drugstore). You should find many differences. Explain the differences
and why they exist. Is there any disadvantage to the small business as it tries to promote its
business?
3. Prepare a list of 10 different types of products or services. For each product, determine which
type of promotional method(s) would be best for informing consumers about the product or
service. Why did you select each method?
4. In teams of four to six persons, develop a chart for the following products and services,
comparing the differences among them. Write a statement for each product or service
discussing how valuable promotion would be in helping the customer make a buying decision.
* Anderson House windows
* BMW automobile
* Maytag washer
* McDonald's new fast food menu item
* Ruffles potato chips
* Artist
* Beautician
* Circus
* Florist
* Printer
5. In teams of four to six, brainstorm strategies to promote your school. Discuss the value of
developing a public relations program for the school to use within the community. Try to use all six
elements of the promotional mix to better accomplish your task. Can all six elements be used
effectively or not?
SOURCE NOTE: The above materials are adapted from PACE, available from the Center on
Education and Training for Employment, The Ohio State University, 1900 Columbus, OH,
43210. For information or to order call 1-800-848-4815
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PROFITS COME FROM TAKING
BUSINESS RISKS
You face risks every day.
You cannot cross the street without some danger that you will be hit by
a car. Getting out of bed, driving a car, and opening a business all
involve SOME risk. Risk is simply the possibility of damage, injury, or
loss.
Like individuals, business owners need to protect themselves against
the risks they face. It is important for entrepreneurs to recognize
potential risks they face and prepare effective strategies to deal with
them. It is also useful for entrepreneurs to design "contingency plans",
or alternative courses of action. Contingency plans show that the entrepreneur is sensitive to
important risks and is prepared to handle risks as they occur.
MARKETS:
Some of the risks that almost all businesses face involve competition, price changes, style changes,
competition from new products, and changes from fluctuating economic conditions.
ACCIDENTS:
Businesses also face risks beyond these market and economic shifts. For example, a merchandise
shipment of tennis shoes may be destroyed in transit. A warehouse may burn down and large
amounts of expensive inventory may be lost. Events like these threaten the security of a business.
They cost money, and they may cause a business to fail. First, entrepreneurs must be able to
identify all the possible risks they face, then decide upon preventive measures to eliminate or
reduce the impact of the risks.
As an entrepreneur, there are two primary types of risk that you will face: speculative risk and
pure risk.
SPECULATIVE RISK
is uncertainty as to whether an activity will result in a gain or a loss. Risks, such as building a plant
that turns out to have the wrong capacity or keeping an inventory level that turns out to be too high
or too low, are speculative risks. Speculative risk is unavoidable and is inherent in the nature of the
private enterprise system
PURE RISK
is uncertainty as to whether some unpredictable event that can result in loss will occur. Pure risk
can result only in loss, never in gain. This kind of risk consists of hazards such as a fire or a
hurricane, death of key employees, or customer injuries on the premises of the business. Pure risk
exists when the possibility of loss is present, but the extent of the possible loss is unknown. Pure
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risk is different from speculative risk because speculative risk carries the possibility of gain as well
as loss.
When you start a business, you automatically assume risk; you intend to make money, but you also
know that you can lose money. Not starting a business at all is the only sure way to avoid the risk.
Successful entrepreneurs, however, take control over how much risk they are willing to accept and
then develop plans to control the remaining risks.
Businesses face many kinds of risks, and you should realize that there is no way to avoid all of
them. Sound business management procedures can minimize the losses your business may suffer
from some risks, but no amount of caution and planning can eliminate risk entirely.
As an entrepreneur, you must be able to identify the risks that your business faces and take
appropriate preventive measures to minimize losses. In addition, you should be aware of which
losses you can protect yourself from by purchasing the appropriate business insurance. Otherwise, a
lifetime of work and dreams can be lost in a few minutes.
Risk should not paralyze the zeal and enthusiasm of new entrepreneurs. They must be willing to
take moderate risks when they believe there is a strong likelihood that they will succeed. For the
entrepreneur, the brighter side of risk-taking is the possibility of success and increasing their
wealth. Most dreams cannot come true unless some risks are taken.
HOW DO ENTREPRENEURS MAKE PLANS TO REDUCE
RISK????
Effective management is clearly the best way to reduce the impact of many
risks, particularly speculative risks. Careful control of financing, product
development activities, production, marketing, distribution, and other
management concerns help ensure that the results of most speculative risks
will be profits rather than result in loss or failure of the business. Many
entrepreneurs control risk by keeping fixed assets to a minimum or by renting
facilities rather than using personal funds to purchase land and buildings.
Entrepreneurs do not necessarily seek out risks; they ASSUME risks. You can
reduce risk through careful planning and decision-making with activities such
as the following:
1. Analyzing current and future economic and market conditions.
2. Considering the consequences of alternative actions
3. Making reasonable decisions in response to conditions as they develop and change.
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WHAT METHODS DO ENTREPRENEURS USE
TO CONTROL RISK?
Once entrepreneurs have identified the risks they face, they must decide what to do about them.
Some risks are easier to control than others and the actions of the owner will vary with the
circumstances faced by individual firms. Most owners control risk by-
RISK AVOIDANCE (eliminating the risk) is abandoning or refusing to undertake an activity
in which the risk seems too costly.

RISK REDUCTION (minimizing the risk) consists of using various methods to reduce the
probability that a given event will occur. Although some risks cannot be avoided, most can be
appreciably reduced. The primary control technique is prevention, including the use of safety and
protective techniques.

RISK TRANSFER means shifting the consequences of a risk to persons or organizations
outside your business. The best known form of risk transfer is insurance, which is the process by
which an insurance company agrees to pay an individual or organization an agreed upon sum of
money for a prospective future loss.

RISK ASSUMPTION, also known as risk absorption or risk retention, involves the planned
acceptance of the risk of loss. In some instances, reducing certain risks may be too expensive.
Generally, the small business owner will assume risks in which losses that occur will not produce
significant financial consequences to the business. Determining the amount of loss that is
significant is not a precise science.
Most entrepreneurs use a combination of methods when controlling and managing risks.
How would you apply this information on risk management to the following CASE STUDY?
Jill Kearns was in her first year of college, and was running low on money. She needed to make at least $500
to cover her expenses. She considered getting a full-time job, but realized that she did not have enough time
to do her studies and keep the job. Her solution was to start a small business venture with the members of a
jazz band to which she belonged. They would hold jazz concerts and sell tickets to Jill's performances.
Jill's idea for this venture came from her own and a friend's interest in jazz. As the popularity of jazz has
grown, she would have seen the potential for a business venture expanding. The idea of using her interest in
music to earn the money was very appealing. Currently, the group members have $500 in the bank. In order
to give a concert, Jill anticipated that they would have the following start-up expenses: an advertising cost of
printing posters, rent on a concert hall, cost of printing tickets, and incidental expenses for transportation,
telephone calls, etc.
By deferring as many payments as possible and obtaining credit, she found that they needed $465to hold their
first concert. Jill figured their total expenses would be about $2000. By giving two shows and multiplying the
ticket price by the legal capacity of the hall, she calculated that the maximum gross receipts would be $2900.
The business venture would earn a profit of $900!
1. What risks are involved in this business venture?
2. How could these risks be reduced or eliminated?
(Source: PACE, Program for Acquiring Competence in Entrepreneurship, CETE/OSU, Columbus,
OH)
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Checklist for Performance Assessment on Mile Marker 7
ADVANCED
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
15. What went better or worse than expected when you exposed your business to
market forces?
16. How do you feel about becoming an entrepreneur in the future?
17. From this experience would you choose to continue to develop this idea as a future
business? Why or why not?
18. If you have decided that you do not have an affinity to entrepreneurship how can
you use what you learned from this experience?
19. What other experiences will advance your knowledge so that you can take your
entrepreneurial venture to the next level?
20. How did it feel to take a chance on creating your own wealth?
21. What are the top things you have learned using the mile markers to better help you
move forward?
PLUS Questions:
S G T
1. After the sale what did you do with the gross income?
2. How did it feel to take a chance on creating your own wealth?
3. What problems do you still have with an idea of being an entrepreneur?
4. What are the top five things that you have learned along the Mile Markers that will
allow you to be successful in your entrepreneurial endeavor?
5. Is there a specific sequence of things to be done or decisions to be made that will
allow your endeavor to operate more successfully? What should be the next step?
6. What are the essentials steps you must complete in order to continue toward your
entrepreneurial dream?
7. As you continue with your education, what choices do you want to make to improve
your skills as an entrepreneur?
22. What classes, programs, or special activities are available in your community that
might help you expand your knowledge and skills to become an entrepreneur?
23. Are there people that you have met along the journey through the Mile Markers that
could allow you to work with them to gain Marketplace experience?
24. Are there internships that would connect you to the specific industry/marketplace
needed to learn more about the industry?
25. Are there associations that could advance your experiences in your chosen
industry/marketplace?
26. Is there a person who would allow you to shadow them occasionally in order to
provide important experiences?
27. Is there a specific source of information to consider more than any other in order to
advance your knowledge about the chosen industry?
28. What is the best process to use to evaluate your entrepreneurial endeavor?
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29. What experiences do you need that could allow you to advance your knowledge
about your entrepreneurial endeavor most effectively?
30. Are there persons with whom you need to consult as you chose your future
direction with the business?
31. What legal protections do you need as you choose to pursue the business idea on
your own?
32. How would you feel about journeying through these Mile Markers again in a class
or classes in your future?
33. If you have decided that entrepreneurship is not for you, how will this experience
help you in any career you may choose?
34. Based on your experience with the Mile Markers, what advice would you give to the
teacher/leader of this experience to improve it for future students?
35. How comfortable were you with searching for the information you needed rather
than having someone package it for you?
36. Can you better understand how entrepreneurs create wealth in this country, the
risks they take to do so, and the importance of the freedom to make your own
decisions resulting in the risks and rewards of entrepreneurship?
PROFICIENT
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T
REQUIRED Questions:
1. What went better or worse than expected when you exposed your business to
market forces?
2. How do you feel about becoming an entrepreneur in the future?
3. From this experience would you choose to continue to develop this idea as a future
business? Why or why not?
4. If you have decided that you do not have an affinity to entrepreneurship how can
you use what you learned from this experience?
5. What other experiences will advance your knowledge so that you can take your
entrepreneurial venture to the next level?
6. How did it feel to take a chance on creating your own wealth?
7. What are the top things you have learned using the mile markers to better help you
move forward?
S G T PLUS Questions:
1. After the sale what did you do with the gross income?
2. How did it feel to take a chance on creating your own wealth?
3. What problems do you still have with an idea of being an entrepreneur?
4. What are the top five things that you have learned along the Mile Markers that will
allow you to be successful in your entrepreneurial endeavor?
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5. Is there a specific sequence of things to be done or decisions to be made that will
allow your endeavor to operate more successfully? What should be the next step?
6. What are the essentials steps you must complete in order to continue toward your
entrepreneurial dream?
7. As you continue with your education, what choices do you want to make to improve
your skills as an entrepreneur?
8. What classes, programs, or special activities are available in your community that
might help you expand your knowledge and skills to become an entrepreneur?
9. Are there people that you have met along the journey through the Mile Markers that
could allow you to work with them to gain Marketplace experience?
10. Are there internships that would connect you to the specific industry/marketplace
needed to learn more about the industry?
11. Are there associations that could advance your experiences in your chosen
industry/marketplace?
12. Is there a person who would allow you to shadow them occasionally in order to
provide important experiences?
PROGRESSING
All REQUIRED questions (in gray) are met and All PLUS questions (in white) are met. (Check
off when completed and place all completed work in your live-project portfolio.) (S =Student,
G = Group and T = Teacher)
S G T REQUIRED Questions:
1. What went better or worse than expected when you exposed your business to
market forces?
2. How do you feel about becoming an entrepreneur in the future?
3. From this experience would you choose to continue to develop this idea as a future
business? Why or why not?
4. If you have decided that you do not have an affinity to entrepreneurship how can
you use what you learned from this experience?
5. What other experiences will advance your knowledge so that you can take your
entrepreneurial venture to the next level?
6. How did it feel to take a chance on creating your own wealth?
7. What are the top things you have learned using the mile markers to better help you
move forward?
S G T PLUS Questions:
1. After the sale what did you do with the gross income?
2. How did it feel to take a chance on creating your own wealth?
3. What problems do you still have with an idea of being an entrepreneur?
4. What are the top five things that you have learned along the Mile Markers that will
allow you to be successful in your entrepreneurial endeavor?
5. Is there a specific sequence of things to be done or decisions to be made that will
allow your endeavor to operate more successfully? What should be the next step?
6. What are the essentials steps you must complete in order to continue toward your
entrepreneurial dream?
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4.05 KEY TERMS
1.
2.
3.
4.
5.
6.
Collateral: Evidence of the ability to repay debt
Economic outlook: Trends associated with the economy that can impact your business’s sales
Forecast: A look into the future to determine, sales, staffing, and other unknowns
Nonprofit corporation: Legal entities that make money for reasons other than the owner’s profit
Policy: Guiding principle, rules or strategy
Portfolio: A collection of documents, photographs, and work samples which is used to demonstrate to
potential employers an individual’s skills, knowledge, abilities, and professional growth in order to
obtain a job
7. Sales projection: Forecast of future sales
8. Short-term loan: Borrowed money that must be repaid within one year
9. Start-Up cost: One-time expenses an entrepreneur incurs when starting a business (for example, the
initial inventory and consultations with lawyers)
10. Variable costs: Expenses that may change from month to month depending on the needs of the
business; costs that increase and decrease with the quantity of the good or service produced/sold (for
example, ingredients and advertising)
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