SP 3 - Summative Assessment Memoranda

FURTHER EDUCATION AND TRAINING CERTIFICATE: NEW
VENTURE CREATION
ID 66249 LEVEL 4 – 149 CREDITS
SKILLS PROGRAM 3:
SUMMATIVE ASSESSMENT MEMORANDUM
SAQA: 114600; 114592; 114593, 114596, 263356,
263534
START AND RUN A BUSINESS
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FULL NAME & SURNAME
ID NUMBER:
NAME OF ASSESSOR
DATE OF ASSESSMENT
VENUE
ACHIEVED NOT ACHIEVED
KNOWLEDGE
SKILLS
Signature of learner Signature of Assessor
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ASSESSMENT PACK
Please complete the following sections (A and B) before commencing with this
assessment. The moderator of this assessment will complete section C.
Section A Learner Information
Name:
Surname:
Date:
Contact telephone no:
Learnership agreement no:
Company: Site:
ID
Section B Assessor Information
Name:
Surname:
Date:
Assessor no:
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Provider no: Site:
ID
Section C Moderator Information
Name:
Surname:
Date:
Moderator no:
Provider no: Site:
ID
Results:
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1. INSTRUCTIONS TO ASSESSOR
Introduction:
This assessment guide has been designed as a generic assessment guide and is
intended for use by the accredited New Venture Creation Training Providers.
Purpose of the assessment

The purpose of summative assessment against this unit standard is to:
♦ Award credits to the NQF to learners who are able to start and run their
businesses.
Learning assumptions
The following knowledge, skills, attitude and/or equivalent:
Assessment methods
The following assessment methods will be used for the summative assessments:
♦ written and/or/verbal questioning
♦ Product sample and on site assessment
2. Assessment Process
General
• Use the assessment guide and your latest company policies and standard operating
procedures to assess the evidence received from the learner.
• Use the section: Addition Comments/Questions to note down any further comments or
questions on the evidence assessed.
• Use the model answers as a guideline to assess the learner’s answers to the assessment
questionnaire.
• The learner can complete the assessment questionnaire orally. In this case, agree a date,
time and venue.
• Provide the learner with a feedback within 10 working days of receiving the evidence.
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Step 1 - Planning for the Assessment
Review this assessment guide to:
➢ Ensure that you understand all the requirements of the assessment in terms of
evidence required to prove competence.
➢ Identify and prepare the learner for the assessment by:
o Completing the Assessment Plan with the learner to discuss and agree the
details regarding the assessment.
o Completing the Assessment Preparation Checklist and getting the learner to
sign.
➢ Ensure that you have familiarized yourself with the following:
o The various patrolling functions and standard operating procedures within the
company.
Step 2: Complete the Assessment

➢ Collect the evidence in accordance with the methods and evidence requirements
specified.
➢ Mark each question as correct or incorrect in the “Office Use” column.
➢ Record the evidence on the assessment guide and indicate “Competent”, “Not Yet
Competent” or “Not Assessed” for each assessment criterion. Note down any
comments at the back of the assessment guide.
➢ Ask the learner additional questions, if necessary, to clarify points. Record these on
the guide.
➢ All questions must be complete as per the criteria specified.
➢ Answers provided must be similar to the model answers.
Step 3 - After the Assessment

➢ Prepare the feedback by writing comprehensive, developmental feedback after
each section on the Assignment Sheets. In addition to this, you are required to write a
summary overall feedback on the Assessment Guide.
➢ Provide the feedback to the learner in a safe, undisturbed in nature.
➢ Ensure that your feedback is developmental and supportive in nature.
➢ Advise the learner on what action to follow in the event of a “Not Yet Competent”
rating.
➢ Advise the learner on what action to take where he/she feels the need to appeal
against your decision.
➢ Allow the learner time to provide you with feedback relevant to the process.
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➢ Record the learner’s feedback in the guide and ensure that it is given to the person
responsible for the quality assurance of assessment tools.
➢ Ensure that the learner co-signs the assessment guide to indicate agreement with the
feedback.
3. Assessment documentation required:

Step 1: Planning for the Assessment
♦ Assessment Plan
♦ Assessment Preparation Checklist
♦ Assessment Policy (including Appeals)
♦ Evidence Matrix
♦ Assessment Instruments
Step 2: Conducting the Assessment
♦ Assessor Guide
♦ Learner’s workbook
♦ Summative assessment pack
Step 3: After the Assessment
♦ Assessment Comments
♦ Feedback Report
4. Specific Instructions
Please note that Part 3 Assessment Instruments are not included in this guide and are
to be included by the assessor on an individual basis.
The actual summative assessments need to be completed and signed off by both
learner and assessor. The assessor will take control of the completed assessment
instruments and will file them under the tab for Assessment Evidence.
The completed assessment pack will be kept in safekeeping at the training provider
for three months after endorsement by SERVICESETA and will then be returned to the
learner.
Guidelines where an appeal is lodged
➢ The normal appeal procedure prescribed by SERVICESETA and described by the

provider’s Quality Management System will be followed.
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ASSESSMENT PLAN
ASSESSMENT DETAILS
Date of Assessment Option 1 Option 2 Option 3 Option 4
TIME OF ASSESSMENT
Start: End:
VENUE Contact
person
LANGUAGE MEDIUM
METHOD OF
METHOD OF ASSESSMENT (please tick off the one to be used)
OBSERVATION ORAL WRITTEN
Simulation Knowledge test Knowledge test
Product Interview
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PRE-ASSESSMENT MEETING CHECKLIST
ACTION YES/NO COMMENTS
Set learner at ease; be friendly, polite and

professional.
Explain to the learner and agree on the

following issues.
1. The unit standard that will be assessed

2. Date, time, venue and process to be
followed during the assessment.
3. Summative assessment tools to be used for
the assessment.
4. The assessment plan
5. Purpose of assessment
Explain to the learner and agree on the
role of all involved during the assessment
process.
Identify possible barriers and or disabilities

of the learner.
Explain the meaning and application of

RPL.
Explain, discuss and provide one complete

set of the Appeals process
documentation.
Explain to the learner when final result swill

be available and how feedback will be
provided.
Discuss previous assessment results if

applicable.
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I, ______________________________ (initials and surname of learner), DECLARE THE
FOLLOWING:
A copy of the unit standard(s) involved has been given to me prior to this meeting. I
know I will be assessed against the criteria, which have been set to the applicable
unit standards. The criteria have been discussed with me, and the procedures and
purpose of the assessment has been clearly explained to me.
I am well aware of the venue, date and time that I will be assessed. I consider the
period of time given to me to prepare myself for the assessment to be fair.
I understand clearly that I have the right to appeal against any decision made by
the assessor during the assessment of the evidence provided by me, and that I have
free access to the appeals procedures attached to this assessment pack. I
understand that I have the right to be accompanied by another person during all
procedures, and that I have free access to the Training Division of SBV’S Health and
Safety Procedures- filed at the offices.
Signature of learner Date
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Assessment Instruments
TAKE NOTE
The assessment instruments included in this assessment pack are all summative
assessment instruments and are to be read in conjunction with the formative
assessment instruments contained in the learner workbook. Both formative
(workbook) and summative assessments are to be retained as part of the learner’s
portfolio of evidence.
A number of the assessment instruments contained in this assessment are workplace

knowledge based questions.
This means that you will arrange with the learner, a time that is suitable, during which
the learner will complete each questions.
Complete the following activities according to the instructions provided
1
Apply innovative thinking to the
development of a small business
Learning Unit
UNIT STANDARD NUMBER : 114600

LEVEL ON THE NQF : 4
CREDITS : 4
FIELD : Business, Commerce and Management Studies
SUB FIELD : Generic Management
Answer the following question in the space provided below.
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Activity Questions Description Mark
1 What is business creativity?
Solving problems, generating new ideas and products has to do with creativity. Taking
customer service to a level your competitors can't match. It has to do with improving
team and personal capabilities in a creative and different way. Business creativity uses
simple techniques to improve your personal and group creativity time and time again.
And creativity isn't just a nice-to-have. In a fast change, furious business world, it's a
matter of survival.
Problem solving, also known as analytical thinking, is not something that comes
naturally to everyone, and thus it is imperative that people learn the techniques
associated with problem solving, as the technique removes a lot of the difficulty is
solving business problems and assisting with making decisions. Business management
requires people to make decisions on an ongoing basis.
Good decision-making is, to a large degree, dependent on the ability to solve
problems and it is only in processing problems that we find solutions. However, at times
we might determine that there are multiple solutions. Then we need to know the
relevant techniques to assess which is the best option. That is, to make a decision.
Even persons who are competent decision makers sometimes need assistance from
one or other tool in making the correct decision. However, in order to realise a wider
range of potential options, we need to be able to think creatively.
2 Define problem.
Definition - A problem is defined as something difficult to deal with or understand. It
needs to be dealt with or solved.
3 Why the problem remain to be unsolved
One of the main reasons that problems often remain unsolved is simply that people do
not understand the true nature of the problem. The main reason for this is that people
interpret the symptom as the cause rather than the symptom it is.
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4 Briefly explain how would you understand the problem at hand
Understand the problem at hand.
It is critical that this initial step be done correctly or else all further effort on this problem
is wasted. How can we be sure that we have found the core issues behind the
problem? The answer lies in using the block diagram method. This is a very simple
technique that can be done anywhere, anytime, with nothing more than a piece of
paper and a pen.
This is a simple technique that can be applied to any problem whether it is a business,
mechanical problem, electronic or any other problem. The technique is extremely
useful in that it often reveals the solution to the problem as well.
However, the technique is limited in that it is ideally suited to a problem occurring within
a structured environment. It does not work all that well with problems of a strategic
nature where there is no explicit solution to the problem at hand.
This is when creative thinking becomes important
5 Express your understanding about the creative thinking
Simple problem solving does not solve all problems, so when are we likely to be required
to do creative thinking in the business environment?
The first opportunity arises when we have a problem that is not linked to a formal
process such as devising a suitable marketing plan, and the second is when attempting
to create a strategy for the business or any of the sub-components of the businesses
corporate strategy.
6 Briefly explain what is creativity?
Many believe it to be an artistic expression such as an experience by an artist or a
musician. However, business is seldom likely to acquire this form of creativity on a
regular basis. It has been suggested that creativity is an innovative response to
situations with multiple possibilities.
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It is the necessity to find solutions to problems that are not plainly obvious. This is why the
block diagram approach fails because you are looking for solutions you are unaware of
and can therefore not put them down and analyze them.
Considering the quotation above, it can be seen that the easiest and simplest way to
become more creative in business is to read.
By reading a wide range of newspapers, magazines, trade magazines and journals,

including those outside of our core area of business, we expose ourselves to a broader
range of ideas, technologies and processes. This results in us having more possibilities on
how to solve the problem.
The more we read the more possibilities we have and thus the more creative we
become. It is also important to be current on new management concepts and
techniques and to be exposed to trends and fads, which might sometimes be used to
our advantage even though they may not directly link to our industry.

7 Discuss the barriers to creative thinking
Barriers to creative thinking
The more you read the more creative you become in business as your general
knowledge of matters related to business grows. This is often termed lateral thinking. This
is the process whereby ideas, processes and concepts from other industries are “pulled
across” into your own industry.
Without exception everybody has creative ability but of course with different degrees
depending on the active circumstances that may either help enlarging creativity
potential, or weaken the creative sensitivity.
Up to the fact that each person has different circumstances than others, family,
education systems, peer groups...etc, are all examples of different environments that
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influence the creative ability of a person uniquely. Whenever barriers emerge in face of
creativity they must be identified and removed, in a way that ensure the highest
creativity potential.
It has already been established that there are two sorts of thinking – analytical and
creative – and that the average person is better at analytical thinking because of his
background. While everybody has an innate creative ability, there seem to be barriers
which prevent the average manager from using it effectively. It is these barriers which
will now be discussed. The identification and acceptance of them, and their removal in
creative session is an essential requirement.

Demonstrate the following:
• self-imposed barriers
• Establishing a pattern or one unique answer
8 • Conformity or giving the answer accepted
• Lack of effort in challenging the obvious
• Evaluating too quickly
• Fear of looking a fool
1. self-imposed barriers:
The self-imposed barrier is one of the more difficult barriers to recognize. We put it up
ourselves, either consciously or unconsciously. If the latter, an understanding colleague
or a friend is required to point out (tactfully) our error. Once recognized, it is however
one of the easy ones to dispose of.
2. Establishing a pattern or one unique answer:
Another barrier is that the analytical man seeks to establish a pattern, or to find the one
right answer. Having established the pattern, he may not be adventurous and establish
other patterns that may equally well exist. Having established a pattern, whether
complete or uncertain, the analytical person sticks with it, and may not bother to look
for other patterns. The creative person, on the other hand, may deliberately seek other
patterns, or is happy to accept a number of patterns or even none at all. This barrier is a
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difficult one for the analytical person to lower. He is trained to seek an answer to a
problem, and may be reluctant to try other possible answers when he has found one
which works.
3. Conformity or giving the answer accepted:
The barrier of conformity follows the previous barrier in the sense that many people feel
they have to conform to the patterns established by their colleagues in the work
environment. When you face the situation in which you are involved in a discussion with
older and more experienced people, you turn to say "I will keep quiet, wait and see
which way the wind bellows, and then conform".
4. Lack of effort in challenging the obvious:
Another barrier is the lack of effort in challenging the obvious solutions. This barrier is, in
fact, two barriers rolled into one. When faced with problems, there is a tendency to go
for the obvious answer, which is accepted without question. May be we are just happy
to have found answer to the problem at all! Secondly, having an answer we avoid
challenging it, even though there may be other and better answers. In general, people
tend to avoid following through ideas and suggestions which depart from the
accepted state of affairs.
5. Evaluating too quickly:
This barrier is not an easy one to remove. Everybody has a well developed capability of
evaluating ideas, and this is applied almost instinctively when ideas are put forward. As
with the "automatic no" response, we tend to analyze and all too often reject ideas
which are slightly offbeat or new: 'that’s silly', 'that won't work', 'we tried it last year and it
didn't work then', are common phrases. The idea is then buried and a chance has been
lost to develop new approaches. One way of understanding this barrier is to look at
your hands. If the left hand represents idea production and the right hand represents
idea evaluation, the two hands are not separate as in real life but are linked and linked
very tightly indeed. So much so, that an idea produced is immediately evaluated and
possibly killed, e.g. by the phrase, 'that won’t work'.
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6. Fear of looking a fool:
Fear of looking a fool is the biggest barrier of all and the most difficult to remove. It is
one of the oldest barriers that it starts very early in life. The imagination and creativity
injected into games played by very young children generate much laughter and
enjoyment. Unfortunately, the laughter can be turned against an individual who then
begins to say, 'they are laughing at me". Nobody likes being laughed at and, as a
consequence, as we grow up we tend to avoid putting forward the silly ideas, in case
we are laughed at, or thought foolish. Another phrase applicably in the creative
situation is "laugh with, not at, wild ideas". This barrier has another aspect. People do not
like going against commonly accepted views, particularly when they are stated by
prominent or notable people. There is a risk of being wrong, particularly if the new idea
is radically different from common practice.

9 Outline your understanding about lateral thinking
Lateral thinking is the ability to see something in use somewhere else and see how you
could apply it in solving your problems, even though the original implementation may in
no way be related to your problem.
This in effect relates back to the PEST analysis required for a business plan. In a PEST
analysis we attempt to analyse the Political, Economic, Socio-cultural and
Technological environments within which our business trades. The only way to gain this
knowledge is to read. The more we read, the better our PEST analysis and thus the
greater the likelihood that we will be successful in choosing our strategy due to us being
more informed.
Also, the more we read, the more information we will have at hand to help us in our
decision making, allowing us more options to select from, even if they are not directly
from our industry.
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Creative thinking or lateral thinking as we discussed above is an important component
in setting up new ventures as well as finding new products for existing businesses.
However the research has shown that most entrepreneurs who start businesses do not
come up with new products or ideas. They simply come up with new ways of doing
things that other business are already doing. This is a clear indicator of the fact that
lateral thinking is not this highly inventive process but rather a cross pollination of ideas
between different businesses and industries. It is highly dependent on reading and
gaining the broadest possible general knowledge within the business environment,
allowing us to find creative ways of doing things.
It is an important lesson that we remember that most entrepreneurs are creating

businesses that exist. They are simply finding ways of doing it differently.

10 Outline any 10 samples of literal thinking
SAMPLES OF LATERAL THINKING
1. There is a man who lives on the top floor of a very tall building. Everyday he gets
the elevator down to the ground floor to leave the building to go to work. Upon
returning from work though, he can only travel half way up in the lift and has to
walk the rest of the way unless it's raining! Why?
2. A man and his son are in a car accident. The father dies on the scene, but the
child is rushed to the hospital. When he arrives the surgeon says, "I can't operate
on this boy, he is my son!” How can this be?
3. A man is wearing black. Black shoes, socks, trousers, coat, gloves and ski mask. He
is walking down a back street with all the street lamps off. A black car is coming
towards him with its light off but somehow manages to stop in time. How did the
driver see the man?
4. One day Kerry celebrated her birthday. Two days later her older twin brother,
Terry, celebrated his birthday. How?
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5. Why is it better to have round manhole covers than square ones? This is logical
rather than lateral, but it is a good puzzle that can be solved by lateral thinking
techniques. It is supposedly used by a very well-known software company as an
interview question for prospective employees.
6. A man went to a party and drank some of the punch. He then left early. Everyone
else at the party who drank the punch subsequently died of poisoning. Why did
the man not die?
7. A man died and went to Heaven. There were thousands of other people there.
They were all naked and all looked as they did at the age of 21. He looked
around to see if there was anyone he recognised. He saw a couple and he
knew immediately that they were Adam and Eve. How did he know?
8. A woman had two sons who were born on the same hour of the same day of the
same year. But they were not twins. How could this be so?
9. A man walks into a bar and asks the barman for a glass of water. The barman pulls
out a gun and points it at the man. The man says 'Thank you' and walks out. This
puzzle claims to be the best of the genre. It is simple in its statement, absolutely
baffling and yet with a completely satisfying solution. Most people struggle very
hard to solve this one yet they like the answer when they hear it or have the
satisfaction of figuring it out.
10. A murderer is condemned to death. He has to choose between three rooms. The
first is full of raging fires, the second is full of assassins with loaded guns, and the
third is full of lions that haven't eaten in 3 years. Which room is safest for him?
11. A woman shoots her husband. Then she holds him under water for over 5 minutes.
Finally, she hangs him. But 5 minutes later they both go out together and enjoy a
wonderful dinner together. How can this be?
12. There are two plastic jugs filled with water. How could you put all of this water into
a barrel, without using the jugs or any dividers, and still tell which water came
from which jug?
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13. What is black when you buy it, red when you use it, and gray when you throw it
away?
14. Can you name three consecutive days without using the words Monday, Tuesday,
Wednesday, Thursday, Friday, Saturday, or Sunday? (or day names in any other
language)
15. This is an unusual paragraph. I'm curious how quickly you can find out what is so
unusual about it. It looks so plain you would think nothing was wrong with it. In
fact, nothing is wrong with it! It is unusual though. Study it, and think about it, but
you still may not find anything odd. But if you work at it a bit, you might find out.

11 Outline the legs of business
Bear in mind at all times that there are five legs to every business. The legs are:
Administration skills Finances Sales Marketing Technical
SESSION 2.
Determine the role of innovation in the development and
growth of a new venture.

12 Briefly explain when does innovation starts
Innovation starts before the start of a new venture and should never, through the
lifespan of the business, be left behind

13 Where does innovation can result
Innovation can result from:
• The “better idea” to do something, to produce something or to bring something to
the consumers.
• A community need
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• A workplace need
• A personal need
Technological advances or development that are applied to satisfy a specific need

14 List and explain two different types of innovation
Idea generators
Idea generators initiate idea generation in the initiation stage of innovation. They are
nonconformists and will disregard or violate existing organizational rules and norms as
the need arises. Idea generators have expertise in a limited number of fields, enjoy
conceptualizing abstract ideas, see new and different ways of doing things and tend to
work alone.
Idea adaptors
Idea adaptors operate in the implementation stage of innovation and have more
bureaucratic savvy, which they use to navigate ideas through the organization's formal
and informal 'corporate immune' systems, where resistance is often encountered. Idea
adaptors have a wider range of interests, are more applied, and interact with others to
sell ideas.
15 Outline the impact of innovation on a new venture
The impact of innovation
Innovation can have impact on a new venture under different scenarios such as:
Innovation can save an existing venture.
• Innovation can change the direction or focus of a venture
• Innovation can demand or bring funding to a venture.
• Innovation can be the reason for a new venture.
16 Give two broad opposing categories of innovation
We can distinguish between two broad opposing categories of innovation, namely:
Incremental innovation is the constant supply of small ideas in product and process
innovation, for example the constant supply of new Tupperware products introduced
each year.
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Radical innovation is the introduction of a few ideas in product and process innovation
that will bring about big change, for example the first introduction of the cell phone
technology.

17 Express your knowledge about the growth of new venture
Growth. In most of these companies, to keep up with whatever real growth had
occurred, leadership started looking at acquisitions to maintain their growth
percentages. The downside of this rapid expansion did not allow for sufficient
managerial oversight to develop and stabilize operations, leaving key performance
indicators overlooked.
Subsequent analysis of these companies after their failures indicates that they could
have safely grown 7.5 percent annually – enough to keep many stockholders happy.
Thirty percent annually over a five year period is just too much. A company ends up
suffering what I call the "round up" effect, wherein, like a dandelion that's been sprayed
with a weed-killer, it grows too fast to sustain itself and it dies.
In my opinion, this is one of the major landmines to watch out for after taking a
company public. Before long, leaders may make decisions to appease stockholders
who want short-term gains, not long term stability.

18 Explain the innovation thinking to generate new prodution
Innovative thinking to generate new products
By making use of the same processes as used when doing the brain teasers, one can
develop ideas for new products or services.
A simple process that is followed in many businesses is that of inviting employees from all
departments of the business to a brainstorming session where ideas are generated.
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Briefly explain about innovative thinking to cut the costs and
19 increase income
Innovative thinking to cut the costs and increase income
The fundamental organizational challenge when implementing innovation is to change

individuals' behaviour. Implementation is the critical gateway between the decision to
adopt an innovation and the successful routine use of that innovation within the
organization.
Implementing innovative ideas involves the following four steps:
• Gain acceptance for your idea
• Execute your implementation plan
• Develop an implementation plan v' Improve your implementation plan
Innovation is not just another way of developing new products and services or
breathing life into existing ones. It involves much more. Innovation is the single best way
in which to leapfrog competition by ensuring constant change in products and/or
processes.
When organisations adopt innovations they do so with high expectations, anticipating

improvements in organisational productivity and performance. However the adoption
of an innovation does not ensure its implementation. The organisational challenge is to
create the necessary conditions in which to utilise the innovation and to develop a
workable plan for its implementation. Only then will an organisation be likely to achieve
the intended benefits of the innovation.
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Demonstrate the Innovative thinking to generate employment
20
opportunities
Innovative thinking to generate employment opportunities
Human labour is the most important part of the small business, because its influence
determines how well the other factors are utilized. Without people your business will not
exist. A variety of viewpoints often allows for creative yet appropriate solutions.

Use your understanding to express Innovative thinking to
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address skills needs of employees
Innovative thinking to address skills needs of employees
Skills or needs of employees should first be identified. Constant contact with employees
is essential. Expectation of evaluation and punishment tends to undermine creativity.
Intrinsic motivation fosters creativity, while extrinsic reward tends to be detrimental to
creativity. Freedom and independence combined with greater democracy contributes
to a creative business climate. A supportive working environment contributes to the
fulfilment of creative potential and it includes a high level of employee responsibility for
the initiation of new activities. Discussing ideas with other individuals, even with those
who know little about the subject helps the process.
Sometimes a question which initially seemed simple, can lead to new discoveries and
new approaches to old problems. Although some people are born with a gift of being
creative, it is possible for anyone to develop and improve his creative abilities.
Formal training does not necessarily guarantee success in a small business. Skills can be
gained from working experience.

Briefly explain Innovative thinking to minimize the impact of
22
opposition
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Innovative thinking to minimize the impact of opposition
It is often surprising how little most small business people know about their competition.
The small business owner must identify competitors and study them carefully. Once you
know your opposition you can use a series of techniques to stimulate creativity in your
venture.

Use your own wards to demonstrate the following based on
SCAMP:
• Substitute
23 • Combine
• Adapt
• Magnify/minimize
• Put to another use
(1)Substitute
This means to use one object instead of another. For example, Sylvan Goldman, owner
of two supermarket chains in 1937, noticed his customers struggling with heavy
shopping baskets. INSTEAD of baskets, he came up with the idea of the shopping cart.
Today there are millions of shopping carts in the world!
(2)Combine
Combining two objects, materials or talents can lead to a whole new business idea. In
the mid 1880’s George Eastman developed a strong, lightweight cellulose film. He
combined this with the idea of a lightweight camera to use with the film. This
combination made Kodak the world leader in photography within ten years.
(3)Adapt
To adapt is to change in some way. An object could be made to look sound or smell or
taste or feel better. That is why it is so important to know you opposition and their
products. In 1893, a Denver man , whose name is no longer know, developed a process
for compressing dried wheat fibres into biscuits. John and Will Kellogg adapted this
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process to produce breakfast cereal. (Kelloggs Corn Flakes) You know what happened
from there!
(4)Magnify/minimize
This means to make bigger and smaller. The enlargement of the small food store into a
big supermarket is an example of the success of magnification! The pocket calculator,
mini cell phone and lap top computer are examples of making successful products
smaller which led to even greater success.
(5)Put to another use
Asking the question “What else could this product do?” can lead to a very successful or
environmentally friendly business. For example, Goodyear Tyre Company has a
pollution free heating plant that uses tyres as its only fuel.
Using each of the above techniques in different ways will help you to generate a range
of different ideas and come up with better products or services than your competitors.
Always remember the words of Michael Crisp:”Often simple ideas are the best”
You can also use brainstorming which is a creative means of generating a large
number of ideas from a group of people in a short time. It is used by big and small
companies to find ways to solve problems.
Being innovative is an advantage for any entrepreneur as this way; you are always able
to come up with fresh ideas that will keep the business sustainable. On the other hand
being too innovative can be a disadvantage as it may lead to the business coming
with ideas and offering products too advanced for people’s liking.

In your own wards outline the example the techniques that
24
people call creative thinking
The answer will relate here
Example
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An example of this is mind mapping. While they do help some people, we prefer a
more natural and systematic approach because successful business is about planned
and structured approach. Too often when a method is learned, there is too much focus
on the methodology than on the creativity itself. This is more particularly for those
people who have not found the method easy to understand or to work with. This
systematic approach that we recommend is also suited to the person who is not
creative. True creativity is still found in business, in the sense of the artist and the
musician, and these people tend to be those who introduce new concepts to the
community as a whole. Let us look at this process in respect of strategic planning when
preparing a corporate strategy.

25 • Strategic Planning
• Scenario Planning
Strategic Planning is a reality in business and creativity is about having a broad
knowledge of those issues, which can impact on your business. It requires examining the
competitors inside your industry and everyone outside your industry. Then look for the
best and / or the new practice and apply it to your industry.
Scenario Planning is a requirement for creativity and is directly or indirectly linked to a

problem or a potential problem. Furthermore the problem may not necessarily be
perceived as a problem. Let us assume that the business is doing well and increasing
turnover and profit annually on an acceptable level. However, the PEST analysis has
alerted them to a potential future problem. We therefore wish to apply our minds in an
attempt to envisage the various scenarios that could play out. It is not a problem now
but may be a potential problem later.
SESSION 3.
Apply principles and practices of innovation to the
development and growth of a new venture.
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26 Explain innovation
Innovation is not just another way of developing new products and services or
breathing life into existing ones. It involves much more. Innovation is the single best way
in which to leapfrog competition by ensuring constant change in products and/or
processes.
When organisations adopt innovations they do so with high expectations, anticipating

improvements in organisational productivity and performance. However the adoption
of an innovation does not ensure its implementation. The organisational challenge is to
create the necessary conditions in which to utilise the innovation and to develop a
workable plan for its implementation. Only then will an organisation be likely to achieve
the intended benefits of the innovation.

Briefly explain the following:
• Innovative thinking to generate employment
27 opportunities
• Innovative thinking to address skills needs of employees
Innovative thinking to generate employment opportunities
Human labour is the most important part of the small business, because its influence
determines how well the other factors are utilized. Without people your business will not
exist. A variety of viewpoints often allows for creative yet appropriate solutions.
Innovative thinking to address skills needs of employees
Skills or needs of employees should first be identified. Constant contact with employees
is essential. Expectation of evaluation and punishment tends to undermine creativity.
Intrinsic motivation fosters creativity, while extrinsic reward tends to be detrimental to
creativity. Freedom and independence combined with greater democracy contributes
to a creative business climate. A supportive working environment contributes to the
fulfilment of creative potential and it includes a high level of employee responsibility for
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the initiation of new activities. Discussing ideas with other individuals, even with those
who know little about the subject helps the process.
Sometimes a question which initially seemed simple, can lead to new discoveries and
new approaches to old problems. Although some people are born with a gift of being
creative, it is possible for anyone to develop and improve his creative abilities.
Formal training does not necessarily guarantee success in a small business. Skills can be
gained from working experience.

Use your own wards to come out with example of different
28
techniques that people call creative thinking
Different techniques that people call creative thinking.
Example
An example of this is mind mapping. While they do help some people, we prefer a
more natural and systematic approach because successful business is about planned
and structured approach. Too often when a method is learned, there is too much focus
on the methodology than on the creativity itself. This is more particularly for those
people who have not found the method easy to understand or to work with. This
systematic approach that we recommend is also suited to the person who is not
creative. True creativity is still found in business, in the sense of the artist and the
musician, and these people tend to be those who introduce new concepts to the
community as a whole. Let us look at this process in respect of strategic planning when
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Produce business plans for a new
2
venture
Learning Unit

CREDITS : 8
SUB FIELD : Public Administration

In your own understanding explain what is the purpose and the
1
importance of business plan
The purpose and importance of a business plan
Business plans are utilised for a number of different reasons. Firstly, a business plan can
be drawn up to assess the viability of your business idea. You will find a business plan
helpful in this sense as you will need to assess the market for your product or service, as
well as your competitors and other important information. Assessing the viability of your
ideas is covered in our manual on viability of business opportunities and ideas. This
manual will concentrate on helping you to formulate a business plan.
Secondly, a business plan can also be drawn up if the business is applying for funding,
especially at banks. Here, the bank manager will want to discuss your business plan in-
depth in order to assess the viability of your business being successful. Business plans can
also be formulated as a tool for moving the business into the future. If the business is
already running, and certain strategies, such as marketing and advertising strategies
have changed, these need to be communicated in the business plan.
Let us take a more in-depth look at the importance of a business plan, and its
components.
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Should the primary purpose of the Business Plan be for the raising of finance? Each
financial institution has a guideline as to their minimum requirements which need to be
included in the Business Plan. Please consult each targeted financial institution before
commencing the development of your Business Plan to ensure that you meet their
minimum requirements.
2 Explain why there is a need of plan and role of plan at work
Why plan?
People plan for different reasons, especially in the business environment. Some of these
reasons may be:
Working Smarter. Planning helps the management team to work smarter by coming up
with better alternatives. It helps them to understand and clarify risks and devise
techniques of managing and reducing risks.
Demonstrate the following based on the plans:
• Future Orientation
• Testing Ideas
3
• Results Orientation
• Stress Management
• Motivation
• Future Orientation: Planning for the future helps a team to anticipate and be more
alert to opportunities, problems and changes.
• Testing Ideas: Planning helps management to develop and update business
strategies by testing the viability of ideas and opportunities.
• Results Orientation: Planning helps to develop and state specific goals, which can
be measurable over time. This enables the performance of the business to be
measured.
• Stress Management: Establishing realistic goals will help in managing stressful
business situations.
• Motivation : Setting realistic goals helps you to motivate and guide the
management and employees of your business
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4 Outline two primary reason for business plan
A business plan is a useful tool and is used primarily for two reasons.
These are:
• To raise capital
• As a means of guiding growth.
5 Discuss the use of business plan
A business plan can also be used to understand the direction of the business and as a
guiding tool for growth. It helps in refining and making difficult decision, as well as
clarifying the business financial requirements. So, it is evident that a business plan is very
important for the success of both new and established businesses. There are certain
procedures and characteristics that will help you to formulate a winning business plan.
By integrating the following characteristics into your business plan, your business will be
well on its way to success.
6 Match column a and b
COLUMN A COLUMN B
Procedure Explanation
Detailed market Know and understand your target market, how you intend to reach them and
the competitive advantage your product or service brings to consumers.
research
Clear and realistic Every business plan should contain forecasted balance sheets, income
statements and cash flow statements. All significant features of these
financial
projected financial statements should be clearly explained. Potential investors
projections will be interested in this information
A detailed If you do not analyse your competition, potential lenders and investors will
become wary of your business plan. Every business has competitors and your
competitor analysis
business plan should acknowledge this and prove you have analysed and
understood the competitor’s strengths and weaknesses.
A description of the A sound management team is a factor that all potential investors and lenders
will be impressed by. Use the business plan to illustrate the different elements of
management team
your management team and their experience that will help you obtain
success in the business
A distinct vision By incorporating a clear vision of where the business is headed, the
accomplishments that the business is pursuing, and how the business intends to
achieve them, will help to make investors excited.
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An understanding If you are considering alternative sources of finance, such as a loan, your
business plan needs to explain why the business needs this financing, how
of financial options.
much money it requires, how the money will be used and how it will be repaid.
This proves to potential investors or lenders that all areas of financing have
been considered.
Proper format and The business plan needs to be interesting to read and well written. It should be
well organised with the table of contents pointing a reader towards the
writing style
different topics contained in the business plan.
Conciseness. There must be enough detail in a business plan in order to answer any possible
questions from potential lenders and investors, however it should also be
concise and to the point. Plans that are too short will more often than not be
rejected. Plans that are too long-winded will never be read.
A good summary Writing the executive summary is probably the hardest part of a business plan.
This is the section that will be read first by any potential investors, so it is
important that it captures the readers interest and attention.
Customisation. You may use various business plan guides and resources as a starting point to
writing your own business plan; however try to customise your plan to suit your
business, as no two businesses are exactly alike. Do not hire someone to write
the plan for you, as your plan should reflect your vision for the company.

7 List the seven basic element of the business plan
Let us take a look at the seven basic elements of a business plan. These are:
1 ) The business model
2 ) The vision and mission.
3 ) PESTEL and SWOT analysis.
4 ) Marketing Plan.
5 ) Human Resource Plan.
6 ) Financial Plan.
7 ) Harvest Strategy.
Express your understanding about the following:
• The business model
8 • The vision and mission
• PESTEL and SWOT analysis
• Marketing plan
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• Human resource plan
• Financial plan
• SWOT Analysis
• Harvest strategy
The business model

This section outlines the history and background of the identified business. In this section
you can describe how you came up with the idea for the business or how it was
formed, what the business will do, as well as the unique capabilities that give your
business an edge in the marketplace. This may help investors understand how your
business will operate. State the legal structures you choose for your business and your
reasons why. Include a copy of any legal agreements to support the information.
The vision and mission

In this section describe your vision of where you want your business to be in the future.
Short-term objectives are those that can be achieved within one year. Long-term
objectives are those that require a longer time frame, usually three to five years, to
achieve. There are usually three broad objectives for a small business. These are the
creation of the business, the survival of the business and the profitability of the business.
These should be discussed in detail.
PESTEL and SWOT analysis

This section needs to convince the reader that you have an understanding of your
competitive environment and the macro-environment your business is operating in. This
should demonstrate that you have a market for your product or service and that you
intend to achieve a competitive position. PESTEL analysis and SWOT analysis are of
significance here. These analysis techniques will be discussed in detail further in this
chapter. Using the results of these techniques, you will need to discuss the overall
market such as the current market conditions, sales and profit projections and other
trends, competitors in the market and the reasons for their success. Move on to discuss
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your specific market or niche you intend to operate in. Describe your strengths and
weaknesses and compare them to the market leaders as well as the outcomes of your
PESTEL analysis. This section will help you to evaluate the various risks that each of these
factors pose on the survival and profitability of your business.
Marketing plan
This section describes the marketing strategy of your business and must be consistent
with the market analysis performed in the section above. Discuss how you intend to
focus on your customer and how you will create customer awareness and satisfaction.
Move on to discuss your strategy in detail, describing how your strategy will support your
strengths and how you will exploit your competitor’s weaknesses. Identify your target
market and describe how you will communicate with them as well as the image you
intend to communicate and portray. You will also need to describe your pricing
strategy and how they compare to your competitors. The distribution of your product or
service should also be discussed.
Human resource plan
It is here that you describe who is behind the business. For example, if you are a sole
proprietor, include your curriculum vitae and discuss your abilities and experience that
you bring to the business. If you need help, discuss how you intend to get that help,
whether through studying or using other personnel. For a partnership, discuss each
partner’s abilities, skills, qualifications and background using supporting documents. In
an incorporated business provide information on the structure and on the key personnel
positions as well as their individual contributions. Salaries, incentives, benefits, employee
responsibilities, job descriptions and strategies for employee development and training
should also be discussed.
Financial plan
In this section you will need to discuss past, current and projected finances. Start by
discussing the financial needs of your business. If you are applying for alternative
funding, this needs to be stated outlining how much funding you require and what you
intend to use the funding for. All information in this section needs to be supported with
relevant data, which should be well organised and easy to find. Move on to provide a
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cash flow statement discussing the cash inflow and outflow of your business over a
period of time. Also provide an income projection over three years. Discuss your break-
even analysis where your business expenses exactly match your sales volume.
In other words, at this point your business will neither make a profit or a loss. If you are a
new business owner, your financial section will not include your actual performance
statements and financial history. If you are applying for alternative funding, banks or
venture capitalists may require a personal balance sheet. If you have already
established your business, you will need to include your actual financial history. This is
found in you past balance sheets and profit and loss or income statements. This
financial history is a summary of your financial information from the start of your business
to the present.
The costs, risks and proposed infrastructure of the operations plan is presented in the
business plan of own venture
This section is covered under the SWOT analysis and Marketing plan in your business
plan
SWOT Analysis
Discuss definite and possible strengths, weaknesses, opportunities and threats
Give an honest assessment of the risks faced by the business, entrepreneurs and
investors in relation to the potential for growth, profitability, and capital appreciation 'I'
Discuss strategies that can be implemented to address the risk factors highlighted
Points to remember: An honest and critical evaluation of the strengths, weaknesses,
opportunities and threats will help you capitalise on your strengths, overcome your
weaknesses, exploit opportunities and avoid threats (or turn threats into opportunities).
Harvest strategy
Another name for this section is an exit strategy. Investors or venture capitalists that
have or intend to invest in your business will require a harvest strategy to know how they
will be compensated for their investment in your business. Without this strategy, they will
not be willing to invest. This section forces you to consider your long-term plans for your
business and what you intend to gain from it. Some people plan to grow their business
and sell it when they retire.
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Others may plan for their children to take control of the business at a later stage. If this is
the case, an attorney will need to be consulted to deal with the necessary paperwork.
This section provides information that describes how you intend to minimise losses when
the need arises to close the business. It also describes how possible damage to the
business image and reputation can be minimised. To create a business exit strategy you
need to understand the various factors that may force you to end business, as well as
the objectives you require before you make the decision to end business. You may
know how much money you want to make out of your business, or by what age you will
want to sell out.
Determine the value of your business and look at your business plan objectively. If you
have set your exit strategy goals too high, they will not be feasible to tie in with your
personal life or business goals. For example, if you have determined that you would like
to exit your business in five years and would like to make R5 million, determine the
current value of your business and how much you will need to grow in order to achieve
this goal. You may find that your harvest strategy goal is too high and is unobtainable.
In this case, you will either need to sell out now and change to a business that will
guarantee R5 million in five years, or you will need to change your strategy slightly to
make it more manageable. You could try aggressive marketing in order to increase
sales, but working flat out for five years could be very taxing and you may end up
hating the day you started the business. Objectiveness is critical in this section; however
remember that the harvest plan should also be flexible. Business, life and personal goals
change over time. Your harvest strategy should change accordingly.
Outline the three main areas in the environment based on pest
9
analyses
There are three main areas in the environment.
1) The internal environment is factors such as staff, office technology, wages and
internal finance etc.
2) The micro-environment is external customers, agents, distributors, suppliers and
competitors.
3) The macro-environment is political and legal forces, economic forces, socio-cultural
forces and technological forces, found through a PESTEL analysis.
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Explain the following based on market analysis techniques
• Political Factors
• Economic Factors
• Socio-cultural Factors
10
• Technological Factors
• Environmental Factors
• Legal Factors
Political Factors
Politics has a significant influence on the regulation of business and the purchasing
power of consumers and other businesses. As a small business owner, you should
consider the stability of the political environment as well as how government policies
and laws may influence your business. Other areas of interest in politics include whether
the government is involved in trade agreements with foreign countries, as well as their
policy on the economy, taxation policies and employment laws.
Economic Factors
The state of the trading economy both in the long-term and the short-term need to be
thought about, especially if you are considering taking your business international.
Factors such as interest rates, exchange rates, inflation levels and long-term Gross
Domestic Product (GDP) per capita should be considered.
Socio-cultural Factors
Culture and society vary from country to country, thus social and cultural influences
differ around the world. These factors affect customer needs and potential markets.
You will need to consider demographic factors such as age distribution, dominant
cultures and religions, career attitudes and language. Attitudes to health and safety,
foreign products and services and the roles of men and women in society also need to
be researched.
Technological Factors
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These factors are important as they can lower barriers to entry, reduce production
problems and influence decisions. This can be vital for creating a competitive
advantage.
This section includes the research and development activities of the business and
should give the owner a greater insight into the advantages of technological change.
An example of this is the use of the Internet to book airline tickets, place orders and
even sell products online. Technology also benefits customers, for example Internet
banking. You will also be able to find out how technology can help you to produce
more cheaply or at a better quality standard.
Environmental Factors
This section deals with the overall outlook on the environment and the effects on the
business. If your target market values products or services that are ‘not tested on
animals’ or are ‘environmentally friendly’, you can use this in your marketing campaign.
Legal Factors
Lastly, this section researches all the legal issues of the business. Things such as patents
and copyrights need to be understood in order to safeguard you against severe
problems in the future.
11 Define SWOT analysis
SWOT Analysis
Provides information that helps to match the business’s resources and capabilities to the
competitive environment of the business. It is usually the first stage of planning and
helps focus on various key issues.
12 Explain the strengths and weakness of business
Strengths and weaknesses are internal factors
Strengths - Strength of a business is its resources and capabilities that can be used to
develop a competitive advantage. These could be strong brand names, good
customer reputation, location of your business, quality processes and procedures,
access to distribution networks or any other aspect that will add value to your product
or service.
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Weakness - The absence of certain strengths can be regarded as a weakness, such as
a weak brand name, poor customer reputation or a lack of access to distribution
channels. Other weaknesses could be the location of your business, poor quality goods
and services or even a lack of marketing expertise.
Express your understanding about the following based on
SWOT analysis:
13 • Opportunities
• Threats
Opportunities
External environmental analysis may reveal new opportunities for growth of the business
or profit. These could be a new technology or developing market, a strategic alliance,
a new market segment that offers improved profits, a removal of international trade
Threats
Changes in the external environment may pose a threat to the business. An example of
this could be new regulations, increased trade barriers, shifts in a consumer’s taste or
even a new competitor. SWOT analysis can be very subjective. In order for this analysis
to be of any significant use, you should ensure the following:
• Be specific.
• Be simple and to the point.
• Be realistic when assessing strengths and weaknesses of your business.
• Distinguish between where your business is currently and where your business could
be in the future.
• Analyze your situation objectively and with reference to your competition.

14 Demonstrate your knowledge both SWOT and Pestel analysis
Both SWOT and PESTEL analysis techniques provide the small business owner with a
variety of useful information that should not only be used in the marketing of the
products or services, but also to compile the business plan. By including this information
43 | P a g e
in the business plan, you will be using this valuable information to its utmost potential,
which will make the whole process more worthwhile.
Now that you have a more thorough understanding of the business plan format and
the analysis techniques you should use, you can start researching and gathering the
information to write your own business plan. Remember that you cannot simply write a
business plan over-night. A significant amount of time and effort should be placed on
your research.
Explain the following:
• Resources
• Print Resources
• Online Resources
15 • People Resources
• Table of contents, covering letter and executive summary
• Main body and appendix
Resources
One thing you will need to consider when drafting your business plan is whether your
business plan is relevant and applicable to your ideas of your business. Relevancy
applies to whether the business plan is pertinent to your business idea. It will not be very
good if your business plan predicts one image of your business when you are trying to
portray another completely different image. Similarly, applicability refers to whether
your business plan is of an applicable or suitable quality. To ensure that your business
plan is of a high quality, you will need to spend a significant amount of time researching
and preparing to write your plan, as well as drafting and editing your business plan
before settling on a final copy. Let us briefly look at a few resources you can use to help
you achieve this.
In the research process, you can use the following resources:
Print Resources
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Your local Library is sure to have many books on various topics such as Marketing,
Financing and managing staff, as well as books on compiling a business plan. These
can all contain valuable information and insight on running your own business and
compiling a business plan accordingly. Magazines devoted to small business ownership
or to the industry you operate in can also be helpful and relevant.
Online Resources
Similar to the information above, there are many business and government sites
dedicated to providing quality information of running a small business and compiling
business plans.
People Resources
There are many people that you can turn to for help with business plans. There are
organisations that will give advice and may provide inexpensive workshops on various
other topics you will need information on. Other organisations, such as you Chamber of
Business, will have important information such as trends in your industry.
Table of contents, covering letter and executive summary
When drafting your business plan, you will need to make sure that it is an attractive
typed document that is well organised. Every business plan should begin with a cover
letter explaining and providing more information on your business and its potential for
success. Your cover sheet follows the cover letter and simply states the name of your
business, the date, the owner and other contact information such as telephone
numbers.
Next, you will need a table of contents. This should list all the sections in your business
plan in order to make it neat and easy to locate. Following this, a statement of purpose
will briefly describe why you are asking for finance and what you intend to do with the
money. If you are not applying for finance, this statement is not necessary. An
executive summary is a short summary of the full business plan and should be interesting
as it usually is the first thing people read. If it is boring, your business plan will most
probably end up being thrown away without anyone even taking notice. It should be
no longer than two pages and should be clear and simple. It should describe your
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business concept and should include sales and profit projections. You will also need to
identify your needs, whether it’s additional capital or more equipment.
Main body and appendix

Moving on to the main body of your plan, this should include the seven elements
described in the earlier chapter. Where possible, use charts and tables to illustrate your
point. Otherwise, keep it straight and simple. Lastly, an appendix is necessary as it
includes any supporting documentation that was not included in the body of the
business plan. Documents such as your curriculum vitae, financial statements, income
tax returns and letters of recommendation are usually found in this section.
It can be seen from this chapter, and from this course, that a significant amount of time
and effort needs to be spent on your business plan. It cannot simply be thrown together
within a few days with the expectation of it being successful. Thought should be given
to the relevance of your draft as well as accepted norms, which can be found by
reading other business plans. Take your time on this project and it will be an extremely
valuable part of your business.
Use your own wards to outline the procedures to present the
16
business plan for own venture to a financier
Procedures to present the business plan for own venture to a financier One of the
institutions that offer finance to businesses is Khula Enterprise. The Khula Credit Indemnity
Scheme was established to give access to finance to people who wish to start or
expand small to medium sized businesses but do not have sufficient collateral / security
to support facilities provided by participating banks. The scheme covers facilities from
R10 000 to R3 million. The funding application to them follows the procedure outlined
below:
Step 1: Approach any participating bank of your choice and submit your business plan
to a business development officer for a facility application.
Step 2: If you do not have enough collateral, inform the bank and request them to
approach Khula for an indemnity on your behalf.
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Step 3: The bank will assess the business plan and your application in terms of the bank's
own lending criteria and decide if the business will be able to cover the business
expenses and the monthly instalments and remain sustainable.
Step 4: If the bank believes that the business will succeed, the facility is then approved
and a facility proposal is submitted to Khula for an indemnity application.
Step 5: Khula considers the proposal and assesses the need for assisting the business
with indemnity. The indemnity can only be used when the SME cannot provide enough
collateral or security themselves. The bank manages the loan and collects your
instalments for the duration of the loan.
17 Fill In the explanation of those values and norms
Values and norms Explanation

Honesty and Maintaining a high standard of integrity in business relationships is
Integrity important, both internally and externally.
Professionalism As a business owner, you should incorporate the highest standards of
business professionalism and competence in your business
practices and amongst your employees
Responsible By optimising the ethical use of resources, maximum benefit will be

Management provided to the customer, the employee, the business and you, the
business owner.
Serving Public By serving public interest, you do not use your authority for any personal
Interest benefit or gain, and you reject any business practice that is improper.
Conforming to You and your business strive to conform to the law of the country in
Law which you operate. You also conform to any institute or corporation
rules and regulations as well as any contractual obligations.

18 Discuss the issues that may lead to unethical behaviour
Issues that may lead to unethical behaviour.
In an office environment potential conflicts and issues may arise that could become
unethical situations. A simple example of this could be an argument between two
employees resulting in the one employee setting the other employee up in an
unacceptable situation where a possible disciplinary hearing or warning may arise. In
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order for your employees to feel a part of the working team and to get along with each
other, it is vital that you find ways of getting them to interact socially and to respect
each other.
Unethical behaviour may arise due to issues in surrounding environments. For example, if
you received some inside information on a new product that was being developed,
would you ‘steal’ the idea or would you find that unethical behaviour?
There are many different views on unethical behaviour, but it is important to remember
that effective communication strategies are key when trying to communicate what you
and your business believe in. By effectively communicating these ethical standards to
employees, you will instil a sense of responsibility in them. Communicating these to your
target market is a great way to get them to believe in your product. Think about the
Innoxa product range. Their ethical standards of doing no harm to animals are a
significant marketing tool.
Ethics and ethical standards should be included in your business plan whenever the
opportunity arises. For example, the Innoxa slogan can be incorporated into their
marketing plan and research sections. The example of product development can be
included in the design and development plans.
As you research and analyse information for each section of your business plan, you
should consider ethical standards and acceptable norms and how they relate to your
business. By predicting possible ethical issues, you can have the upper hand when
dealing with customers and investors, and it proves to investors that you have
considered and value the morals of your employees, your customers, your competitors
and society.
Outline the important reason for monitoring the implementation
19
of your plan.
Monitoring the implementation of your plan is important for a number of reasons.
• First, it helps to assure that your efforts conform to the plan. That you're actually
performing the action steps you intended. That you're "on track."
• Second, you've got to be sure the results you achieve align with your quantified
objectives.. That you're accomplishing what you intended to accomplish.
Monitoring helps here too.
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• Also, monitoring allows for corrective action. For making the necessary changes
along the way. To "fine tune," not only your strategies, but your planning process as
well.
• And since monitoring is part of a control process, it encourages improved
performance. Knowing they'll be measured stimulates employees to do a better job.
• Finally, and most importantly, monitoring provides the essential link between the
written plan and the day-to-day operation of your business. It demonstrates to all
that "you really are managing the business according to your plan".
SESSION 3.
Establish and prioritise business, financial and/or operations
goals and objectives for new venture.

Demonstrate the Personal objectives to the plans of own
20 venture.
Personal objectives are a part of many professional processes and documents. Many
people start a resume with a section titled "Objectives." Personal objectives can also be
part of a corporate performance management program. Writing personal objectives
doesn't have to be part of a formal document or program. Keeping your objectives
written down can help you to check progress toward goals. One method for writing
personal objectives is the SMART process--for Specific, Measurable, Achievable,
Realistic and Time-constrained.
Effective setting of personal objectives requires specific goals. Each objective should
define who else might be needed to achieve it. It should specifically define what the
objective will accomplish. You should define why the objective is necessary, when it
needs to be completed and a general outline of the steps to accomplish it.
The objective should be measurable. Measurable means that a successful outcome
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must be quantifiable. For example, if setting an objective to contact potential
customers or clients, set a number as a goal. If the objective is something like being
financially independent, clearly define the objective for your particular circumstances.
For financial independence, it might be a set amount of income or a measurable
reduction in expenses.
An objective needs to be time-constrained. Setting a goal to bicycle from New York to
Los Angeles but failing to set a deadline for achieving the goal can result in failing to
achieve the objective because of procrastination. Setting a deadline creates a sense
of urgency, which can help you to work to achieve your personal objective.
21 Explain the business objective
Business Objectives Detailed
Business objectives are a list of goals and directions that a business owner sets down in
writing for a company to follow. It is essentially an outline of where the company wants
to go and how it intends to get there. They give everyone in the company a written
sheet to compare their efforts to in order to see if they are working towards the overall
goals of the company. In short, they provide the overall direction the company wants
to go in and communicates that to the company.
Demonstrate the following based on business objectives :
• Write it Down
22
• Disadvantages
• Guidelines
Write it Down
It is important to have business objectives written down because it gives everyone in the
company a sense of where the company is going. It allows everyone to know what the
company is, what the company makes, and who the company's major competitors
are. Having these things official is vital to the cohesiveness of the company and gives all
members of an organization something to refer to when planning business ventures. The
business objectives can be a beacon for an entire company.
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Disadvantages
Sometimes business objectives can pigeonhole a company into a certain niche that it
cannot get out of. It is important to have business goals, but it is also important to
remember to remain flexible. Just because business objectives state one thing, does not
mean that risks cannot be taken on something else. That is one of the primary
disadvantages of business objectives: there is not much room for movement. As long as
flexibility is remembered, they should be a helpful tool.
Guidelines
When writing business objectives, it is important to keep a few things in mind. Make sure
that the objective is expressed in terms of numbers and not vaguely. Give a specific
time frame for the objective to be completed in. Be flexible, understandable, and
realistic when forming these objectives. Try to avoid being vague with things like just
"want to increase sales". Try instead to say things like "increase sales by 3000 units before
the end of the year." That's a better business objective.
Business objectives should be easy to write and communicate to the company at large.
They express the goals of the company in simple, easy-to- follow terms. Writing the
objectives down should be considered a priority even if one is in business alone since it
helps to solidify business goals. When in business, it is important to make goals
reasonable, achievable, and concrete. Business objectives are the way to do this and
should be taken seriously as a helpful tool.
23 Express your fully understanding about vision statement
A vision statement is sometimes called a picture of your company in the future but it’s
so much more than that. Your vision statement is your inspiration, the framework for all
your strategic planning.
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A vision statement may apply to an entire company or to a single division of that
company. Whether for all or part of an organization, the vision statement answers the
question, "Where do we want to go?"
What you are doing when creating a vision statement is articulating your dreams and
hopes for your business. It reminds you of what you are trying to build.
While a vision statement doesn't tell you how you're going to get there, it does set the
direction for your business planning. (For more on the role of your vision statement in
business planning, see Quick-Start Business Planning.) That's why it's important when
crafting a vision statement to let your imagination go and dare to dream – and why it’s
important that a vision statement captures your passion.
Unlike the mission statement, a vision statement is for you and the other members of
your company, not for your customers or clients.
When writing a vision statement, your mission statement and your core competencies
can be a valuable starting point for articulating your values. Be sure when you're
creating one not to fall into the trap of only thinking ahead a year or two. Once you
have one, your vision statement will have a huge influence on decision making and the
way you allocate resources.
Review sample vision statements before you write one for your new venture. Vision
statements differ from person to person, but looking at a number of examples may help
you focus in on a singular vision for your company. Websites like Time Thoughts provide
examples of vision statements used for personal and professional purposes (see
Resources below).
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Create a list of your company's goals and principles as the first step in your vision
statement process. You need to know the goals and benchmarks you set for your
business before you create an overall vision. Write these goals on a dry erase board or
distribute copies to everyone involved in the planning process to keep everyone on
task.
Peak to the rest of your ownership team about their vision for the company. While your
group may agree on specific achievements for the company, you need to agree on a
unifying statement before proceeding with business activities.
Develop small sample vision statements which fit your specific goals and the public
profile you want to create. A list of four or five statements allows you to gauge which
one works best with promotional materials, investor documents and other print material.
Perform some market research after you write your draft version of the vision statement.
You can utilize friends, family and colleagues in different industrial sectors to test out the
effectiveness of your vision statement in getting people interested in your company.
Promote your vision statement in every document that you distribute from your
company. Letters, bulletins and newsletters should feature this statement prominently to
keep every aspect of your business focused on your larger goal. You can also write your
vision statement as a screen saver or use it on large posters around the halls of your
company.
Questions Description Mark

Activity
Explain the following goals:
• Short-term goals
24
• Long-term goals
• enabling goal
• Short-term goals are ones that you will achieve in the near future (e.g., in a day,
within a week, or possibly within a few months).
• Long-term goals are ones that you will achieve over a longer period of time (e.g.,
one semester, one year, five years, or twenty years).
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• An enabling goal is a special type of shorter-term goal. It is written to help us
achieve a long-term goal. Enabling goals are like stepping stones that help us
measure our progress toward reaching longer-term goals.
Express your understanding about the cultural values and
beliefs of prospective employees and expected consumers are
25
incorporated into the plans of own venture.
Cultural values and beliefs of prospective employees and expected consumers are
incorporated into the plans of own venture.
Culture is one of those terms that are difficult to express distinctly, but everyone knows it
when they sense it. For example, the culture of a large, profit corporation is quite
different than that of a hospital which is quite different than that of a university. You can
tell the culture of an organization by looking at the arrangement of furniture, what they
brag about, what members wear, etc. -- similar to what you can use to get a feeling
about someone's personality. Corporate culture can be looked at as a system. Inputs
include feedback from, e.g., society, professions, laws, stories, heroes, values on
competition or service, etc. The process is based on our assumptions, values and norms,
e.g., our values on money, time, facilities, space and people. Outputs or effects of our
culture are, e.g., organizational behaviors, technologies, strategies, image, products,
services, appearance, etc. The concept of culture is particularly important when
attempting to manage organization-wide change. Practitioners are coming to realize
that, despite the best-laid plans, organizational change must include not only changing
structures and processes, but also changing the corporate culture as well. There's been
a great deal of literature generated over the past decade about the concept of
organizational culture -- particularly in regard to learning how to change organizational
culture. Organizational change efforts are rumored to fail the vast majority of the time.
Usually, this failure is credited to lack of understanding about the strong role of culture
and the role it plays in organizations. That's one of the reasons that many strategic
planners now place as much emphasis on identifying strategic values as they do
mission and vision.
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SESSION 4.
Design and present business, financial and/or marketing
plans based on a budget for a new venture.

26 Briefly explain the business of the venture
The business of the venture
Business venture is a start-up enterprise that is formed with the expectation and plan
that a financial gain will result. Many refer to a business venture as a small
business, since it normally starts out with an idea that begins with a small amount of
capital or finances. Mostbusiness ventures are backed by one or more investors with the
hope that the business will be profitable.
In general, a business venture is born out of a need for something lacking in the current
market. This need can be a service or product that consumers are asking for or need to
serve a particular purpose. Once the need is identified, the business venture can be
started by a smart investor or small business person that has the resources and time to
develop and market the new commodity on the open market.
A business venture will most likely be funded initially by an investor, which is often the
small business owner or the originator of the idea. Once the business is created, other
investors may get involved by providing support and venture capital to fund further
development and increase awareness of the business venture with the intention of a
higher profit being shared by all investors. In this scenario, the organization is actually a
shared business venture, in that more than one party is involved in the process.
In the beginning of a business venture, it is recommended that a formal business
plan be written in order to outline the purpose and mission of the business for the future.
An effective business venture plan will also include a measurable process for identifying
additional business, increasing profitability and drafting an escape plan should
the business fail. Many new business ventures fail within the first one to three years of
inception, so it’s vital to include a plan to dissolve the business if needed to reduce
financial loss.
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A small business may also choose to become a public after a certain period of growth
allowing additional business venture investors, in the form of public stock holders, to
become involved in the success of the company as a whole. Alternatively, the
small business may choose to remain a private business venture in order to retain
control over decisions that impact the daily operations and direction of
the business venture. Either way, a successful business venture creates a profit that is
shared by investors over time.
Outlined the fundamental question that you need to ask yourself
26
when you do business plan
Once you put your plan on paper, there are some fundamental questions you will want
to ask yourself:
• Why have I decided on this product or service?
• What is the basis for the volumes that I have planned?
• What do I need to do to be able to achieve the volumes?
• How will cash flow in and flow out of my venture, and hence how much
additional cash will I have or need at different points in time?
• What if some of my assumptions do not materialize?
27 Discuss the structure of a business plan
Structure of a Business Plan
The very first formal step you need to take before deciding to start a new venture or
diversify into a new line of business, is to define your vision and mission, followed by the
goals. At this stage you are assessing the innovation content in the products and/or
services you want to get into, and justifying why you zeroed in on this. Obviously, the
product-service mix you want to get into is itself driven by your vision, mission and goals.
Having decided on the product-service mix, you are now ready for answering the
question on how to write a business plan. Your next steps in this process will include
market research and competition analysis, in order to determine the demand for your
mix, and what strategies your competitors have adopted. This brings you to the business
model for your own plan. The business model you adopt will determine the classic
Product-Promotion-Price-Place mix (the 4 P’s of Marketing), which will then lead to your
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marketing plan along with the revenue forecasts, the sales manpower plan and the
promotion plan necessary to achieve the revenue forecast.
28 List the typical structure for business plan start up venture
Typical structure for a business plan for a start up venture [8]
• cover page and table of contents
• executive summary
• business description
• business environment analysis
• industry background
• competitor analysis
• market analysis
• marketing plan
• operations plan
• management summary
• financial plan
• attachments and milestones
29 Outline the 4 main reason for writing a business plan
There are four main reasons why writing business plans is considered best practice for
every business owner whether starting a business or developing an existing business and
these are:
• To provide information about your intentions to you and others.
• To persuade a third party to provide resources or assistance.
• To help your strategic thinking so you know what you are trying to achieve and how
you are going to achieve it.
• To set financial targets so you can forecast sales & control costs

Describe the following based on business plan:
30
• Your plan layout
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• Keep it concise
• Be realistic
• Show a path to profitability
• Show a strong management team
Your plan layout
Each and every business plan written follows the same structure and you can get an
idea of what should be contained in your plan by following the link above or signing up
for the free template in the box on the right. Other than that, follow these following tips:
Keep it concise
About 12-20 pages should be good enough to outline your aims and financial
projections
Be realistic
Don't be optimistic. People reading your plan must see that you have done your
research and analysis and you understand your business
Show a path to profitability
The most important question for anyone investing will be "when do I see a return"
Show a strong management team
It is the people in your team who are going to make a success of your company.

31 Outline the other planning tips
Other Planning Tips
• Competition - Understand your competitors and learn from them. See what they do
best and understand why they do it well.
• On the key items you believe are vital to your success, rate each of your
competitors to see who the best is and where you fit into the picture.
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• Comprehensive step by step advice on your plan layout is contained in our guides.
• Marketing Plans - Who are your main target customers, what are their needs, and
how are you going to tell them about your products?. That's marketing.
• Work out these two questions and you are well on your way to making sales. There
are many ways to communicate that are cheap to do from trialing your product
frees to emailing your prospects.
32 Why we choose the structure before we start a business
Choose a structure before you start your business
The key is to ensure that whatever structure you choose is in place before you start the
business and that you're able to comply with the various legal requirements it carries.
There are six structures that you can choose from. However, the first four are the most
widely used in South Africa.
Describe the following based on the business plan:
• Partnership
• Company
33 • Trust
• Cooperative
Partnership
A partnership involves two or more people (but no more than 20) going into business
together.
Company
A company is a separate legal entity capable of holding assets in its own name.
Shareholders own the company while directors run it.
Trust
Unlike a company, a trust is not a legal entity. They are often used in connection with
running a business for the benefit of others.
Cooperative
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A cooperative is a member-owned business organisation with at least five shareholders,
all of whom have equal voting rights regardless of their level of involvement or
investment, although every shareholder is expected to help run the cooperative.
Outline the factors that should be consider in-order to make the
34
right decisions for business plan
Your accountant or business advisor can help you make the right decision, but some of
the factors to consider include:
• taxation requirements and liabilities;

• legal liability;
• costs;
• capital; and
• Management requirements.

Discuss the following based on marketing campaign
GET LISTED
CONTACTS
YOUR BUSINESS WEBSITE
THE ALMIGHTY BUSINESS CARD
35
ADVERTISE
FREE GIFTS, BRIBERY AND SMARM
DEALING EFFECTIVELY WITH THE PUBLIC

YOUR BRAND IMAGE
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1. GET LISTED
This is one of the most basic methods of business promotion. List yourself in as many
business directories, yellow pages, and local business Websites as you can find. Many of
these will list your company for free, though some might require you to pay a small fee.
This type of promotion is well worth the time and investment, as most people consult
these publications when looking for a designer, plumber, electrician etc. You see the
point.
2. CONTACTS
It’s not what you know, it’s who you know. This little phrase holds a great deal of water
in the small-scale Web design industry. When you’re first starting out, you’ll find that a lot
of your work comes in via word of mouth promotion. It’s therefore very important to
make connections early. Do a few free sites for local charities, community groups and
organisations – this is a great way to build up your portfolio and also spread your name
around potential client firms. Eventually you’ll be approached by ‘a friend of a friend of
so-and-so’ who wants a site designed. This is an example of ‘viral marketing’ and is one
of the most effective methods you can use to promote any business.
3. YOUR BUSINESS WEBSITE

This site is it – your big chance to knock the socks off of your potential clients! Here’s
your opportunity to show them what you can do, to tell them exactly how your
company can help them and why they should choose you over the competition. Never
forget that first impressions count, and if your portfolio isn’t the best you can make in
terms of design, layout and content, you’re selling yourself short straight away.
A Website for your business is very important. Hey, it’s what you do, isn’t it? Aim for a
crisp, clean design that emphasises your professionalism and skill. Give your potential
clients as much information as you think they’ll need. Remember, this is most likely going
to be your first point of contact with a potential client, and could determine right away
whether or not the contract goes to your company, or Joe Bloggs Inc down the road.
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4. THE ALMIGHTY BUSINESS CARD
Yes, we’re living in the 21st century, and yes, it’s the digital era, the age of technology,
the future and all that, but let’s be honest: nothing beats a business card for quick,
effective promotion.
Let’s take an example: You’re out with some friends at a suave local get-together. You
start chatting to a friend of a friend; the topic of conversation turns (as always) to work;
she asks what you do; you tell her you build Websites for a small to medium sized
companies in your area. Eureka! It turns out she’s the owner of Jane’s Boutique, a
fashionable designer clothing outlet in town. What’s more, she’s been toying with the
idea of investing in an e-commerce enabled Website for her business, so she can
accept orders online and break into mail order. This gets better and better. So you tell
her you’d certainly be interested in helping her out (for a fee of course) and that she
should give you a call. Now, do you:
A. Scribble your details on a napkin that she’s most likely going to pull out of her pocket
and blow her nose on without realising what it is, or
B. Pass her one of your high quality, professionally printed business cards that contain
every method to contact you imaginable, including of course the URL of your business
Website, which she’ll place in her purse and most likely use to contact you?
The moral of the story? Sometimes, the old-fashioned methods work best.
5. ADVERTISE
Of course, you could always go the traditional route and advertise. Targeted
advertising is the key here; billboards and the sides of buses simply won’t cut it. Try
placing an advert in the local newspaper, or target your market even further by
advertising in publications specifically published for small business owners in your local
area. These will vary depending on where you are and what the local economy is like,
so take some time to research the various advertising mediums available before you
commit yourself to anything.
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6. FREE GIFTS, BRIBERY AND SMARM
This method does take some capital investment to start with, but can yield good results
if it’s done properly and is correctly targeted. Invest in some branded mouse-mats,
pens, coasters etc to promote your business. Try to aim for items that executives would
keep on their desks. Desk calendars are especially good for this purpose because
they’ll be in use for a whole year if you’re lucky, and cardboard ones are fairly
inexpensive. The advantage of these items over traditional business cards is that they’re
more likely to be kept, plus your contact/business information generally remains on
open view, as opposed to being in a wallet, purse or filing system somewhere.
This will help get your company name and details out to your target audience, and will
hopefully get your name and details seen by the right people.
7. DEALING EFFECTIVELY WITH THE PUBLIC

Dealing with people is very, very, very, very important in Web development or indeed
any other type of consultancy work. How you deal with potential and existing clients
can be just as important as your level of technical skill or design competency.
Remember: your clients are the reason you’re in business — without them you might as
well pack up and start selling vacuum cleaners door to door. Treat your clients with
patience and respect, and try as hard as you possibly can to make them happy.
Besides the obvious, it’s also a good idea to interact with your clients on a more
personal level. Ask them how they are when you meet them, and send them a thank
you card when a project is completed. Christmas cards, frequent project updates and
other little niceties can make a client feel valued, wanted and appreciated, which will
probably lead them to offer you more work in the future, or refer you on to other
potential projects. If they do refer you to another paying client, remember to say “thank
you”.
8. YOUR BRAND IMAGE
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You do have a brand image, right? The establishment of a brand is a key factor in any
business’s promotional activities. Create a corporate image for your company, and
incorporate it into all your stationary, documents and business Website — these
techniques echo professionalism and class. If done well and designed in-house, it can
also be a good way to demonstrate your design skills. Business stationery is al so worth a
mention here. It’s well worth designing at the very least a professional looking
letterhead and invoice that you can use to correspond with and bill clients.
36 Express your understanding about business plan format
Business Marketing Plan Format
For putting the figures down to calculate the resource requirement against the sales
revenues you have projected, we will use a simple intuitive format. As you will notice in
the sample Small Business Marketing Plan Format, you prepare a table with rows and
columns (this sample has been prepared in MS-Excel). We prepare the projections for
three years: Year 1, Year 2, and Year 3. First task is to forecast the sales quantities you
expect to achieve for each product in the three years. Then put down the expected
average price. With this you get the forecast sales revenue from Product-1.
Repeat this step for all product and services, and you get the total sales income for
three years. Now to derive the sales force required, you first need to decide on a target
you would like to set for your sales executives for each year. Since you know the
forecast sales figures, you can derive the number of sales executives for each year (by
dividing the sales income by the target per sales executive). Thus you get the number
of sales executives (13, 20 and 43 in Year 1,2 and 3 in the sample Small Business
Marketing Plan Format).
Next you need to estimate the number of sales managers to supervise and manage
these sales executives. Generally, you assume that 1 manager is needed to control 7
executives (also referred to as span of control). Thus we have the number of sales
managers in the last row of the sample plan.
Thus you are now ready with the Small Business Marketing Plan Format for Sales
Revenues and the resources required for sales. Adding the support staff for marketing
and the marketing expenses for promotion, and other overheads like travel will give you
the total picture of gross income and the selling expenses.
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Use your own wards to demonstrate the venture capital options

& requirements
37

Venture Capital Options & Requirements
Venture capital is a great source of financing for many small business start-ups. There
are sometimes ups and downs associated with venture capital financing, but this should
not dissuade people from exploring their options. Venture capital companies are
located all over the world and they specialize in small startups. Venture capital is not
easy to come by for many new business owners. In addition, venture capital may have
strings attached to it that are detrimental to the business owner.
It is critical to understand what venture capitalists are looking for in a company and it is
also important to understand that they are typically seeking a very high rate of return.
Many new entrepreneurs are not willing to give up a portion of control over their
businesses and venture capital firms generally insist on this condition.
Other issues that are associated with venture capital is that you may lose some control
over the direction of the company, depending on how a contract is written. Before you
start seeking venture capital you should make sure that you know the pitfalls that are
associated with this method of financing. Venture capital is costly in a number of ways,
including potentially giving up portions of equity in your company. Venture capital firms
do provide millions of dollars annually to start-ups.
• A Basic Guide to Understanding Venture Capital

• Explaining the Venture Capital Investing Process
• Ins and Outs of Venture Capital
• Finding the Right Venture Capital Firm
• Additional Concerns
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Every person who is seeking money for a start-up venture has numerous concerns that
must be addressed. There is often a lot of erroneous information surrounding business
financing and it’s important to separate fact from fiction. The issue is that finding the
right information is sometimes challenging. These helpful articles will help you
understand concerns you have to deal with.
There are some government grant programs that are available to small business
owners. However, there are not nearly as many as some people may have you believe.
You'll need to do your research and avoid companies that promise you that for a fee
they'll help you get "free money". There are grants that can be obtained, but you must
qualify for them and you can apply for them yourself.
This group of articles can help you determine what is right for your business and help
you make good decisions for financing your business.
• Government Grants: Separating Fact From Fiction

• Minority Business: Potential Grant Funding Available
• Borrowing to Start or Expand Your Business: What Are Your Options?
• Angel or Venture Capital Funds? Which Is Better?
• Using Venture Capitalists to Fund Your Business
• Making the Perfect Pitch
38 Discuss the purpose of financial plan
Purpose of a Financial Plan
When we gave an overview about writing a business plan, we had said that there
could be several reasons behind writing a business plan. Besides serving the purpose of
being a documented blueprint of your thoughts on running the business, one of the
most common purposes behind a business plan relates to the funding needs. Your
business plan is the only document through which you can communicate the proposed
road map laid out by you to potential investors and other funding agencies about your
business.
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Why do you need potential investors or funding agencies, and who are these possible
targets? Any business is funded by a combination of the promoter's equity, equity
contributions from other 'owners,retained earnings pumped back into the business,
Grants received, and various types of Loans - long-term and short-term loans. As you
grow, (or in some cases, while starting up a new business itself), you quite often need
additional funds over and above what the original promoters and internal generation
from the business can sustain. In such cases, the additional funding needs can be met
by:
• Private equity investors
• Venture Capital Partners
• IPO (for large public equity funding)
• Banks and financial institutions for long-term loans as well as short-term working
capital needs
• Private lenders etc...
All these potential investors, and funding agencies, are interested in knowing all the
components of your business plan - the marketing strategies yo propose to use, the
operational plans, your human resources strategies etc... Besides all these, from a
funding point of view, they are most interested in your bottom lines - as reflected in the
crucial business financial plan, since that is the real indicator of the health of your
business. We will now see what is needed to prepare the financial plan for your
business.
If your savings fall short no matter how much you stretch your resources, you need to
begin looking at other possible sources of capital. Other money sources may be
available from family members, partners, or friends. You may also want to try getting
bank loans, loans from the government, credit card, venture capital companies,
mortgage property, or any other source that you can think of.
Getting credit often depends on the strength of your credit history, availability of
collateral, and capability to repay the loan. If you have equity in your home, you may
be able to get a home equity line of credit that you can use to jumpstart your new
business. However, banks may be more inclined to approve loan applications of
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someone with a steady paycheck and job, instead of someone who recently quit his or
her job and whose entrepreneurial future is still uncertain.
When looking at credits and loans to start a business, a good rule of thumb is that you
should not borrow more money than is necessary.
List and explain the key element that should be included when
39
you preparing adept
Key elements that should be included are:
1. Business concept. Describes the business, its product and the market it will serve. It
should point out just exactly what will be sold, to whom and why the business will
hold a competitive advantage.
2. Financial features. Highlights the important financial points of the business including
sales, profits, cash flows and return on investment.
3. Financial requirements. Clearly states the capital needed to start the business and
to expand. It should detail how the capital will be used, and the equity, if any, that
will be provided for funding. If the loan for initial capital will be based on security
instead of equity, you should also specify the source of collateral.
4. Current business position. Furnishes relevant information about the company, its
legal form of operation, when it was formed, the principal owners and key
personnel.
5. Major achievements. Details any developments within the company that are
essential to the success of the business. Major achievements include items like
patents, prototypes, location of a facility, any crucial contracts that need to be in
place for product development, or results from any test marketing that has been
conducted.
40 Demonstrate the preparing for fainancing
Preparing for Financing
The first step to finding financing for your business is to create a business plan. Well
thought out business plans are a requirement for nearly all types of financing unless an
entrepreneur is using personal resources or they are getting a loan from a friend or
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family member. Even if a new small business owner does not need to apply for
financing, having a good business plan may still help them keep their business on track.
Business plans are crucial for long-term success and knowing some business plan basics
is helpful. Many investors may not even meet an entrepreneur without reading their
business plans first. This means the plan must be well thought out, contain all relevant
information and intrigue an investor enough to warrant follow-up. In some cases,
business plan software may also be helpful but the successful entrepreneur will also
want to make sure they include information that investors will need to make a good
decision.
• Business Plan Basics

• Business Plan Elements
• Types of Business Plans: Finding the Right Model
• Keeping It Simple
• Components of a Business Plan
• Understanding Business Plan Pro Software
• Internal Planning: Annual Business Plans

41 Discuss the business plan information
Business plan information
Businesses of all sizes and types need a functional roadmap to guide the direction
taken; a clear business plan is critical to a business' goals and vision, and keeping the
business on track.
Below are some guides for a clear business plan.
Intended Audience
There are a wide range of proposal formats available online; some are more general
and some are designed for specific audiences. Those intended for internal audiences,
such as employees, owners, senior management and Board of Directors, focus on the
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implementation of a strategy that is believed to be relevant for the company's growth.
This kind of template is also known as the strategic plan.
On the other hand, formats for external audiences, such as clients, suppliers, investors,
bankers and even the government, are focused on attracting financing, suppliers or
talents for the business. For these audiences, the proposal format may be a condensed
version of the larger business plan, especially when your purpose is to attract investors.
This kind of document is also referred to as a business funding proposal. Obtaining
financing is crucial for a business' growth and may also pose an enormous advantage
against its competitors.
Content
A business plan must be comprehensive; it must clearly describe where the business
venture is heading. Thus, it must consist of:
• executive summary
• history of the company
• a clear statement of the business concept
• marketing and competitive analysis
• implementation plan
• assessment of resources
• growth and exit strategies
Analyses to be used for the document should be based on realistic research for it to
hold substance. Depending on your intention, the content of the document can go
longer or shorter.
Length
Business plans are usually 20-pages long. In some instances, it can reach up to 100
pages or longer, depending on the business' nature, purpose and target.
Template or Consultant
Templates allow entrepreneurs to simply cut and paste their business plans into a given
format. These save business owners time; they can now focus on the content rather
than the format. It also creates a standardized format for the whole organization.
However, templates may also limit the creativity and information contained in the
business plan. In cases like this, entrepreneurs may opt to hire a consultant or write the
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document themselves. The good thing about the latter is that you can include other
relevant information which is not included in the format.
Ending It Right
Business plans are considered to be an easy way to 'sell' the business idea to its
prospective audience; thus, it may be beneficial to address methods of preventing
problems within the organization Business plans may include a conclusion in the form of
supporting documents (i.e. credit reports, job descriptions, contracts, etc.) to help make
the business plan clearer.
There is "no one size fits all" business plan template since there are an infinite number of
businesses and business plans; however, a sample business plan is a great way to guide
the development of your business plan. A business plan template, appropriate for your
business model, is a great tool. Your intention and target audience should be your
guide to tell you what is and what is not to be included in the document to make it
clear.
42 Express your understanding about the entrepreneur
Every entrepreneur has to present a business plan to outsiders at some point if he or she
is seeking a loan or investment in the company. Obtaining venture capital funding,
angel investment, or even bank loans for a business is increasingly difficult in a tough
economy. You don't want a poor pitch to impede you ability to score financing for your
business. In fact, it's imperative to have a pitch and presentation that showcases your
idea, your potential, your market and your ability to provide investors with a return on
their investment.
Many small business owners write a business plan for no other reason than that they
want to have a clear picture of where they are going in the next year, or the next five
years. That is a very good reason to write a business plan, and it is something that every
business owner should do.
However, the business plan that you write for yourself, and the one that you write to
approach potential funders for your business are often two different things. In this
article, we look at what financiers look for in a business plan.
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Keep It Concise
Know What Makes Your Business Unique

43
Honesty
Hope for the Best, Plan for the Worst
Keep It Concise
When you’re an entrepreneur applying for business funding, it’s tempting to fall into the
trap of believing that your business plan needs to be a long, drawn out document, that
covers every minute detail of your idea, and contains a lot of what can only be termed
‘waffling.’
The truth could not be further from that idea. What you need to remember is that
financiers, whether they are bankers or angel investors, are probably very busy people.
They probably get at least a dozen (or more) plans like yours every week, and they
probably do not have the time to wade through dense tomes of information.
A good business plan covers the facts, but it is also concise. One could even say that
the art of creating a good business plan is in knowing what to include, and what to
leave out.
Know What Makes Your Business Unique
One of the main things that financiers are going to look for in your business plan is not
how well you spell, or how handy you are with Microsoft Word. It is going to be what
sets your business apart, and makes it unique.
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If you do not already know what your USP (Unique Selling Point) is, then you need to sit
down and figure it out, before you ever put pen to paper on your business plan. It is
that spark of creativity – that uniqueness – that financiers are looking for in your business
plan, so make sure it is there.
Honesty
There’s a tendency (among all entrepreneurs) when writing a business plan, to be

overly optimistic about sales and profits, and to underestimate costs, the time it will take
to break even, risk and competition.
One of the most important things you should make sure that your business plan is is
honest. Financiers are clever people, and they know a lot about business. If you try to
overestimate your chances of success, and downplay the risks, they will know. Even if
you get to the point where you actually pitch your idea, those discrepancies will be the
first things you are asked about.
It is better to make your business plan an objective and honest assessment of your
business, its potential, and the industry and market you are hoping to enter, than to be
dismissed as a dreamer.
Hope for the Best, Plan for the Worst
The final key factor that any financier will be looking at in your business plan is whether
you have spent enough time planning, and whether you have systems and plans in
place to make it through the rough patch those most new businesses go through.
They will be looking at your team, your marketing plan, the technologies, equipment,
and premises you are considering, and everything else. Make sure that you base all of
these on realistic, solid ideas and systems, and that you have the solutions to mitigate
potential risks.
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When it comes right down to it, there are two things any financier wants to see in a
business plan they are funding: a great idea and that you are the person to turn that
idea into a business. Make sure that you spend a lot of time planning, and bear these
tips in mind when you start writing your business plan, and you should end up with a
document that at the very least is read, and considered.
Tender to secure business for a new
3
venture
Learning Unit

CREDITS : 6
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Who runs tenders or bids?
1
Previously, all national government procurement (the obtaining of goods and

services) had to be done through the State Tender Board. The State Tender Board is
in the process of being dismantled and the provision of the Public Finance
Management Act (PFMA) No.1 of 1999, which repeals the State Tender Board Act, is
likely to become law in 2004.
The regulations to the State Tender Board Act of 1968 were amended in December
2003 so that the accounting officers of national departments can procure goods
and services in terms of the PFMA. Procurement can be done in both the old and
the new way until the State Tender Board Act is actually repealed.
Provincial Treasuries are in the process of carrying out similar processes, which will
lead to the dismantling of Provincial Tender Boards, and the empowering of
accounting officers in provincial departments. This whole process is called “the
implementation of supply chain management”. The National Treasury has issued
‘Practice Notes’ which national departments must follow to ensure uniformity in the
procurement process. Provincial Treasuries are empowered to issue additional
practice notes, which must not conflict with the national practice notes, for their
provinces. It is during this process that government began referring to tenders as
‘bids’
What is defined in a tender process?
2
What is defined in a tender process?

The tender process defines the following:
• Who is permitted to submit a tender
• What the tender is for
• What the conditions of the tender are that need to be fulfilled
• Legal terms and conditions
3 Outline the condition that is needed to be fulfilled
The conditions that need to be fulfilled will be in terms of:
75 | P a g e ALL COPY RIGHT RESERVED

• The product or service
• The price
• The delivery terms and project plan
• Contract duration

4 Briefly explain the financial viability
Financial viability
Tenders can be open or closed tenders. A closed tender only allows selected or
invited companies to respond to the tender. An open tender allows response from
any individual or company.
5 Fill in the missing words in column b
Column a column b
Step Process
Defining the tender strategy The organisation defines its aims, decides what is
needed, prepares the proposal and decides how the
tender exercise will be carried out.
Inviting tenders An invitation is made to suppliers to put in an offer or
tender. This is usually in response to an advert.
Sometimes a questionnaire needs to be completed
before tendering, supplying information on financial
status, experience and references. This enables
Evaluating the tenders The tenders
suppliers to are then evaluated
pre-qualify against
and help set standards.
to narrow down the
This process is where the tender is clarified before
tenders.
Awarding the tender acceptance
The contract is accepted and awarded to the supplier
contract whose bid offers the best value for money
Managing the contract Both parties involved work together according to the
specifications in the contract
Review and testing The supplier’s performance is checked and monitored
by the organisation. The need for a repeat of the
contract will be reviewed, and may be advertised
again.
6 How do you identify tender opportunities?

How do you identify tender opportunities?
As a supplier, your first step is to identify tenders that are appropriate to the goods or
services that your business can offer and provide. Some people feel that is it difficult
to find tenders and work for their business, however businesses that require goods or
services want you to find their tenders and they want you to respond. Thus, tenders
can usually be found in obvious places such as newspapers and trade publications
or magazines. Websites are a good place to start. If you have a list of businesses that
may need your services, log on to their websites to see is there is any further
information available. If they do not have any tenders available, they may very well
have place for you to leave your details in order for them to contact you when
tenders become available.
Most major businesses have web pages dedicated to tenders and business
opportunities. Daily newspapers are also well worth the look. There are usually a few
tender applications advertised and you may come across a few related to your
business industry.
Typically, you may need to download the relevant information and documents from
the business web page or contact the relevant person in order to arrange for them
to be e-mailed or posted to you. These documents are very important and the
tender process cannot go ahead without them as they contain very important
information. Sometimes you will need to register your intent to apply to the tender,
either by submitting a letter of intent or by attending a compulsory information
session where you will register.
SESSION 2.
Analyse tender documents for viability in the new venture context.
Learning Outcomes
• Appropriate tenders for own business are identified with reasons why they suit
own business.
• The presentation methods and tender submissions procedures are explained with
examples.
• The business activity levels within a specific tender are recognised and limitations
of own business capacity are specified in that context.
• The internal and external factors of human resources capacity that impact on a
specific tender are determined for own business.

Use your own understanding to demonstrate the analysing of
7 the tender documents
Analysing the tender documents

Only a very few of the tenders will be suited to your business. It would be a waste of
your time and effort to respond to every tender that you come across. Responding
to tenders can be time consuming and expensive. In order to make sure you do not
waste your time and money, you will need to analyse the tender to find out if it is a
viable tender opportunity.
When assessing the viability of the tender, focus on your target market and core
competencies. Many businesses have an outline with criteria that they assess in
order to decide whether to bid or not to bid. Meetings are usually held at regular
intervals to evaluate the viability of the business to deliver the tender on a technical
level, on a commercial level, on a legal level and on a logistical level. If, during
these meetings, it is evident that the business cannot deliver or realistically meet the
requirements, the decision is either made to withdraw from the process or to
continue but to partially comply with the requirements.
Essentially, in analysing the viability of the tender, you are examining the
requirements of the tender against the products or services you can supply. When
you evaluate the tender, you should short-list the essential ‘killer criteria’. Killer criteria
are used to dispose of tender applications that do not meet certain predefined
criteria so that the bulk of the responses are immediately eliminated.
South Africa’s killer criteria usually include items such as:
• Black Economic Empowerment
• Technical aspects of the client’s requirements that are considered non-
negotiable requirements.
• Acceptance of legal terms and conditions.
If you intend to respond to a tender, you should consider any killer criteria that may
be evaluated and make sure that your tender more than meets the requirements.
8 Discuss the cost, revenue and profit of a tender
The cost, revenue and profit of a tender

This is where the real work begins. You will discover that the tender evaluation
team’s sole purpose will be to get as much from you for as little as possible. Your
purpose is often the opposite. If you provide a pure commodity, your price is the
only differentiator. For any other goods or services, your task will be to convince the
client of the value of your solution at the price offered.
When a business issues a tender, they have a good idea what revenue should be
generated through the new goods and services. They also have an idea of what
profit they would like to achieve. PROFIT = REVENUE – COSTS.
To you, the price of the product or service you are tendering is revenue. From your
client’s perspective, your price represents a cost to them. You will be trying to
maximise your revenue while they are trying to minimise their costs. You ultimately
control the final price, as no business can force you to accept a price, however
being inflexible may cause you to lose the business.
The total cost of ownership or the life cycle costs are other terms often used in
tenders and for all practical purposes they mean the same thing. If a customer was
deciding to purchase some equipment, they will generate a profit and loss analysis
to understand implications of the purchase. Similarly for the tender evaluation team.
If they do not make the necessary calculations, they may make a serious error in
judgement and damage their business through this error. This may cost them their
jobs.
As a supplier, you also have input costs and fixed and variable costs. All businesses
strive to make a profit. When you price your tender, you will need to understand your
profit margin and how much can be added or subtracted without impacting your
profitability negatively.
How will the client pay if you are awarded the contract? This can impact heavily
onyour business.

9 Outline the options based on tender payment
Options could be:
• To pay in full, up front.
• To deposit deferred payments.
• To lease.

List and explain the internal factors that impact upon price
10
decision
Product
• Level of quality
• Differentiating product lines within organisation
• Stage of the product life cycle
• Product design
Promotion
• Coupons, rebates, discounts, etc
• Advertising
• Sales & negotiation
Distribution
• Distribution channels involved
• Traditional channels vs. direct via Internet
Cost
• What does it cost to produce, promote, and distribute the product?
• Break-even analysis
• Total Cost (TC) = Fixed Costs (FC) + Variable Costs (VC)
• Total Revenue (TR) = Price x Quantity Sold
• Break-even point is where TC = TR
• Additional sales beyond this point will result in profit (TR-TC)
• Break-even analysis example - Manufacturing tennis shoes
• FC = equipment, facility lease (R100,000)
• VC = wages, leather (R20 per shoe)
• 5,000 pairs of shoes produced and sold
• TC=100000 + (5000 x 20) = R200,000
• Price to break even at 5,000 shoes sold = R200,000 / 5,000 = R40 per pair
• What would the break-even price be for 10,000 pairs of shoes?
• Cost-plus pricing
• Building upon the break-even analysis, we can add a desired profit to the cost
side of the equation
• TC=FC +VC +desired profit
• Flat amount vs. percentage of costs
• Cost-minus pricing?

11 Outline the organizational objectives
Organizational objectives
• Income = achieving maximum profits
• Sales = maintaining or enhancing market share
• Competitive = meet, avoid, or undercut competitors
• Social concern
List and explain any 5 external factors that impact upon the
12
pricing decisions
External factors impacting upon pricing decisions
Competition Effect
You competitor’s actions have a huge influence on your pricing decisions.
Competitors will also react to your pricing decisions. It is important to monitor both
your competitor’s price levels and their reactions to your pricing moves. A
competitor might lower his prices to respond to you cutting your prices. The
competition can also launch a product that is similar to yours at a better price. This
method can be reversed, when you use the competitor’s prices as a guide for your
pricing. It is very important that you constantly collect information on your
competitor’s prices. Try to meet or beat your competition.
Cost Effect
The cost of raw material is often beyond your control, yet it is a factor that affects all
business.
The end benefit effect
How price sensitive are buyers? Will he/she cancel the tender if the price is above
the limits? How important is the product for the buyer.
The total expenditure effect
How significant are buyer’s expenditures in the product both in Rand terms and as a
share of their total budgets?
The price/quality effect
Is a prestige/neutrality/expertise image an important attribute of the product? Is the
product enhanced in value when its price excludes/includes some customers?
The sunk investment effect

Has the buyer of the products made complementary expenditures in anticipation of
its continued use? For how long are buyers locked in by those expenditures?
The unique value effect
Does the product have any unique attributes that differentiate it from competing
products? How much do buyers value those unique differentiating attributes?
The substitute awareness effect
What alternatives do buyers have (considering both competing brands and
competing products)? Are the buyers aware of the alternative suppliers or substitute
products?
The difficult comparison effect
How difficult is it for buyers to compare the offers of different suppliers? Can the
attributes of a product be determined by observation, or must the product be
purchased and consumed to learn what if offers? Are the prices of different suppliers
easily comparable or are they stated for different sizes and combinations that make
comparisons difficult?
• Cost-orientated pricing
13
• Cost-plus pricing
Cost-orientated pricing
Many small businesses determine their basic price based on their costs. The idea is
to set your price high enough to cover your costs and still make a profit (Van der
Walt et al., 1995)
Cost-plus pricing
Many small businesses use this method. Here you determine the cost of the
product and then add a set percentage to the cost for the profit margin. This
method is popular and easy to use.

Briefly explain the rate of return pricing
14
Rate of return pricing

This method is similar to the previous one but brings another aspect into the
calculation, namely the cost of investing your money into the business. The idea is to
set a price that gives you a certain rate of return on your total investment. This differs
from the cost-plus method, which gives you a certain profit margin per item sold.
15 What you need in order to use the rate of return pricing
To use this method you need:
➢ an estimate of the units that you will sell
➢ what each unit costs
➢ the total amount of money invested in making and selling
➢ the product the target rate of return that you want on your money
Briefly explain the following:
• Customer orientated pricing
• Backward pricing
• Prestige pricing
• Odd-number pricing
16 • Price lines
• Bundle pricing
• Leader pricing
• Expenses and revenues
• Expenses
• Expenses prepaid
Customer orientated pricing

It is setting a price that is perceived by customers to be of value relative to what
they get for the price (Van Der Walt et al., 1995:490)
Backward pricing
Estimation of the price that customers will be willing to pay
Prestige pricing
This method shows the quality or prestige of a product.
Odd-number pricing
Using prices ending in odd numbers or under a round figure e.g. R2.99 instead of
R3.00.

Price lines
Use only a few prices for each of your product lines. E.g. economy line, value line,
high quality line
Skimming and penetration pricing
When introducing a new product to the market you can use the skimming approach
– price your product or service fairly high to recover your investment quickly or the
penetration approach – Price your product relatively low. You will do this to break
into new markets.
Bundle pricing
To combine two or more products at the same price; It is also a good way to
introduce new products.
Leader pricing
This is when the business owner lowers the price on a popular product to attract
more customers to the store. Although the business earns lower profit margins on the
products, customers might buy other products that will improve the profits.
Expenses and revenues
Expenses accrued refers to expenses that relate to the financial year under review
but which are not yet recorded in the general ledger because the invoices have not
been received by the last day of the financial year.
Expenses are decreases in economic benefits during the accounting period in the
form of outflows or depletions of assets or incurrences of liabilities that result in
decreases in equity, other than those relating to distributions to equity participants.
Expenses prepaid refer to expenses paid in the current financial year, of which a
portion relates to the current year and the balance to the next financial year(s).

17 What you need to do before you submit the tender form
Before submitting tender documents see to the following:
➢ Your tender is a professionally presented document. It gives the impression
that you are professional, reliable and efficient.
➢ Ensure documents are in the correct format.
➢ Allow sufficient time to complete the documents and submit on time.
➢ Remember that no fax/telex/electronic mail tender submissions will be
allowed.

➢ Ensure that the place where the tenders must be submitted is known well in
advance.
• Express your understanding about date and time of
18
submitting tenders
Adhere to dates and times of submitting tenders
It is important to have a clear understanding of the following concerning
dates and times.
Closing time: Means the date and the hour specified in the tender
documents for the receipt of tenders.
Timeliness: With respect to supplies, timeliness means delivering the
requisitioned supplies to the end user in the quantity and at the time necessary
for the end user’s purposes. With respect to services, timeliness means
performance at the time necessary for the end user’s purposes.
It is very important to adhere to dates and times, if it they are not adhered to
it will lead to disqualification of the tender.
Example of dates and times specified in a tender document: factors
regarding dates and times are underlined.
19 • Outline the rules of tender
The following rules of engagement will apply:
• The completed Tender documentation must be returned to SARS by no later

than 11h00 on 19/11/2009
• The Tender documentation must be sealed in an envelope on which the
following information is clearly indicated:
• The name and address of the tenderer;
• Tender number; and
• Closing date
20 What if you are unsuccessful?
What if you are unsuccessful?

If you are unsuccessful you may ask for feedback from the tender evaluation
team or business. They have to provide you with feedback if you have requested
this within 15 days. The request will have to be in writing.
If you are unsuccessful with one tender, do not be disheartened. This does not
mean that you will be unsuccessful on other tenders. Use the feedback to help
you with future bids.
Demonstrate the following based on business objectives :
• Price Negotiation
Better Offer
21 • Better than that
• Cards on the table
• Deadlines
• Expanding the pie
Price Negotiation
In negotiation, there are many tactics that you may meet or use. They can be
fair, foul or something in between, depending on the competitive or
collaborative style of the people involved and the seriousness of the outcomes.
Outlined below are few price negotiation techniques that can be used.
1. Better Offer
When the other person makes an offer, say that you have already received a
better offer from somebody else. If they ask what that offer is; then you may or
may not choose to tell them. If you do, then you have the opportunity to set a
lower limit that the other person knows that they cannot go below.
2. Better than that
When the other person makes an offer, say 'You'll have to do better than that!'.
You can accompany this with a saddened, shocked or disgusted look.
Then be quiet and wait for the “to do better”.
2. Cards on the table
Tell the other side exactly what you want or give them information that they did
not know before. Explain why you are doing this, for example is because you trust
them or because you are in a hurry.
3. Deadlines

Set a deadline by which the other person has to decide or act. Make it clear that
this is an absolute time by which they must do what you want them to do.
As the deadline approaches, increase the emotional atmosphere, talking more
about what will happen if the deadline is missed. This may be specific and
threatening actions or vague and disturbing hints. Use things which cannot be
challenged, such as contract completion dates, demands made by senior
people and so on.
5. Expanding the pie
Change the frame of the negotiation from a zero-sum, win-lose game to a win-
win scenario where both sides can benefit more by working together on mutual
benefits.
Demonstrate the direct costs and indirect costs
22
Direct Costs
Direct costs can be traced directly to a cost object such as a product or a
department. In other words, direct costs do not have to be allocated to a
product, department, or other cost object.
For example, if a company produces artisan furniture, the cost of the wood and
the cost of the craftsperson are direct costs—they are clearly traceable to the
production department and to each item produced—no allocation was
needed. On the other hand, the rent of the building that houses the production
area, warehouse, and office is not a direct cost of either the production
department or the items produced. The rent is an indirect cost—an indirect cost
of operating the production department and an indirect cost of crafting the
product.
To calculate the total cost of the production department or to calculate each
product’s total cost, it is necessary to allocate some of the rent (and other
indirect costs) to the department and to the product.
Indirect Costs
Indirect costs are business expenses that are not directly related to a particular
product or function within the general operation. Costs of this type tend to have

an impact on the overall operation of the business, making it very difficult to
charge the costs to a specific department or associate them with one function.
Costs of this type are sometimes referred to as overhead, a term that helps to
describe the broad application of these costs.
There are many examples of indirect costs that occur in both small and large
businesses. General supplies for the administration of the business are one
example. Items such as paper, pens, and other essentials that are utilized in the
record keeping and general clerical functions of each department are often
classified as an indirect cost. In like manner, services such as auditing the
accounting books or the preparation of legal documents are expenses that
impact the entire operation and are usually considered indirect in nature.
Several of the expenses related to the upkeep and maintenance of business
facilities are considered indirect costs. Utilities such as electricity, water, and
Internet access are expenses that benefit the business in general and thus are
classified as overhead expenses. In like manner, the cost of renting or leasing
business space is also part of the overhead, making it an indirect cost.
There are examples of what may appear to be an indirect cost actually being a
direct cost. One example has to do with employee salaries. When the employees
are performing their usual functions, they are benefiting the business as a whole;
their wages and salaries are considered indirect costs. However, if those same
employees are assigned to a specific project that is the sole focus of their
workday for a period of several days or weeks, their wages or salaries can be
considered a direct cost, with that cost directly applied to that project.
Companies in different parts of the world handle the documentation of indirect
cost allocation differently. Some choose to create a general line item that
accounts for all indirect costs. Others choose to create a line item in the budgets
of each department and divide the overhead among them equally. Because
the revenue arms of many national governments provide specific instructions on
how to classify an expenses as direct or indirect, companies operating within a
specific jurisdiction will adjust their classification of direct and indirect costs to
comply with those instructions.

Research the viability of new venture
4
ideas/opportunities
Unit

CREDITS : 5
SESSION 1.
Identify and assess own business ideas/opportunities for a
new venture.

• Express your understanding about how to identify
1
business
With the growing unemployment rate, many people are forced to find
alternative methods to supplement their diminishing income. Many of these
people decide to start their own business. Their reasons behind this decision may
vary. Some prefer the idea of being independent and not working for a boss,
while others like the sense of achievement by taking the risk in creating a
successful small business. Owning your own business also allows you to be
creative, which is not always possible when working for a boss with different

ideas. Other people are attracted to the idea because of the profits they
predict.
However, owning your own business also has various risks. It requires hard work
and sacrifices. The demands of owning your own business may isolate you from
family and friends. There may also be added pressure for you to achieve your
goals and ambitions, which causes added stress
2 • Outline the 5 uncontrollable factors that cause the
small business to fail
1. Discrimination against small businesses. Due to the limited access to resources

such as finance, expertise and raw materials, small businesses are often
discriminated against. Also, the small business often ends up paying more for
goods and services and has higher interest rates because they do not have the
same bargaining power as larger businesses.
2. Change in the economic climate. Due to the fact that small businesses do
not have easy access to resources, they will be hit harder by an economic
downward trend when sources of finance are limited and small businesses are
forced to pay higher interest rates.
3. Change in the political environment. Small businesses are also sensitive to
government policies, laws and regulations.
4. Changes in consumer behaviour. The needs and wants of humans are always
changing. Their behaviour, preferences and demands change with time and if
the small business does not keep up-to-date with these changes, it can have a
severe impact on the business.

Demonstrate the following controllable factors that couse
small business to fail
3 • Technical skills
• Financial skills
• Marketing skills
1. Technical skills. As a small business grows, greater demands are made on the
technical skills of small businesses. Where it was previously easy for them to

manage the business with their limited skills, more difficult problems are exposed
that require better technical skills. Sooner or later the business may have a
situation that cannot be handled and may cause the small business to fail.
2. Financial skills. Inadequate financial skills may result in cash flow problems
where the small business does not have enough cash to cover their obligations.
Cash flow problems are mostly caused by poor cash management and
insufficient initial capital. This problem can be eliminated by using accurate cash-
flow forecasts. Another financial problem is inadequate financial control such as
failure to budget for inflation or keeping control over unnecessary expenses.
3. Marketing skills. Poor market research and marketing skills will hinder the ability
to sell products
• Outline the three phases of establishing your own small
4
business.
1. The idea phase. Here you identify an opportunity in the business environment.
This phase challenges you to formulate a business idea that is innovative as well
as an opportunity that will change people’s values or needs.
2. The planning phase. Here, the viability of the idea is investigated and a
business plan is drawn up.
3. The implementation phase. Here the business plan is implemented and the
opportunity is fully utilised with an objective of making a profit.
5 Discuss the difference between ideas and opportunities
The difference between ideas and opportunities
A small business idea is not necessarily a small business opportunity. All
opportunities are based on ideas, however all ideas do not necessarily represent
opportunities. Opportunities are basically ideas that work, that are successful and
profitable. They are ideas that can be converted into a successful business
enterprise.
An opportunity is thus an idea with the following:
• It is based on a product or service that will satisfy a need or add value.
• It is possible to enter the market and the entrepreneur is able to organise
people and tasks to achieve the goals and objectives.
• The business gains a competitive advantage using the opportunity.

• The opportunity is viable because if offers significant potential for growth and
profit.
Demonstrate the following based on the sources of
information for ideas and opportunities:
• Trade shows
• Customers
6
• Distributors & wholesalers
• Networking
• Product licensing
• Reading
• Trade shows: are an excellent place to examine and learn about all the
different products and services and potential competitors. You also have the
opportunity of talking to sales representatives, and if you are lucky enough, you
may be able to talk to someone who knows about the market trends in the
industry.
• Customers: By contacting, and staying in contact with customers you will
determine the individual needs and whether these are currently being met. If
not, you may have identified an opportunity.
• Distributors & wholesalers: are usually able to give you more in-depth
information about existing products as well as improvements that customers are
longing for. This is ideal, as you could learn more about your potential
competitors as well as identify a unique opportunity.
• Networking: is where you make contact with other entrepreneurs as a
function or a meeting. Here you can exchange ideas and just chat about your
industry in general. Formal networking meetings have started to emerge.
• Product licensing: By reading various product-licensing publications, you will
be exposed to a number of ideas and opportunities. Businesses and universities
research and develop ‘ideas’ that may not be successful in a business, however
if you are sharp enough, you may figure out a few changes to make that idea a
business opportunity. These universities and research corporations usually publish
their findings in a journal.
• Reading: is an extremely important point. By reading, you gain knowledge of
your business environment, as well as knowledge of other sectors. You will be

able to utilise facts that you have learnt through your reading in other industries,
in your business and your industry. This is called lateral thinking. You utilise an idea
or concept from one industry in another entirely different industry.
• List and explain the procedure that is used when you
7
making the decision for the small business ideas
The following procedure is usually used when a decision needs to be made on a
small business idea.
1. Informal discussion of ideas. The business ideas are discussed informally with
family friends and other more knowledgeable people to test their acceptability.
2. Eliminating ideas. During these informal discussions, certain ideas are
eliminated, as they certainly will not work. This helps to reduce a long list of ideas
to a few possibilities.
3. Weighing up ideas against personal objectives. The remaining ideas are
weighed up against personal objectives of the entrepreneur.
4. Drawing up a list of priorities. A list of priorities is drawn up setting out the ideas
from the most important to the least important.
5. Combining ideas. Sometimes two or more ideas from the list are combined to
create a better idea. Remember to take into account your interests, skills and
abilities when choosing an idea or a number of ideas.
6. Choosing a suitable idea. If more than one person needs to decide on the
business idea, the following techniques may be used:
8 discuss the group decision-making
Group decision-making
Generating ideas in groups is often more effective and there are three forms of
group decision-making techniques.
• Majority wins scheme is usually used more frequently than other methods.
Here, the group’s decision must have the support of the majority of the group
members. v' Truth wins scheme provides comprehensive information and
opinions, which are discussed. The group as a whole comes to an objective
decision.
• Two-thirds majority scheme requires two-thirds majority of the group to reach
an agreement about a matter before a decision is made.

9 • Briefly explain Delphi techique
Delphi technique
This is another group decision-making technique however; studies show that it
produces very accurate results. A group is formed consisting of experts and non-
experts, but members do not have physical contact with one another. Each
member of the group must make an anonymous forecast or provide some input
regarding the idea. Each member then receives the combined feedback of all
other members’ inputs. Inputs are again offered on the feedback received. This
process is repeated until all the members of the group reach a consensus.
This tends to be the most accurate technique due to the members inputs staying
anonymous. This allows more flexibility and there is no fear of failure. A
disadvantage is the length of time it takes to reach consensus.
A few factors that need to be considered when analysing the viability of an idea
or opportunity are:
• The expected sales volume from the product or service.
• The market share of the product or service. Is this opportunity part of a large
market share with many competitors, or is it different.
• The extent of independence from outside control. Are there many outside
factors, such as government regulations and laws that govern your idea or
opportunity? This may hinder the success of your business.
10 Outline the list of Criteria for choosing a business
List of Criteria for choosing a business
Need for product or service
Market Size
Target Population (client profile) v' Quality
Cost per job/product or service v' Potential for profit
Empowerment
Number of jobs created

SESSION 2.
Analyse the viability of a selected idea/opportunity
against specific screening variables.

Demonstrate the difference between Personal Analysis and
11
Market Analysis
Personal Analysis
Once you have determined which industry your idea is categorised into, start to
analyse your own skills and abilities. Draw up a personal profile. You will realise this
is a very helpful tool. Many businesses do not make it past the first few months,
due to inadequate planning. Assessing your own strengths and weaknesses, and
your expectations, will help you to focus your attention on influencing factors in
the business, as well as why you want to attempt to run your own business. Any
motivation behind your ideas will be uncovered, which will also help you to
decide which idea is more appropriate.
Once you have analysed your strengths and weaknesses, you can now start to
analyse your potential market. This gives you a realistic view to the strengths and
weaknesses of your business, which allows you to capitalize on your strengths
while working on your weaknesses.
Market Analysis
Performing a market analysis will help you to understand your customer and their
needs, which will be a crucial advantage in generating cash flow. It will allow
you to position your business for greater exposure to your target market by giving
you important information on market trends and competitor’s pricing and
marketing strategies. By staying informed of market trends, you will be able to
predict any changes or outcomes, without spending important capital
unnecessarily.
In order to perform a market analysis, you will need to research and conduct a
PEST and SWOT analysis. I am sure you have come across these techniques
before, however we will revise them quickly. These techniques should form the

starting point for any research you intend on performing, as these techniques
uncover vital information that can be used for almost any problem.
12 Outline the environment which researched by pest analysis
PEST analysis researches the following environments:
The political environment
The economic environment
The social environment
The technological environment
13 • What does the SWOT analysis analyses
A SWOT analysis analyses the:
Strengths
Weaknesses
Opportunities
Threats
Demonstrate the following based on the location :
• Costs.
• Security
14 • Taxes
• Availability
• Infrastructure
• Personal Considerations
Costs. A location at the local shopping mall can be more costly.
Security. Certain areas in the city are unsafe, and these are generally avoided
so as to not pose any risk to the business and its patrons.
Taxes. In some cases you may find yourself paying higher taxes, which forces
you to sell your products and services at a higher price.
Availability. Think about your long-term decisions and how the location choice
may affect these long-term dreams. Do not choose a location without
considering your goals. If you dream of expanding, can you build onto the
current location?

Infrastructure. Think about your surrounding infrastructure. Are there suppliers
nearby? Is there enough support for your business?
Personal Considerations. How close is the location to your home and other
commitments?
15 Discuss the assessing the competion
Assessing the competition
One critical step in marketing -- assessing your competition -- merits your regular
attention. Why? First, because there is more competition than you imagine, even
though you do not see it from others who sell what you sell (more on this later).
Second, because we live in a financial environment of accelerating change,
keeping up with those changes means knowing who else also keeps up, who
leads the innovation process, and what innovations make the most profits. Third,
because if you understand your competition, you will be better able to
understand your clients' and prospects' questions and concerns as they compare
opportunities in the course of making their buying decisions
The best way to assess your competition is to periodically ask yourself the right
questions about what is going on in your marketplace and target markets.

Outline the things that should get you started on the
16
competion
The following ones should get you started.
What companies and products do I keep running into in competitive situations
and in the buyer's thinking?
Do I really understand these competing products?
What are these products' real strengths?
What are their real weaknesses?
What are my competitive advantages?
How do I demonstrate the advantages of buying from me?
Are these competitors worth the effort to market against?
How do I market against them?
Where do I need to improve to be more competitive?
Do I really want to compete, or would I rather be the

Competition and set the standard?
17 Demonstrate the constraints of trade
Constraints of Trade
There are factors that may limit the trade of a business entrepreneur. These
constraints need to be researched and addressed in a manner that solutions are
identified to avoid or solve these constraints.
Constraints of information is often discovered during the market research
process, where information is either not readily available, or it is inaccurate.
Inadequate management is not good for the ultimate growth of the business.
In many cases, managers feel that
Entering certain markets are too much work, and they are not even willing to
research the potential.
Financing and expenditure. Lack of sufficient funds to start or sustain the business
is a serious issue and needs to be addressed. Also take into consideration the
high cost of credit.
A lack of skilled labour.
Political and economic unrest could result in high inflation and unemployment.
Communication problems across cultural barriers.
High transportation and insurance costs.
Lack of reliability in your suppliers.
All of the above listed factors are constraints of trade and affect your business.
Solutions need to be found for these constraints, and the many more constraints
that have not been listed. A brainstorming session is a good technique to use.
SESSION 3.
Research the potential of a particular idea/opportunity as
a new venture.

• Market Feasibility Study
18
• Product Description
Market Feasibility Study

Importance of a market feasibility study
Definition of a feasibility study: This is when you analyse the market to find out if
your idea will be practical, suitable and profitable.
Every business should care about its market. The word 'market' refers to people
who are customers, their money and their need to exchange money for products
and services. By creating your business around satisfying the needs of customers,
you can find out if your business is a feasible marketing opportunity. Your
customers are the reason for being in business.
Product Description
A product or a service is something that exists to satisfy the need of a customer.
Customers do not buy products or services; they buy the benefits that those
products or services offer.
For example:
They buy clean rooms, not the polish; They buy security, not the burglar bars;
They buy experience, not the destination.
An important part of marketing is creating new products. Business survival
depends on new product innovations. By being creative and flexible, an
entrepreneur can provide a better service than his or her competitors. There are
various ways that you can adapt and *vary your product or service to suit the
needs of your customers.
Some ways to adapt and vary your products and services are:
If you make T-shirts for tourists, you can vary the colour and quality of the
material you use. You can also vary the design and style of the shirts.
You can vary your type of packaging.
If you provide a tour operator service, you can vary the quality of your routes by
having low cost routes and high cost routes.
If you make curious, you should constantly display new designs in your showroom.
The travel agents should have regular promotions that offer, for example, special
product combinations or price discounts.
19 • List and explain the types of products
Products

All products can be divided into broad categories namely:
Industrial products
Commercial products Service products
Consumer products Shopping products Specialty products
Convenience products Staple products
Impulse products
Emergency products
Industrial Products
Industrial products are used to produce other products. For example, steel is used
to produce machinery and equipment.
Commercial Products
Commercial products are products that are not used directly in the production
of other products, but assist in that production, for example computers, filing
cabinets, office supplies.
Consumer Products
Consumers buy consumer products to eat, drink or use. Consumer products are
divided into three main groups: convenience products; shopping products; and
specialty products. Often, consumer products can belong to more than one of
these groups because consumers use products for more than one purpose and
have a variety of places where they can buy them.
Convenience Products
These are products that consumers (users of products or services) can easily buy
at a variety of shops. They are low-priced and do not rely on strong brand name
recognition. They are products like: Staple products that are bought and used
often, for example bread, potatoes, coffee. Staple services may be dry-cleaning,
garbage collection and car services.
Impulse Products
Impulse products are products that shoppers buy on impulse at that moment.
They are often displayed at point of purchase areas (This is where you pay at a
supermarket or shop) in supermarkets. Impulse products are products like
chocolates, gifts, curious and
magazines.
Emergency Products

Emergency products are bought when consumers need them urgently, for
example medicines and bandages. Emergency services are those provided by a
security company late at night or by an ambulance service.
Shopping Products
Shopping products are purchased only after customers compare a variety of
similar and competitive products. Consumers generally compare price, style,
quality or service provided by the seller.
Specialty Products
These are identified by strong brand names. They have special features that
make them different from competitors' products. Some examples of speciality
clothing products are 'O’Niel', 'Reactor' and 'Nike'.
Services Products
Services are activities aimed at satisfying the needs of consumers and industrial
users. They have nothing to do with the selling of products or other services.
Examples of different kinds of services are:
Accommodation services - renting of rooms, flats, houses, etc.
Household services - repair services for household appliances like fridges and
TV's, cleaning of houses, etc.
Recreational services - cinemas, holiday resorts, theatres, sport clubs, etc
Personal services - beauticians, dry cleaners, barbers, hair salons, etc.
Professional services - tourist guides, travel agents, advertising consultants, etc.
Financial services - travel insurance, commercial banks, foreign exchange, etc.
20 Outline the procedure to propose new venture
Produce a preliminary evaluation of the proposed new venture
When you have identified your market, study that market and find answers to the
following questions:
How they make their buying decisions
What the demographic factors of that specific market are.
Some of the relevant demographic factors to consider are:
Your customers' occupation; Are your customers professional people like
managers, or are they artisans like bricklayers, welders, etc?

What are your customers” location? This means where do they live or work? It is
important for customers to be able to get to your business easily to buy your
products or services.
What is the average age of your customers?
What gender are your customers? Male or female? Who does the shopping?
What is their education level? This influences factors such as their choice of style,
fashion and the acceptance of the pricing of certain products.
Can you reach your clients and how?
Do they have access to mass media or the internet?
• Express your understanding about the following:
• Marketing information
• Collection of data
• Methods of collecting primary data
• Developing the questionnaire
21
• Collecting Secondary Data
• Assess the business' strengths and weaknesses
• The external environment
• The internal environment
•
Marketing information
Entrepreneurs need to research their business ideas, and when in business,
continue to get information to stay competitive.
Before offering any products, a business must do a market survey (examination,
inspection or study). The survey helps to find out if sales goals can be met and
helps with financial planning.
A new business in a new area may need to do an extensive (large, in depth,
expansive, thorough and / or comprehensive) market survey. However, a new
store in a well-established shopping centre where extensive market surveys have
already been completed may only need extensive advertising to introduce its
business. When doing a survey, you may need to use specialists in market
research to give you market information for the business you want to start. These
specialists can also help by giving you a market potential and sales forecast (This

is a calculation that shows what you can expect in terms of number of customers
and sales) and action plan on how to serve your market.
Your general market survey should give you answers to the following questions:
The size of the market
If the market is growing
What products or services the market wants
Why the market wants these products or services
How the market buys these products or services
What is the geographical distribution of the market
What price the market will pay for these products or services What market
share can you expect
How to give the market the necessary information about your products or
services
Collection of data
Secondary data
This is information that has been researched by another person, business or
organisation. You can read the results of this research in reports, newspapers,
magazines, etc.
Primary data
This is information that entrepreneurs collect through their own research efforts.
Some ways of collecting primary data is by interviews, your own experience,
studying, doing surveys and observation studies.
The information you collected about ideas for business opportunities is an
example of primary data.
Methods of collecting primary data
a) Surveys
Surveys involve getting information from specific people by using direct
questioning or by using indirect questioning through a questionnaire.
Opinions - For example, "Which butter do you prefer?"
Motives - For example, "Why do you go to Maputo every year for your
holiday?"
There are various ways to make contact with people for a research survey.
Telephone surveys
Postal surveys

Personal surveys
Traffic counts
Experimentation
Observation
Test marketing
Developing the questionnaire
When you design a questionnaire give careful attention to the type of questions
asked, the words used, and the order in which the questions are asked.
The questions must be easy to understand and be relevant and useful for the
study.
You can use two types of questions:
Open questions - respondents answer using their own words
Closed questions - you give respondents a choice of selected answers
Collecting Secondary Data
Secondary data is data that has already been collected by someone else, but
the entrepreneur needs to search for it. Valuable sources of secondary data can
be magazines, the internet, census reports, trade publications, advertising media,
trade associations and market research companies' surveys. Although secondary
data costs very little to collect, it is often old information that is outdated.
Assess the business' strengths and weaknesses
To develop a successful, competitive business, entrepreneurs must research the
business environment for opportunities and threats, as well as determine the
strengths and weaknesses of their business. By examining the external
environment, entrepreneurs can discover opportunities and threats, and by
analysing their internal business environment, they can determine the strengths
and weaknesses of their business.
The external environment
By investigating and analysing the total market environment entrepreneurs can
identify opportunities and threats that can have an influence on the success of
their business.
The internal environment
After examining the opportunities and threats in the external environment,
analyse the internal environment to find the strengths and weaknesses of your
own business.

SESSION 4.
Analyse a range of risks associated with a new venture.

22 • List the types of risk
Types of Risk
There are many types of risk and these can be grouped into four main
categories.
1. Economic Risk
2. Performance Risk
3. Physical Risk
4. Psychological Risk.
23 • List 4 factors of risk
1. Perils
2. Hazards
3. Threats
4. Vulnerabilities
24 Demonstrate the factors that cause loss?
What factors cause loss?
A loss in business can be caused by a number of principle factors. Firstly, poor
planning can be a major issue. Planning is highly important in order to minimise
risk and damage. Whether it is financial planning and budgeting in order to
ensure that you have sufficient funds for the year, or planning to take out
insurance against fire and flood damage. Without sufficient planning, you
cannot expect your business to avoid the risk or loss or damage.
Inadequate management is another factor. Using unsuitable policies and
procedures, poor supervision and training and lack of communication can only
result in damage to some area of your business. Whether it is damage to your

staff or to your property or even to your image as a business owner, this is all a loss
to the business.
Individual team members and workers can also cause damage through their
individual mistakes, poor attention to detail, improper procedures, poor attitudes
and work ethics. This could be due to poor training and supervision, or it could be
related to personal problems. Either way, this type of attitude is harmful to your
business, and in some cases can also be harmful to colleagues and co-workers.
25 How do we analyse risk?
How do we analyse risk?
1. Outline what exactly you are analysing. Do you want a general outline of
what risks your business may face? Would you prefer a detailed analysis of every
potential risk? Assess the nature of your business and any influences, whether
external or internal factors. Assess your target market, the location of your
business and any other environmental factors. This is a great opportunity to use
your SWOT and PEST analysis. From these assessments, you will be able to identify
various factors that may pose a risk to your business.
Rank these risks or divide them into the following fields: v' Financial risks – theft,
legal action, loss of profit. v' Management risks – poor management.
v' Health and safety risks – accidents, crime. v' Environmental risks – natural
disasters.
By grouping risks into these fields, it allows you to formulate specific strategies to
manage these risks. You should attempt to estimate the potential impact of
various risks occurring. The risk with the highest potential degree of loss should be
concentrated on when developing the risk management strategies.
Finally, recommend strategies to adopt in order to reduce risk, prevent loss and
ensure that your business is a success. These recommendations should define the
action to be taken, when this needs to be performed, who needs to take this
action and who is accountable for this strategy.
26 List and explain four types of risk manegement
There are four risk management strategies.
Avoiding

Reducing
Anticipating
Transferring / Spreading
Avoiding risk required actions to be taken in order to stay away from risky
situations. In most cases these actions can be impractical, however in the
business environment you can avoid risk by participating in thoughtful business
practices. For example, if you wish to decrease the risk of bad debts in your
business, why not participate in more thorough credit checks before awarding
credit to clients and customers.
Risk reducing strategies are a better option. These strategies incorporate an extra
degree of safety into the situation. An example of this is common safety
practices such as the installation of fire extinguishers.
Anticipating risk is the element of knowledge that risk still exists in the business. The
business owner therefore decides to set aside an amount of money to cover the
loss or damage that may occur from any risk. This is a self-insurance fund.
Transferring or spreading risk will help when a self-insurance fund is not large
enough to cover the degree of loss. An insurance fund is an example of this,
where the individual or business transfers the risks or costs to an insurance
company, who in-turn will help to spread the financial burden of the risk.

27 List and explain the four types of insurance
Types of insurance
There are four major types of insurance for your business and your employees.
These are:
Property and casualty insurance.
Life and disability insurance.
Health insurance and worker’s compensation coverage.
Liability insurance.
Property and casualty insurance covers tangibles such as equipment, machinery,
buildings and inventory.
Life insurance protects families and businesses against a loss of income in the
event of a death. Disability cover is also available to protect individuals in the
event of often expensive disabilities.

Health insurance provides health care for business owners and their employees.
Worker’s compensation covers employees who may become sick as a result of
their job.
Liability insurance protects against losses from accidents and injuries, either as a
result of consumers using a product or service, or errors made by employees.
Employment practice liability insurance protects against any employment
discrimination claims such as sexual harassment and violations of legislation.
28 Discuss the advantages and disadvantages of insurance

Advantages and disadvantages of insurance
The advantages of insurance include the following:
It covers the insured against any possible loss they, or their business, may suffer.
It provides security to employers, covering them against any damage that may
arise from irresponsible behaviour by employees during working hours. It
provides greater peace of mind.
Life insurance policies may be offered as security.
Benefits are calculated from the payment of the first premium.
Certain policies can serve as a form of compulsory saving.
Insurance can provide for future events such as retirement.
Insurance can provide financially for the possibility of disability or death.
There are no real disadvantages to insurance, except that it costs regular
monetary payments. In order to make sure you are making the right choice
when it comes to insuring your business, do as much research as possible. Discuss
insurance with existing business owners who may not be competition, but would
provide insight on how they run their business with insurance and risk
management strategies. Research the industry you are in to analyse the various
risks in your business. Sign up for short courses to stay on-top of any changes in
your industry. By thinking ahead and planning for any risks, you will ensure that
your business will run long into the future without any ‘un-for-seen’ circumstances
occurring.

SESSION 5.
Evaluate new venture ideas/opportunities based on
research findings.

29 List the technical evaluation
Technical evaluation
• Innovative product, not “me too”
• Competitive advantages, features, and benefits
• Barriers to competitive entry (hard to imitate)
• High quality
• Third-party test results
• Ability to deliver a consistent, quality product on time
• Spin-off, different market applications
• Environmentally safe
• No safety/health risks, regulatory control
30 List the market evaluation
Market evaluation
• Competitive advantage
• “USP”: Unique Selling Proposition Differentiate on quality, service, or innovation
• Market Pull vs. Market Push
• Solves customer problems
• Sunrise vs. Sunset market
• Significant market niche
• Market plan/strategy
• Distribution channels available
• Repeat sales likely
• Year-round vs. Seasonal demand
31 Preliminary evaluation
New Venture Concept
Preliminary evaluation

the steps involved in evaluating and choosing a new venture not only include
assessing the potential to generate the desired level of profit in the desired time
frame but also the preliminary assessment of both personal and project
considerations.
Prior to evaluating the financial feasibility of your business idea you need to ask
yourself the following questions:
• Why do I want to start this new venture?
• What do I want to accomplish by starting this new venture? (be specific)
• Short-term (less than 1 year)
• Intermediate (1 to 3 years)
• Long-term (3 to 5 years)
• What is (was) my family's reaction? The decision to start a new venture affects
the whole family therefore it is important to have their input.
• How will my lifestyle and my family's lifestyle be altered?
• Do I have the necessary skills required to develop and operate this new
venture? If no, what skills do I need to develop? Should I hire someone who
possess the skills I am lacking?
New Venture Concept
Once you have evaluated your personal and family commitment and your
ability to enter a new venture you need to evaluate the potential success of it. It
is critical for you to be able to explain clearly and concisely what your
product/service is. If you have difficulty explaining your product/service to others
your new venture idea needs to be refined. A well-defined idea will ensure your
feasibility study is accurate and contains all of the information required to make
a well informed decision.
Briefly describe the business you want to enter.
List the products and/or services you want to sell.
List who will use your product/services.

Unit 5 UNIT STANDARD NUMBER : 263356
CREDITS : 5
SESSION 1.
Entrepreneurship is discussed in terms of employment
opportunities.

Express your understanding about the distinction between an
1
entrepreneur and entrepreneurship
The distinction between an entrepreneur and and entrepreneurships
An intrapreneur is someone who does not have a desire to establish his/her own
enterprise, but who wishes to realise his/her potential for entrepreneurship within an
existing enterprise.
The existing enterprise can survive only if it learns to promote intrapreneurship. The
large enterprise has the capacity for entrepreneurship, since it already has the
necessary resources, especially human resources, and management skills (a
management team has already been established). Any enterprise has
entrepreneurial potential. However this must be pursued consciously. Certain
elements in an enterprise are conducive to entrepreneurship. The enterprise can
also take certain steps to encourage entrepreneurships in the enterprise.

Again, without becoming embroiled in the debate on what is meant by the
concepts ‘entrepreneur’ and ‘entrepreneurship’ we can say that entrepreneurship is
called entrepreneurships in an existing enterprise. An entrepreneur is someone who
does not have the need to start an independent enterprise, but wishes to express his
or her entrepreneurial abilities in an existing enterprise. In other words, an
entrepreneur is a person who prefers the advantage of an existing enterprise (such
as a regular salary and available resources) to the uncertainty associated with
starting his or her own enterprise.
The importance of intrapreneurship

The modern-day enterprise especially the large enterprise will simply not be able to
survive periods of drastic change and innovation unless it acquires an
entrepreneurial predisposition. Not only is it in the best interests of the enterprise to
learn how to apply entrepreneurship within the enterprise, but the enterprise also has
a social responsibility to do this.
It is essential for intrapreneurship to exist in South African enterprises, particularly in
view of the following realities in the micro and macro environments:
• The South African economy is currently under great pressure (as is the global
economy). By means of intrapreneurship the existing enterprise can make a
positive contribution to the economic welfare of the country.
• There are social threats in the form of unemployment and financial instability.
These threats can be effectively addressed through intrapreneurship.
• Technological developments are increasing at a tremendous rate. In order to
remain competitive, an enterprise must keep pace with these developments.
• Productivity is no longer concerned with the effectiveness of the enterprise’s
activities but also with satisfying the client’s needs by means of available
resources. This challenge can be effectively addressed by intrapreneurship.
Express your understanding about the entrepreneurship in the
2
new small business
Entrepreneurship in the new small business enterprise
Approximately 1000 job seekers enter the labour market every day. Of these, only
100 will find work in the formal sector. This situation is going to change in the short
term. On the contrary, it will become even more difficult to create job opportunities

in the future. The reasons for this are South Africa’s weakened competitive position
on the world market. Creating job opportunities in the formal sector in South Africa
will become increasingly difficult in the future because of various factors. Examples
of these factors are the cost of the transition between governments and the inability
of the South African economy to provide sufficient job opportunities thus far. Many
South Africans will have to turn to the small business sector to create work for
themselves.
Steadily rising population growth and increasing urbanisation problems are added
complications. In this regard, the entrepreneur can make a valuable contribution by
establishing his or her own enterprise.
The economically active population consists of the informal sector, the formal sector,
the unemployed sector and a subsistence sector. The formal sector, in turn can be
divided into small business enterprises and large business enterprises.
Entrepreneurship and the establishment of an informal small business enterprise
For hundreds of thousands of South Africans the informal sector is the easiest starting
point in the stimulating world of the entrepreneur. The informal business sector offers
many people (who have little money or business training and no hope of finding
work in the formal sector) not only a means of survival, but also a dream of ultimate
success. The enterprise in the informal sector plays a very important role in that it
contributes to job creation, helps to build entrepreneurial skill, serves to suppress
salary and wage inflation and mobilises capital at grass roots level.
An enterprise in the informal sector is not a registered enterprise, and it can be
distinguished by one or more of the following criteria:
• Legal activities which are not reported for tax purposes v' Sometimes they break
the rules and regulations
• Mainly cash transactions take place
• Certain illegal activities take place
Demonstrate the following based on the principal reasons for
entering the informal sector in South Africa:
• Survival
3
• Realisation of entrepreneurial aptitude
• Other considerations

Survival
A large proportion of the entrants to the informal sector take this course as a way
to survive. Job opportunities in the formal sector are relatively scarce or non-
existent, while poor remuneration, staff reductions and the closure of enterprises
force people to turn to the informal sector. A lack of working experience and
training makes it difficult for people to enter the formal sector as employees.
Realisation of entrepreneurial aptitude
The desire to provide one’s own innovative product or service is a further reason
for entering the informal sector. The entrepreneur regards the informal enterprise
as an important starting point and training – school for the eventual
establishment of a formal employee
Other considerations, for example, the high tax rates in South Africa. As a result of
South Africa’s high tax rates, people need to supplement their disposable
personal income by entering the informal sector. The informal entrants to this
category are not motivated by survival or an entrepreneurial predisposition but
by insufficient wages and a desire to evade taxation.

Express your understanding about the following based on the
legal activities in the South African informal sector:
• Trading and Hawking
4
• Manufacturing services
• Transport services
• Other services
• Trading and Hawking These activities are mostly carried out by street vendors
and include the selling of fruit and vegetables, cooked food, flowers,
newspapers, clothing, meat, etc.
• Manufacturing services - include all informal activities which are aimed chiefly at
the manufacture of a product, for example the making of clothing, furniture and
shoes, and the construction of houses.
• Transport services Taxi drivers, minibus drivers, people who offer their cars to form
lift clubs and transport contractors are examples of people who are involved in
informal activities. These informal activities require relatively large capital inputs.

• Other services For e.g. Hairdressing, photographers, people who cultivate
agricultural products on a small scale, child minders, herbalists, and people
involved in small scale hiring, mechanics, garden workers, shebeens etc.

5 Outline the obstacles ranging that the entrepreneurs faced
Entrepreneurs in the informal sector are faced with many obstacles ranging from:
• Lack of suitable premises
• Lack of initial capital
• Lack of finance
• Lack of business skills and expertise
SESSION 2.
Describe the characteristics of a successful entrepreneur.

• Risk-taking
6
• Creativity and innovative ability
Risk-taking
Successful entrepreneurs take calculated risks. This means they evaluate
opportunities realistically. They are not inclined to gamble or rely on luck but they
understand that risk levels are too low usually suggesting limited profitability because
more people are prepared to enter the specific market. Having the courage to
exploit an opportunity is as important as being able to identify it in the first place.
Entrepreneurs usually focus on reducing their personal risk by the following methods:
v' Finding investors like family members or banks to provide finance:
v' Making arrangements with suppliers to provide goods on consignment means
suppliers provide the products but are paid only when the goods are sold. v'
Persuading suppliers of services and goods to accept special terms of payments.
Creativity and innovative ability

Creative thinking and innovative ability are fundamental to starting a new
enterprise. Creativity is needed to establish a business where nothing existed
previously. Adjusting or refining existing procedures or products, identifying
opportunities and solving problems all require creativity. Creativity is about new
ideas, innovation. Although entrepreneurs understand the importance of innovation,
they often view the risk and the investment required for the development of
innovative products or services as out of proportion to the profit potential. This
explains why owners of small businesses creatively adapt the innovations of their
competitors.
Use your own wards to express your understanding about the
following:
• Management skills and the use of advisors and / or
experts
7 • Customer service
• Market orientation
• The importance of quality and/or services
• Planning

Management skills and the use of advisors and / or experts
What is required for success in a specific enterprise is clear to the successful
entrepreneur. They also understand how they themselves can contribute to the
benefit of their enterprise. In addition they are aware of their personal limitations and
appoint appropriate staff, consultants, contractors or experts to address those issues.
Customer service
All successful entrepreneurs know who their competitors are, their strengths and
weaknesses, the quality of their products or services and their market share.
Market orientation
Identifying the target market, the needs and demands of the target market, and
how to meet those needs profitably are all important for the success of an
enterprise. Successful entrepreneurs position themselves by differentiating their
products and/ or services from those of their competitors.
The importance of quality and/or services

Entrepreneurs realise that value for money is important and that satisfied customers
will recommend their products and services to new clients.
Planning
A business plan ensures that the entrepreneur considers the most important issues
when setting up business. It also serves as a guide in the management of the
enterprise.
SESSION 3.
Develop individual entrepreneurial characteristics.

8 Preliminary evaluation
Explain the method of mind programming
Methods of mind programming
Your fear becomes the biggest hindrance in your path to success. So, if
entrepreneurship is what you are looking at you would need to work on yourself
to release your negative self-beliefs and build your confidence. The problem is
that with time our negative beliefs become like long held bad habits, which are
difficult to break. They get so firmly entrenched in our subconscious and we
eventually we accept as a part of our personalities. Therefore to get completely
rid of our negative beliefs we would need to look for a way to communicate with
the subconscious
9 Outline two methods of mind programming
The following are two methods of mind programming which can help you achieve
this goal:
• Visualization
• Affirmation
10 Discuss the team affirmation based on mind programming
Affirmation

Developing a positive mindset is one of the most powerful life strategies there is.
Using powerful positive thinking techniques, visualizations and positive affirmations, it
is possible to achieve whatever you want. Professionals and business people can
use these techniques to develop personal power or gain a competitive edge. At a
personal level it will transform your life, your health and renew the joy and passion for
life. Imagine waking up each morning, bursting with excitement, energy and joy for
the new day! It really is that powerful...
Our subconscious uses the behaviour patterns we have learned to automatically
respond and react to many everyday events in our life. This is essential to our survival,
we need to be able to respond quickly to events around us which would be
impossible if we had to re-examine every aspect of things every time something
simple happens. Our learned responses and thought patterns enable us to
automatically respond to circumstances quickly and easily.
You can use "Positive Affirmations", which are usually short positive statements
targeted at a specific subconscious set of beliefs, to challenge and undermine
negative beliefs and to replace them with positive self-nurturing beliefs. It is a kind of
"brainwashing" only you get to choose which negative beliefs to wash away. The
way these statements are constructed is extremely important.
It is important to remember of course that everything we say and think is a positive
affirmation, using positive affirmation statements forces us to keep focused on our
inner goals and reminds us to think consciously about our words and thoughts and to
modify them to reflect our positive affirmation.
How to create your own affirmations
11
How to create your own affirmations

Start by taking some time to think about areas in your life you would like to improve
and how you might want your life to be. It is worth taking some time over this
process. Write the most important ones down in a list.
Now look at each item on the list and write out a few positive statements for each.
They must be positive and in the present tense, focus on what you do want, not on
what you don't want.
12 List and explain the 8 mental laws

1. What you think upon grows – This law states that whatever you think about
becomes your existence. Whatever you allow to occupy your mind you magnify in
your life. Whether the subject of your thoughts be good or bad, the law works and
the condition grows. The more you think about lack, bad times, etc., the worse will
your business be; and the more you think of prosperity, abundance, and success,
the more of these things will you bring into your life.
The more you think about your grievances or the injustices that you have suffered,
the more such trials will you continue to receive; and the more you think of the
good fortune you have had, the more good fortune will come to you.
2. Law of Cause and Effect (The Path Principle) – The direction you set in your life
will determine your destination in life.
3. Use or Lose – This is the concept that practice make perfect.
4. Law of Correspondence (The BE – DO – HAVE Principle) – “First, within, then
without.” To have what you want in your life you have to first conceive of it in your
mind.
5. Law of Substitution – The only way to remove a negative thought from your
mind is to substitute another thought in its stead.
6. Law of Belief – Anything that you believe with feeling will become real in your
life.
7. Law of Attraction – You will attract to yourself those things in your life that are
most like yourself. If you are positive, you will attract positive things to your life and
vice versa.
8 Law of Compensation – You must give freely, without any thought of reward. If
you give while thinking of reward you aren’t giving, but are instead investing.
13 Discuss the mental law from employee to entrepreneur
From Employee to Entrepreneur
The decision to be or not be an entrepreneur is an intensely personal one. It
depends on each one's appetite for risk. There is never a right or wrong answer, just
as there is never a right or wrong time. The fundamental decision has to come from
within.
Making the transition from a traditional job to starting your own business can be
scary. You are giving up the known for the unknown, giving up stability and schedule

for something that isn’t guaranteed. But you are also giving up limitations for
unlimited possibilities, and a strict schedule for complete flexibility.
The most common advice is that you need to save up at least 3 months worth of
living expenses before you quit your job, or make the transition to be an
entrepreneur. I think that this is great advice, and recommend it myself.
Another option is to begin working on your business idea in your spare time, while
keeping your current job. While this may mean insanely long days and unrealistic
hours for you... it is only an investment you have to make for a short time. Once your
business begins to earn what you are making at your job, you can comfortably
leave that job and get back to normal working hours.
No matter which option you choose, you will most likely be making a sacrifice of
some sort... and taking a chance. Plan smart, believe in yourself, and resolve to do
whatever it takes to see your dreams come true.
Most people go into business for themselves because they want more out of life.
More free time, more flexibility, more options, and more financial stability. Whatever
your “more” is, want it bad enough to throw caution to the wind and make it
happen!
Unit 6
CREDITS : 4

SESSION 1.
Design an action plan for a new venture.

1 How could you design an action plan for a new venture
Design an action plan for a new venture
Starting a business requires you to plan in terms of the necessary resources that you
will require for the establishment of your business. These resources range from the
finding of suitable premises to run your business from to the equipment that you will
need. In order to ensure that everything go’s according to plan you should develop
an action plan for your new venture. Your action plan should list all the things that
you need to do and the dates that these need to be completed by. By doing this it
will ensure that you do not waste time doing the unnecessary things and will be
focusing on the important things. You need to identify what are your objectives in
terms of your new venture and when their need to be completed.
Explain the assign priorities
2
Assign priorities
After establishing the actions to take to establishing your business it is important to
assign priorities to the objectives that you need to accomplish. Correctly assigning
priorities results in doing the right things. It is very important to do the right things. To
be efficient on the wrong task, or on the right task but at the wrong time, may be
highly ineffective.
Advaice someone about the ways to stick to the priorities
3
Stick to the priorities

After identifying and assigning priorities to work objectives, you should do the
following:
• Allocate correct positions of time to each task
• Stick with a priority task until it is finished.

• Accomplish tasks within established deadlines.
• Avoid wasted effort in accomplishing tasks
• Allow for flexibility and change things when facts so dictate.

Within the framework of accomplishing objectives according to assigned priorities
you should plan your action plan.
SESSION 2.
Set up business premises and operational systems.

List and explain the things that you should consider when you
4
choose a place of establishment
You should consider the following when choosing a place of establishment.
Market
This is especially important in the case of a trading enterprise where the business
must be visible to the target market; in other words the business must be near the
market and easily accessible.
Raw materials
Depending on the type of business you will be venturing into it is important that you
have easy access to raw materials. This is especially important in the case of a
manufacturing business. You need to determine whether it is more important to be
close to the market or close to raw materials. The types of raw materials and the
type of final product will determine this choice.
Labour
Availability of suitable human resources or labour
Cost
The cost involved in hiring or renting the building and how it compares with other
possibilities. Also compare it to those of competitors. Remember the cheapest is not
always the best.
Regional incentive program
To encourage development in particular regions or industries, the government
promotes industrial incentive schemes. These entail, for example the availability of
financing for building factories in certain areas, reduced taxes for a specified period

etc. Contact the Department of Trade and Industry and local authorities for more
information.
Services
Take note of factors like the availability of public transport systems - roads, harbours,
train services, airports, and water supply; parking space; electricity and support
services of other businesses in the area you are considering.
Personal and social considerations
These are often the most important factor in the choice of a place of establishment.
The entrepreneur must ensure that all the factors mentioned above are considered
and that a choice is not made simply of personal preference

Express your understanding about Dealing with legal issues in
5
establishment of new venture
Dealing with legal issues in establishment of new venture
In planning to start your own business involves concluding a variety of contracts such
as leasing or buying premises, buying stock and appointing personnel. In order to
conclude a legally binding contract, all the legal requirements of a valid contract
must be met.
The requirements for the different types of contracts differ. Some requirements are
applicable to all types of contracts and are a prerequisite for the conclusion of any
valid contract.
• Legal aspects of establishment
• Licenses and permits
6 • Restraint of trade
• Safety of building and workers
• Resources to conduct business
Legal aspects of establishment

Before any contracts are concluded or expenses incurred in this regard, the
prospective entrepreneur should obtain clarity as to the usage rights of the premises

The use of the premises for various purposes, example business, office or industrial
purposes is controlled by a number of statutory and other regulatory measures. The
most important of these being the zoning of premises for particular use in terms of a
town planning scheme, and the so called restraining conditions which are
sometimes registered against the title deed of premises
Local authorities are entitled to adopt town planning schemes. In terms of these
schemes, the total municipal area is divided into zones or areas. Thereafter, a
specific usage right is accorded to every zone for residential business or industrial
purposes. This allocation takes place according to accepted town planning
principals and depends on the layout of a specific town area and/or the needs of
the particular community.
Apart from the zoned right, additional usage rights are sometimes granted by local
authorities. These additional rights are normally referred to as consent uses.
Irrespective of the terminology used, it amounts to a local authority approving the
use of specific premises for some other special purpose (the zone right excluded).
Each case will be considered on merit and the local authority may stipulate
conditions. For example permission is sometimes granted for a residence to be used
as a medical practice.
The usage rights of premises can also be influenced by conditions that are registered
against title deeds of the properties. These conditions can vary and usually regulate
aspects such as particular usage rights of premises, building restraints, the right of
entry to the premises.
Sometime the usage rights of premises are controlled by both the conditions of title
registered against the title deed of the property as well as the town planning
scheme. In such a case, both the mentioned regulatory measures must provide for
the use of the property for a specific purpose before the premises may be used for
such purpose.
Should you use the premises for other purposes? This conduct will not only be an
offence, but the local authority may also obtain a propitiatory interdict against
further use of ht premises for such prohibited purpose.
Licenses and permits

Only two businesses need presently be licensed at local authorities in terms of the
Business Act (71/1991). This applies where meals are provided either from fixed
premises or movable accommodation, such as a converted caravan and places of
amusement, such as a disco. A permit or licence may sometimes also be required
by governing bodies such as the liquor board. Although most businesses are exempt
from trading licences, the regulations and requirements of local authorities such as
health, building, and fire prevention regulations and legislation must still be adhered
to. It is important that the local authority is consulted beforehand.
Restraint of trade
It often happens that a person involved in a business, concludes a contract to the
effect that he undertakes not to conduct a similar business in a specific area directly
or indirectly in opposition to the first business for a specific period after his retirement
or resignation from such business. When businesses are sold, restraints of this nature
are sometimes included in contracts to protect the goodwill of the business. This
clause is known as the restraint of trade clause. The current situation in the law is that
clauses of this nature are prima facie valid and the person, who wishes to dispute a
provision of this nature, must prove that the restraint is contrary to public interest and
consequently unreasonable.
Safety of building and workers
In establishing a new business you have to take into consideration the safety of the
employees that will be employed by you. You will need to ensure that the
workplace is safe to work in. In establishing a new business you will need to abide by
the health and safety legislation that is in place. This legislation is the Occupational
Health and Safety Act 85 of 1993.
Resources to conduct business
In setting up a new business you need to also look at what resources you will require
in terms of equipment, stationery, telephones etc. A list of all stationery requirements
should be drawn up. These should be costed and budgeted for in your financial
plans for the business. If this is not done you could open your business for trade and
be unproductive due to not having the right resources example if your business
entails dealing with customers a lot over the phone and you only apply to Telkom to
put a line in for you once you have opened your business you will lose a lot of
money. The reason being that it takes Telkom in the region of three to four weeks to

install a line. Therefore it is important that application is made prior to opening your
business.

Outline the few products of your business that should reflect a
7
Professional image
Here are a few products of your business that should reflect a Professional image:
• The name of your business
• Your business sign or logo
• Your business letter heads
• Your business website
• The manner in which you provide your contact details – business cards or just ona
piece of paper
The manner in which the person answers the phone at the office
Use your own wards to explain the following based on
financial control.
• Do it yourself or Hire Someone Else?
8
• Doing it yourself
• Receipts and Record of Expenses

Do it yourself or Hire Someone Else?
Many small business owners hire someone to ―keep the books‖ rather than do this
work themselves.
Always check into the background of your bookkeeper. You need to do this for two
reasons. First, you need to make sure that they know exactly what they are doing.
Your bookkeeper must know about payroll deduction, income taxes, filing
deadlines, etc. Second, you must determine that your bookkeeper is so ridiculously
honest that you can actually trust that person to watch YOUR money. Giving
someone control over your money is a very, very serious matter, as you well know. It
is made more serious by the fact that if your bookkeeper does not pay taxes either

on time or at all, your business and YOU PERSONALLY will be held liable by SARS.
There would, of course, be fines and penalties as well as the underlying tax bill.
While we understand that you probably have no desire to engage in routine record
keeping and tax work, you might want to consider developing your own record
keeping system. Consult a tax professional who can help you develop your record
keeping system, preferably someone who specialises in helping small businesses in
your industry. Once you have the system in place and know how it works, then hire
someone to look after it for you and teach them to use your system for your books.
Then you are not dependent on your bookkeeper, if he leaves, you can do your
own books until you hire a replacement. Or if they seem untrustworthy or
incompetent after you hire them, you can perform your own checks of your records
to make sure everything is okay.
Doing it yourself
Using computer programs to keep track of business affairs is probably the best
record keeping. It is advisable to invest in some good accounting software such as
pastel accounting or QuickBooks. Quick Books accounts can be set up in about an
hour. You may want to spend an afternoon reading through the manuals and
information they send along with the program—it is very helpful.
Good record keeping is essential for any business. From the beginning, there are
three types of records your business should absolutely maintain:
• a record of expenses
• a record or income
• a record of assets.
We briefly discuss each of these below.
Receipts and Record of Expenses
Like any business, you will incur expenses. Most of these expenses are deductible
when tax time comes. All receipts, invoices, cancelled cheques, contracts requiring
payments by you (e.g., leases) involving a pay out of money from your business
should be stored in a folder. (Preferably a folder which contains evidence of similar
expenses) Credit card statements should be kept even if you have the underlying
receipts from the transaction. You should jot down a quick note on all cancelled
cheques and copies of receipts reminding you of what the expense involved. For
instance, if you take a client out to dinner; write the client’s name on the receipt,
why you were having lunch (i.e., what business matter you discussed), the amount of

the bill, and the restaurant. Or if you buy office supplies and the receipt does not list
the items purchased and their respective cost, write them down yourself.
In addition to such records, you should keep a journal or ―record of expenses

recording, at the least, the following information:
• How the expense was paid (credit card, cash, check number)
• Date of the transaction
• The party to whom the money was paid.
• The particular type of expense involved (e.g., office supplies, equipment, utilities,
rent, etc.).
Discuss the following based on human resource
management:
• Recruitment and selection
9 • Wages and working conditions
• Conflict of interest
• Financial management
• Customer service and marketing
Human Resource Management
Recruitment and selection
The external environment places pressure on companies to ensure that job
specifications do not deliberately exclude any person or group. Affirmative action
demands require companies to be transparent about their selection criteria.
It is important not to disadvantage an individual by applying an average to him/her
during the selection process. For this reason there are objections to the use of
psychometric test that may be culturally biased.
It is important to have and communicate a clear affirmative action policy. If the
company’s policy is black advancement, expectations must not be raised among
members of minority groups.
The company must guard against nepotism or preferential hiring. For example if a
relative of an employee at any level is considered for a position, care must be taken
to ensure that the person’s application does not receive preferential treatment.
Hiring and promotion decisions must be based on competence, and not on aspects
such as period of service and gender.

It is important that employees be dismissed only for just cause and after following the
correct procedures. For example it would be unfair to dismiss an employee because
a love affair between them had soured.
Wages and working conditions
It is necessary to ensure that fair wages are paid, and that these wages are
comparable to the going rate in the industry. Many companies nowadays opt for
profit- sharing. It is important to ensure that profit sharing is fair and based on the
contribution of the employee or team. A stable and secure work environment will be
a motivating factor for many employees. The Occupational Health and Safety Act
require that employees work in a safe and healthy environment.
Sexual harassment in the work situation must not be tolerated.
Conflict of interest
It is essential to have a clear policy on what a conflict of interest means in the
company – especially in the areas of bribery, extortion and the exchange of gifts.
This policy must be formulated before any incident takes place.
Bribery is the act of paying another person an amount of money for the purpose of
ensuring a financial return in an area over which the recipient has control. An
example of extortion is if a buyer will only consider an offer from a supplier if the
supplier has given the potential buyer a substantial gift, and where the acceptance
of such a gift does not necessarily result in a buying transaction (Garrett & Klonski;
1986:54)
Financial management
The policies for reimbursing employees for their expenses must be clear. The
company must apply ―generally accepted accounting practices‖.
Customer service and marketing
Customers have the right to information. Products must be designed with safety in
mind. If a product is dangerous and this is known, customers must be informed of
these dangers. Guarantees on products must be honoured.
Credit sales must be transparent. The terms and interest rates to be paid must be
clear and understandable. Advertising must be transparent. For example, if a
manufacturer places a retail tag on an item and the retailer then claims to sell the
item at a large discount, one would question the integrity of both the manufacturer
and the retailer. Both the normal price and the discount on an item must be shown.

Some advertisers use the practice of ―bait and switch‖ whereby the advertiser
promotesa certain article which is in fact not for sale. When the customer comes in
to enquire about this item, the advertiser claims that the item is sold out and tries to
convince the customer to buy a more expensive item. This is unethical.
Business ethics play an important role in a business an as an entrepreneur it is
important to understand this role. Sound business ethics are a means of gaining a
competitive advantage and ensuring that stakeholders place their trust in the
organisation and its management. The move is not necessarily away from profit, but
rather towards more justifiable and morally acceptable profit. The profit of a
company which complies with business ethics may be smaller but the choice will
eventually be between a smaller acceptable profit or no profit at all.
SESSION 4.
Identify the risks associated with the new venture.

10 Give and explain the two types of risks in the business.
Two types of risks in the business world:
Non insurable risks
Insurers do not insure all risk. E.g. normal everyday risks, namely changes in consumer
tastes, bad debts and political actions e.g. strikes and riots, that can cause damage
to the business are not insurable.
Insurable risks
Many of the risks in the business world however, are insurable and insurance
companies are prepared to take the chance to carry these risks. A distinction is
made between long and short term insurance.
Express your understanding about the following insurance:
• Long term insurance
• Short term insurance
11 • Fire insurance
• Theft/Burglary insurance
• Fidelity insurance
Long term insurance

It is possible to take out cover on your own life or somebody else’s life if an insurable
interest exists. Partners should take out insurance on each others life. If a partner
should pass away, there should be enough funds to pay out the family of the
deceased. Life insurance can be used as security with a financial institution and can
be ceded to the bank in order to obtain more loans.
Short term insurance
Short term insurance normally stretches over a twelve month period and is
renewable, e.g. vehicle insurance or property insurance. The following are examples
of short term insurance:
Fire insurance
The assets of a business can be insured against losses caused by fire. However it is
necessary to have a complete set of accounting records in a fireproof safe.
Theft/Burglary insurance
Stock, equipment, vehicles and other valuable articles that are stolen or damaged,
can be covered by insurance.
Fidelity insurance
Entrepreneurs involved in giving professional advice to customers should take out
insurance against any claims for loss or damage arising from dishonesty or
negligence on the part of employees. This type of insurance is compulsory for estate
agencies.
12 Explain the money / goods in transit
Money / Goods in transit
Money that needs to be deposited at a bank or withdrawn must be transported. This
also includes the transport in connection with the purchase and sale of stock.
Insurance can be taken out to protect the business if damage is suffered as a result
of theft during transport.
Explain the storm damage
13
Storm damage
Weather conditions e.g. wind, hail, floods etc can cause a business huge losses.
Insurance is available to protect the business from damage suffered as a result of
storms.

Apart from the above insurances that can be taken to protect your business the
following insurance are compulsory. In accordance with South African law you will
be required to take the following types of insurance to protect you and your staff
from associated risks that might occur.
List and explain the seven financial risk that influence the
14
business
A security system is established according to the identified financial risks there are a
number of financial risks that will influence the business:
(1)Currency risk: A business is principally exposed to currency risk from potential

changes in contracted and projected flows of payments and receipts. The objective
of foreign exchange risk management is to reduce the impact of foreign exchange
movements on the Group’s income and financial position. a business normally has a
natural risk coverage through the sale as well as costs in local currencies.
(2)Interest risk: By interest risk is meant how changes in the interest level affect the
financial net of the Group and how the value of financial instruments vary due to
changes in market interest rates. a business attempts to manage interest-rate risk by
matching fixed interest periods of financial assets and liabilities and through the use
of derivative financial instruments such as interest-rate swaps.
(3)Market risk: Market risk is defined as the risk for changes in the value of a financial
instrument due to changed market prices. For all financial instruments, except the
bond loan, the price risk only consists of currency risk and interest risk.
(4)Liquidity risk: Liquidity risk is defined as the risk that the Group would incur
increased costs due to lack of liquid funds. The loan facility with the banking
syndicate consists of two parts.
(5)Cash flow risk: Cash flow risk is defined as the risk that the size of future cash flows
linked to financial instruments is fluctuating. This risk is mostly linked to changed
interest and currency rates. To the extent that this is perceived as a problem,
different derivative instruments are used to fix rates. See description of exposure and
hedging measures under interest risk.

(6)Refinancing risk: Refinancing risk is defined as the risk that the refinancing of
maturing loans becomes difficult or costly. The loans of the Group are mainly long
term and only mature when the agreed loan period expires.
(7)Counterparty risks: Financial instruments that potentially subject the Group to

significant concentrations

15 Outline the risks that stock and other business assets carry
There are a number of risks that stock and other business assets carry. A few of these
risks include:
• fire, explosion and earthquakes
• acts of nature (wind, thunder, lightning, storm, hail, flood and snow)
• damage caused by bursting and overflowing of geysers and water pipes
• malicious damage
• power surges (excludingStock)
• impact
• fire brigade charges
• collision and overturning for your Stock in Transit
• theft
• accidental damage for specific electronic equipment
subsidence, heave and landslip
Use your own knowledge to demonstrate monitoring Your
16 Progress
Monitoring Your Progress

Developing an effective plan is only "half the battle." Getting it implemented is the
other, and generally the tougher, half. And an important part of plan
implementation is monitoring – taking a periodic look at "how it's going." Monitoring
the implementation of your strategic plan is important for a number of reasons. First,
it helps to assure that your efforts conform to the plan. That you're actually
performing the action steps you intended. That you're "on track."

Second, you've got to be sure the results you achieve align with your quantified
objectives, that you're accomplishing what you intended to accomplish. Monitoring
helps here too. Also, monitoring allows for corrective action. For making the
necessary changes along the way, to "fine tune," not only your strategies, but your
planning process as well. And since monitoring is part of a control process, it
encourages improved performance. Knowing they'll be measured stimulates
employees to do a better job. Finally, and most importantly, monitoring provides the
essential link between the written plan and the day-to-day operation of your
business. It demonstrates to all that "you really are managing the business according
to your plan".

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FURTHER EDUCATION AND TRAINING CERTIFICATE: NEW

ACHIEVED NOT ACHIEVED

Signature of learner Signature of Assessor

Section A Learner Information

Contact telephone no:

Learnership agreement no:

Section B Assessor Information

Contact telephone no:

Section C Moderator Information

Contact telephone no:

Provider no: Site:

Purpose of the assessment

Step 2: Complete the Assessment

Step 3 - After the Assessment

3. Assessment documentation required:

Guidelines where an appeal is lodged

➢ The normal appeal procedure prescribed by SERVICESETA and described by the

Date of Assessment Option 1 Option 2 Option 3 Option 4

METHOD OF ASSESSMENT (please tick off the one to be used)

OBSERVATION ORAL WRITTEN

Simulation Knowledge test Knowledge test

ACTION YES/NO COMMENTS

Set learner at ease; be friendly, polite and

Explain to the learner and agree on the

1. The unit standard that will be assessed

Identify possible barriers and or disabilities

Explain the meaning and application of

Explain, discuss and provide one complete

Explain to the learner when final result swill

Discuss previous assessment results if

Signature of learner Date

A number of the assessment instruments contained in this assessment are workplace

Complete the following activities according to the instructions provided

UNIT STANDARD NUMBER : 114600

Answer the following question in the space provided below.

By reading a wide range of newspapers, magazines, trade magazines and journals,

Activity Questions Description Mark

Activity Questions Description Mark

2. Establishing a pattern or one unique answer:

3. Conformity or giving the answer accepted:

4. Lack of effort in challenging the obvious:

5. Evaluating too quickly:

Activity Questions Description Mark

It is an important lesson that we remember that most entrepreneurs are creating

Activity Questions Description Mark

Activity Questions Description Mark

Activity Questions Description Mark

Activity Questions Description Mark

Activity Questions Description Mark

Activity Questions Description Mark

Activity Questions Description Mark

Innovative thinking to cut the costs and increase income

The fundamental organizational challenge when implementing innovation is to change

Implementing innovative ideas involves the following four steps:

• Gain acceptance for your idea

• Execute your implementation plan

• Develop an implementation plan v' Improve your implementation plan

When organisations adopt innovations they do so with high expectations, anticipating