Everything You Need to Know About Entrepreneurship and Business Planning But were Afraid to Ask - by...

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Everything you need to know about

Entrepreneurship and

Business Planning but were afraid to ask.

PART 1

Top 8 Questions about Entrepreneurship

1. Why should we care about Entrepreneurship? 2. Why would anyone want to be an Entrepreneur?

3. What is Entrepreneurship? 4. Is Entrepreneurship more fun in the Philippines?

5. Who can be an Entrepreneur? 6. What does it take to be an Entrepreneur? 7. How does one become an Entrepreneur? 8. How do you choose a business?

#1 Why should we care about

Entrepreneurship?

Importance of Entrepreneurship in the Philippines’ Future

Entrepreneurship (SMEs) plays a big role in Developed countries!

1. It creates wealth; 2. It creates jobs; 3. It strengthens democracy.

Why would anyone want to

be an Entrepreneur?

An Entrepreneur’s Life •  Long Long n •  Long hours of Work with no vacation

leave! (you are on duty 24 hours per day, 365 days in a year!)

•  Salary is not guaranteed (sometimes, you need to forego your salary)

•  You don’t look forward to payday and dread the thought of 13th month pay - because you have to pay for it!

An Entrepreneur’s Life •  Long Lo •  You pursue your passion; something

that you really believe in!

•  You control your destiny! •  You become the best that you can be! •  You can make a big impact in the lives

of people!

•  You have limitless earning potential!

What is

Entrepreneurship?

YES and NO!

Is Entrepreneurship the same as business?

WHAT IS A BUSINESS?

A business is an entity that is set-up or designed to make

goods, sell goods, or provide a service for

a profit.

Adam Smith

WHAT IS A BUSINESSMAN?

A business is an entity that is set-up or designed to make goods, sell goods, or provide a service for a profit.

What a businessman does.

Why he does it.

Definition of ENTREPRENEURSHIP

The Babson College:

"a way of thinking and acting that is opportunity obsessed, holistic in

approach, and leadership balanced.”

“involves consistently thinking and acting in ways designed to uncover new

opportunities that are then applied to provide value”

Comparing Definitions

Business Entrepreneurship

Products and Services

Opportunities

Profit Creating/Providing Value

WHAT IS AN ENTREPRENEUR?

COINED BY JEAN BAPTISTE SAY, A FRENCH ECONOMIST, FROM TWO FRENCH WORDS:

1.  ENTRE – TO ENTER, GET IN, MOVE IN 2.  PRENEUR – SOMEONE WHO TAKES

An ENTRE-PRENEUR Creates or initiates

An ENTER-PRISE

(Enter and Capture)

An enterprise is a venture…

Entrepreneurship is an adventure!

BUT, THERE ARE ALWAYS RISKS!

THE GREATER THE RISK, THE GREATER THE RETURN!

Therefore we can say that

an ENTREPRENEUR

is a businessman on an adventure!

•  Chartering unknown territories •  Uncovering untapped opportunities

•  Discovering new ways of doing things!

BUSINESSMAN VS. ENTREPRENEUR “What is more important:

making money or solving a problem?”

•  A Businessman would say it is ‘Money’! •  A social worker would say ‘Solving a Problem’!

•  An Entrepreneur would see an opportunity to make money while solving a problem!

The nature of problems The Chinese character for CRISIS is combination of the word for “Danger”

& “Opportunity”

What Entrepreneurs see in problems:

Is Entrepreneurship more fun in the Philippines?

Why it’s more fun in the Philippines!

1.  Our economy is still “undeveloped”

There is a lot of room for growth!

But haven’t we been “undeveloped” for a long long time? What makes this time any different?

1.  Our economy is still “undeveloped” but ... is projected to develop faster than the rest of the World:

•  The center or economic growth is now in Asia

•  Asean Integration

2.  We have a large population who are beginning to earn more!

•  Demographic “Sweet Spot”; a large young population with majority in the working age.

•  Real income projected to grow by 5% every year.

3.  And best of all,

There are a lot of

BIG problems

to solve!

a lot of mediocrity;

a lot of dissatisfaction;

a lot of unmet needs and wants;

a lack of good choices!

Who can be an

Entrepreneur?

ARE ENTREPRENEURS BORN OR MADE?

BORN AND MADE! •  THOSE WHO ARE BORN WITH NATURAL ABILITY (THE MICHAEL JORDANS, MOZARTS)

•  THOSE WHO BECOME GOOD ENTREPRENEURS BECAUSE OF AN INTENSE DESIRE THAT DRIVES THEM TO DO WHATEVER IT TAKES TO BECOME ENTREPRENEURS.

Who can be an Entrepreneur?

Kevin Ready of “Ready for Business” Column, Forbes Magazine:

“Anybody can but not everybody should...Because...becoming an entrepreneur has less to do with what you know and what your experiences are, and everything to do with what you are willing to do to

succeed.”

IS ENTREPRENEURSHIP ABOUT SKILL OR LUCK?

Yes, they were lucky but they were also READY!

READY to take advantage of the OPPORTUNITIES that came their

Am I too old to learn?

You can start to learning at any age!

Am I too Old/Young to start?

You can start a business at any age!

Business founders and their ages: Michael Dell (Dell Computers) - 18

John Mackey (Whole Foods) - 27

Milton Hershey (Hershey’s) – 37

Sam Walton (Walmart) - 44

Ray Croc (McDonald’s)– 52

“Colonel” Harland Sanders (KFC) – 65

Who can be an Entrepreneur?

Anybody who has the will to do whatever it takes!

What does it take to be an

Entrepreneur?

What does it take to be an

Entrepreneur?

According to HBS professor Howard Stevenson:

Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled.

The basic attitude of an

Entrepreneur

Businessman:

They want to be sure before they decide – they want to make it right.

Entrepreneur:

They take a decision, and then make it right!

Doing whatever it takes means being:

1.  Passionate – they feel strongly about their cause.

2.  Determined and Resourceful – they have the will to persevere.

3.  Intelligent and adaptable – they have the ability to learn and change.

How does one become an

Entrepreneur?

How does one become an

Entrepreneur?

3 things to work on:

1. Self Mastery 2. Enterprise Mastery 3. Situation Mastery

Objective #1:

SELF MASTERY – KNOW YOURSELF

The essential first step.

Without this, you wouldn’t know what business to get

WHAT IS YOUR PURPOSE/GOAL IN LIFE?

– Everyone was created to solve a problem. Everybody has a purpose.

– Know your purpose, what problem you were made to solve; what you think you can contribute most to the world.

– What is your passion? What is your deepest desire? What activity/ies do you enjoy doing?

HOW ARE YOU AS AN •  ORIGINATOR – someone who GENERATES

•  ORGANIZER – someone who CREATES SYSTEMS AND STRUCTURES

•  OPERATOR – someone who EXECUTES, MAKES THINGS WORK

All 3 need to be present to build and run a successful business.

What is your current level of knowledge (IQ)? You have to learn technical and business skills.

What is your current level of inter-personal skill (EQ)? You have to interact with people.

How well do you handle adversity (AQ)? You will encounter a lot of stressful situations.

WHAT ARE YOUR STRENGTHS

AND WEAKNESSES?

– Capitalize on your strength; – Staff your weakness; – Never stop improving (change for the better) – Stay hungry, stay foolish!

Objective #2:

ENTERPRISE MASTERY – KNOW YOUR BUSINESS

Without this, you wouldn’t know how to be profitable.

1.  TECHNICAL ASPECT – SPECIFIC TO YOUR INDUSTRY

2.  BUSINESS ASPECT – THE FUNCTIONAL AREAS OF BUSINESS (OPERATIONS, HR, FINANCE AND MARKETING)

YOU HAVE TO BE FINANCIALLY LITERATE!

–  Capitalization –  Return on Investment / Rates of Return –  Payback Period –  Break-Even Point –  Income Statement / Result of Operations –  Balance sheet and Cash Flow

Objective #3:

SITUATION MASTERY – Know “Heaven and Earth”

Without this, you wouldn’t be able to spot problems and

take advantage of opportunities.

SITUATION MASTERY

Sun Tzu – The Art of War

If you know neither the enemy nor yourself, you will succumb in every battle.

If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.

If you know the enemy and know yourself, you need not fear the result of a hundred battles.

If you know heaven and earth, you may make your victory complete.

How do you choose a business?

What kind of business should I get myself into?

A Business that:

1.  You have some knowledge/experience in (avoiding the problem of “you don’t know what you don’t know”)

2.  You would enjoy doing (don’t build a business that you will dread going to everyday)

3.  One that can cause meaningful improvement in users’ lives. (RELEVANCE)

A Business that:

1.  You have some knowledge/experience in (avoiding the problem of “you don’t know what you don’t know”)

2.  You would enjoy doing (don’t build a business that you will dread going to everyday)

3.  One that can cause meaningful improvement in users’ lives. (RELEVANCE)

How do you start a business?

PART 2

Business Planning: 8 STEPS

To take in STARTING A BUSINESS

8 STEPS to take in STARTING A BUSINESS

1.  Have a Crisis! 2.  Develop the Business Model 3.  Get the Money 4.  Get the Location 5.  Secure Government Permits and Registration 6.  Ready (prepare the organization) 7.  Get set (physical set-up) 8.  Go!

STEP 1: Have a Crisis! You need to encounter a “Problem”

1.  You think you can do better than an existing business;

2.  There is no business that is serving your need;

3.  You have an expertise that you think you can earn from;

4.  Etc...

STEP 1: Have a Crisis! oftentimes, the problem finds you.

Founder Problem

Thomas Edison of GE Ang dilim!

Howard Schultze of Starbucks

I miss Italy!

Tony Tan of Jollibee There’s a McDonald’s opening near my store!

Alvin Lim Franchise wasn’t

renewed!

STEP 1: Have a Crisis! What Entrepreneurs see:

STEP 2: Develop the Business Model

Your business model should show:

1.  Why people will buy your product.

2.  What you need to do to deliver on your USP.

3.  How you are going to make money.

1. Why will people buy your product?

Unique Selling Proposition

1. Has to be DIFFERENTIATED 2. Has to be RELEVANT 3. Has to be AFFORDABLE (priced right) 4. Has to have an INTERESTING STORY

Unique Selling Proposition COMPONENTS:

1. PURPOSE - relevance 2. PERSONALITY – look and feel 3. PLACE – strategic location, access 4. PRICE – strategic position 5. PROMOTION – what’s the product story

2. What do you need to do to deliver on your USP?

3. How you are going to make money?

Sales – COGS - OVERHEAD = Profit or Loss

1.  Maximize your Sales, 2. Minimize your Cost of Goods Sold

and Overhead.

Maximizing Sales:

Sales = Price X (# of Customers)

How much should you price your products so that you have

enough sales to earn a profit?

Maximizing Sales:

Pricing Strategies:

1.  Luxury Pricing

2.  Value Pricing

3.  Budget Pricing

Maximizing Sales:

Pricing Strategies:

1.  Luxury Pricing (Le Souffle)

2.  Value Pricing (Sérye)

3.  Budget Pricing (Andok’s)

Maximizing Sales:

Pricing Strategies:

1.  Luxury Pricing

2.  Value Pricing

3.  Budget Pricing

You should play where your

strengths are. • Which market do

you know? • What quality can

you deliver?

Matching price and Value

Sales = Price X (# of Customers)

THE BEST PRICING STRATEGY IS TO BASE IT ON PERCEIVED VALUE!

IF PRICE IS HIGHER, MAHAL. (IT WILL BE HARD TO SELL)

IF PRICE IS LOWER, MURA. (EASIER TO SELL BUT YOU LESSEN YOUR PROFIT)

THE PERFECT SITUATION: PRICE = PERCEIVED VALUE

Matching price and Value

THE BEST PRICING STRATEGY IS TO

BASE IT ON PERCEIVED VALUE!

BUT REMEMBER:

PRICE ALSO AFFECTS PERCEIVED VALUE - BECAUSE WE ASSOCIATE HIGH PRICES WITH

HIGH END VALUE, AND LOW PRICES WITH LOW END VALUE!

Maximizing Sales:

PULL/PASSIVE SELLING

PUSH/ACTIVE SELLING

Minimizing Costs

Sales – COGS - OVERHEAD = Profit or Loss

1.  Cost of Goods Sold - How much will it cost to make/deliver your product or service?

2.  Overhead – What will be your regular monthly expenses to keep the business running?

Minimizing Costs

1.  Cost of Goods Sold: –  Getting the rigth Quality and Quantity

at the right Prices at the right time all the time.

2.  Overhead: –  Getting the most out of your

resources (Man, Machine, Methods).

Some Tools Designing Business Models:

Supplier Management System What are your specifica6ons and standards

Where will you get your supplies? What will be the terms of payment?

Your USP

Your Source Of

How you are able to deliver on your USP

STEP 3: Getting the Money

POSSIBLE SOURCES: 1.  Personal funds 2.  OPM – Other People’s Money –  Friends and family, Angel investors – Bank loans and other financial institutions – Venture capitalists – Equipment loan financing

1.  The Business Model 2.  The Financial Projections –  Capitalization –  Income Statement / Result of Operations –  Break-Even Point –  Balance sheet and Cash Flow –  Payback Period –  Return on Investment / Rates of Return

What will lenders/investors look for?

1.  Capitalization •  A.k.a Initial investment

•  The amount of Money needed to set-up and run a business (for at least a year).

2.  Income Statement •  Also known as “Result of Operations”

•  Indicates your projected Sales, COGS, Overhead and Profit or Loss for a given period

•  Investors will usually require 5 years

Some Useful Finance Terms:

3.  Break-Even Point •  The amount of sales needed for a period so that

you neither earn nor lose money.

•  The amount of sales you need to reach to keep your business running without losing reserved funds.

4.  Balance Sheet •  Shows where the company sourced it funds:

–  Equity

–  Debt

–  Retained Earnings

•  And, how it used the funds:

–  CASH and other Financial Instruments

–  INVENTORY

–  EQUIPMENT

5.  Cash Flow Statement •  Shows where the company sourced and used cash for

a particular period.

6.  Pay-back Period •  The amount of time it will take to recover your

CAPITAL (a.k.a initial investment)

7.  Return on Investment / Rates of Return •  The percentage of earnings relative to your initial

investment

•  An acceptable rate for investors would be 8% and above.

8.  Weighted Average Cost of Capital (WACC) •  How much an investor can earn in alternative

investments.

STEP 4: Get the Location

CONSIDERATIONS: 1.  Should be near your target market, 2.  Should be consistent with your market

positioning,

3.  Should have high traffic yet easy to access,

4.  Should have the amenities required by your market.

STEP 5: Secure Government Permits and Registration

List of Gov’t units:

1.  SEC or DTI – Articles of Incorporation or Business Registration

2.  City Hall - Mayor’s Permit (Business Permit) 3.  BIR – BIR Permit, O.R. registration

STEP 6: Prepare the Organization

1.  Establish Systems and Procedures

2.  Prepare your staff •  Recruitment

•  Selection

•  Training

STEP 7: Get set (physical set-up)

1. Construct your Store, Office, Etc.,

2. Buy your Equipment,

3. Conduct a Dry Run!

STEP 8: Go!

CONGRATULATIONS!

YOU’RE IN BUSINESS!

GET READY FOR A THRILLING RIDE!

PART 3

NEVER STOP ADAPTING!

IN 2015

WATCH OUT FOR THE NEW AND IMPROVED

SÉRYE

MARAMING SALAMAT PO!

Everything You Need to Know About Entrepreneurship and Business Planning But were Afraid to Ask - by...

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