4.
Management of Risk - Entrepreneurs know
LESSON 1: INTRODUCTION
Entrepreneurship came from the pioneering
work of Joseph Schumpeter, which eventually
resulted to the concept of creative destruction.
It is the ability to be able to know what products
and services are needed by people, and to be able
to provide these things at the right time, at the
right place and to the right people, and at the
right price.
Concept of Entrepreneurship
• According to Dr. Ralph Sorensen
premised that it is an art of creating,
launching and growing new
businesses.
• Entrepreneurship is the ability and readiness
to develop, organize and run a business
enterprise, along with any of its uncertainties
in order to make a profit.
Entrepreneur is a reference to individuals who
have initiated the establishment of a business
enterprise.
If you own a business, you are
businessman or woman. If you manage business
you are called a professional manager. If you
bought a franchise, you ae a franchisee.
Characteristics and Traits of Entrepreneurs
1. Passion for business - This trait refers to the
eagerness to be involved in commercial activities.
2. Confidence - is a must have trait for
entrepreneurs, who should posses that bellef in
themselves and their capabilities to see things
through and get things done.
3. Self-Determination - is the belief that one's
fate or destiny lies really on oneself his beliefs,
efforts, and actions.
how to take risks but these risks are calculated
risks! that are well thought out and considered
done.
5. Initiative and Need for achievement -
Entrepreneurs usually have a great need to
achieve things and to have accomplishments.
6. Creativity. Entrepreneurs - have often been
said to be creative because they are not satisfied
with just copying or doing the same routine or
churning out the same product.
7. Seeing the Big Picture - Entrepreneurs are
able to assess how particular decisions about
who operations or human resources can affect the
other aspects of the business. they realize that
venture specific decisions in certain areas can affect other
areas, as well as the business as a whole.
Types of Entrepreneurs
1. Innovative entrepreneurs - They are those who
always make new things by thinking of new
ideas.
2. Imitating entrepreneurs - They are those who
don't create new things but follow the ideas of
other only follow entrepreneurs.
3. Fabian entrepreneurs - They are those
called skeptical. They don't initiate but follow only after
they are satisfied.
4. Drone Entrepreneur - They are those who lives
on the labor of others. They are die-hard
conservatives even ready to suffer the loss of
business.
5. Social Entrepreneur - They are those who
initiate changes in the various fields such as
education, health, human rights, environment
and, enterprise development.
COMPETENCIES IN ENTREPRENEURSHIP
A. Common Competencies
1. Decisive - an entrepreneur must be firm in
making decisions.
2. Communicator - an entrepreneur must have a
convincing power.
3. Leader - an entrepreneur must have the
charisma to be obeyed by his employees
4. Opportunity seeker – an entrepreneur must
have the ability to be the first to see business
chances.
5. Proactive - controlling a situation by - making
things to happen or by preparing for possible
future problems.
6. Risk Taker - they have the courage to pursue
what is their business ideas.
7. Innovative the entrepreneurs have
business ideas and they do not stop improving
and thinking of new worthwhile ideas for their
business.
B. Core Competencies
1. Economic and dynamic activity
Entrepreneurship is an economic activity
because it involves the creation and operation of
an enterprise with a view to creating value or
wealth by ensuring optimum utilization of
limited resources.
2. Innovative – A Entrepreneurs constantly look
for new ideas, thus he needs to be creative.
3. Profit Potential - meaning the entrepreneur
can be compensated by his profit coming from the
operation.
4. Risk bearing - meaning the entrepreneur
needs to gamble but wise enough to offset the
risk.
What is Business Risk?
Business risk is the exposure a company or
organization has to factor(s) that will lower its
profits or lead it to fail. Anything that threatens a
company's ability to achieve its financial goals is
considered a business risk.
THREE BASIC SOURCES OF BUSINESS RISK
1. Demand Risk. It was explained as the risk that
the product will not be accepted by the market or
that the market is much smaller than what was
originally estimated to be.
2. Competition Risk. It was stipulated as the risk
that competitors may be able to replicate the
business model and capture the market ahead of
the proponent.
3. Capability Risk. It is related to the capability
of the firm; this considers the possibility that the
product or services of the firm would fail to
deliver the value proposition that the customers
are willing to pay for.
big IMPORTANCE OF ENTREPRENEURSHIP
1. Creation of Employment
Entrepreneurship generates employment. It
provides an entry- level job, required for gaining
experience and training for unskilled workers.
- 2. Innovation
Entrepreneurship generates employment. It
provides an entry-level job, required for gaining
experience and training for unskilled workers.
3. Impact Society and on Community
Development - A society becomes greater if the
employment base is large and diversified. It
brings about changes in society and promotes
facilities like higher expenditure on education,
better sanitation, fewer slums, higher level of a
homeownership.
4. Increase Standard of Living
Entrepreneurship helps to improve the standard
of living of a person by increasing the income.
The standard of living means, increase in the
consumption of various goods and services by a
household for a particular period.
5. Supports research and development
New products and services need to be researched
and tested before launching in the market.
Therefore, an entrepreneur also dispenses
finance for research and development with
research institutions and universities. This
promotes research, general construction, and
development in the economy.
FIVE REASON WHY FILIPINOS DON'T GO TO 11. Inadequate long- term plan
BUSINESS 12. Undercapitalization
1. Money 13. Unidentified target market
"Magilpon muna ako, kulang and pera ko." ("I 14. Inadequate financial control
don't have enough cash"). 15. Inventory control problems
2. Time 16. Pricing strategy
"Madami pa akong Inaasikaso." ("I'm so busy
with a lot of things") Basic Components Of A Business Plan Can Be
3. Skills Organized As Follows:
"Hindi ako marunong mag-business, baka malugi 1. Providing a description of the business.
lang ako." (I don't know how so I'm afraid I might 2. Choosing the best marketing strategy.
fair 3. Identifying the management plan, and:
4. Opportunity 4. Analyzing the finances needed to start the
"Hindi para sa akin yan." (That business is not business and make it successful.
for me")
5. Connection What is Market Potential?
"Wala akong kilala masyado." ("I don'tknow a lot Market potential is the entire size of the market for
of people") a product at a specific time. It represents the upper
limits of the market for a product. Market potential
is usually measured either by sales value or sales
LESSON 2: BUSINESS PLAN volume.
What is Business Plan? For example, the market potential for ten speed
A business plan is a document that defines in detail bicycles may be worth $5,000,000 sales each year.
a company's objectives and how it plans to achieve Elements in Determining Market Potential
its goals. 1. Market Size. The first and most important factor
A business plan lays out a written road map for the to consider while determining market potential is
firm from marketing, financial, and operational the market size of your product. Market size is the
standpoints. Both startups and established total market sales potential of all companies put
companies use business plans. together.
2. Market Growth Rate - you have to forecast based
Reasons in Making A Business Plan on the differences between product line extensions
1. Vision and a completely new concept in the Market.
2. Market assessment Samsung has the Samsung galaxy series which is a
3. Opportunity assessment pioneer series in Samsung.
4. Implementing the Plan 3. Profitability - to understand the market potential.
5. Financing If the business is going to give low profitability,
6. Outside Failure then the volumes need to be high. Calculation of
7. Poor cash flow control profitability to determine Market potential can use
8. Trade area competition three main elements.
9. Lack of managerial experience, training, ROI - Return on investment
skills ROS - Return on sales
10. Poor site location (retail) RONA - Return on net assets
ROCE - Return on capital employed.
You can use any of the calculations mentioned
above to calculate the likelihood of profitability and
to determine how profitable the industry or product
is going to be.
4. Competition. You need to know and understand
the competition in an industry to determine the
market potential for the product you are going to
launch. If the industry has high competition, the
entry barriers are going to be high and at the same
time, establishing yourself will require deep
pockets.
5. Product and Consumer Type. Is your product a
repeat buying product or one time sale only? In the
above examples, Soap and shampoo is a repeat
buying product. But once you buy a refrigerator, i
doubt you will need another for the next 10 years.
So in your whole lifetime, you will buy 8-10
refrigerators at the max.
The Part of Business Plan
1. EXCECUTIVE SUMMARY: The first section
should be a concise overview of your business plan.
It should be short, and must be well written. Your
goal is to draw readers in so they want to learn
more about your company.
The executive summary for a business plan should
include:
• Your business name and location.
• Products and/or services offered.
• Mission and vision statements
• The specific purpose of the plan (to secure
investors, set strategies, etc.)
2. COMPANY DESCRIPTION This high-level view
of your business should explain who you are, how
you operate and what your goals are.
• The company description should feature:
o The legal structure of your business
(corporation, sole proprietorship, etc.)
o A brief history, the nature of your business,
and the needs or demands you plan to
supply
o An overview of your products/services.
customers, and suppliers
o A summary of company growth, including
financial or market highlights
o A summary of your short- and long-term
business goals, and how you plan to make a
profit
3.
PRODUCTS/SERVICES DESCRIPTION: Clearly
describe what you're selling, with a focus on
customer benefits.
• Include details about suppliers, product or
service costs, and the net revenue expected from
the sale of those products or services. Consider
adding pictures or diagrams.
• A detailed description of your product/service
that emphasizes customer benefits.
• An explanation of the market role of your
product/service and advantages it has over
competitors.
• Information about the product/service's life
cycle Relevant copyright, patent, or trade secret
data
• Research and development activities that may
lead to new products and services
4. MARKET ANALYSIS: Show your industry
knowledge, and present conclusions based on
thorough market research.
• Place detailed findings of any studies in an
appendix.
• Your market analysis should include:
✓ A sketch of targeted customer segments,
including size and demographics of each
group
✓ An industry description and outlook,
including statistics Historical, current and
projected marketing data for your
product/services
✓ A detailed evaluation of your competitors,
highlighting their strengths and
weaknesses
5. STRATEGY AND IMPLEMENTATION
Summarize your sales and marketing strategy, and
how you'll implement them with an operating plan.
This section should include:
• An explanation of how you'll promote your
business to customers and enter the market
Details about costs, pricing, promotions, and
distribution/logistics An explanation of how the
company will function. Including the operations
cycle (from acquisition of supplies through
production to delivery)
• Information on sources of labor and number of
employees
• Data on operating hours and facilities
6. ORGANIZATION AND MANAGEMENT TEAM
Outline your company's organizational structure.
Identify the owners, management team and board
of directors.
Include the following:
• An organizational chart with descriptions of
departments and key employees
• Information about owners, including their
names, percentage of ownership, extent of
involvement within the company and
biography listing their background and skills.
• Profiles of your management team, including
their names, positions, main responsibilities,
and experience
• List of any advisors, such as board members,
accountants, and attorneys.
7. FINANCIAL PLAN AND PROJECTIONS
• This last section of your business plan should be.
developed with a professional accountant after
you've completed a market analysis and set
goals for your company.
• Some of the important financial statements that
should be part of your plan include:
o Historical financial data (if you own an
established business). including income
statements, balance sheets and cash flow
statements for the past three to five years
o Realistic prospective financial information,
including forecasted income statements,
balance sheets, cash flow statements and
capital expenditure budgets for the next five
years.
o A brief analysis of your financial data,
featuring a ratio and trend analysis for all
financial statements.
LESSON 5: BUSINESS
IMPLEMENTATION
Operating a Business
In Operating a business, the entrepreneur should
first consult professional for advices, like
accountants or consultants from small enterprises.
In your case, you can consult your teacher in
entrepreneurship or anyone you think that could
help you.
a
OTHER STEPS TO FOLLOW BEFORE
OPERATION A BUSINESS:
1. Set up an accounting system or hire an
accountant. Knowing how the business is doing
financially is important for planning and survival.
2. Advertise the business. No one will buy the
products or services if customers do not know that
the company exists. You can make use of the social
media.
3. Secure Insurance for the business. Liability
Insurance protects the business in the event of
litigation. Consider life and disability Insurance.
health insurance and fire insurance when you are
leasing an office or storefront.

KEEPING BUSINESS RECORDS

• Good record keeping can help protect the
business, measure the performance and
maximize profit.
• Records are the source documents, both
physical and electronic, that specify transaction
dates and amounts, legal agreements and
private customer and business details.
• Developing system to log, store and dispose of
records can benefit the business. A systematic
recording allows you to;
A. Plan and work more efficiently
B. Meet legal and tax requirements
C. Measure profit and performance
D. Protect your rights, and
E. Manage potential risks