FURTHER EDUCATION AND TRAINING CERTIFICATE: NEW

VENTURE CREATION
ID 66249 LEVEL 4 – 149CREDITS

SKILLS PROGRAM 3:
LEARNER GUIDE
SAQA: 114600; 114592; 114593, 114596, 263356,

263534
START AND RUN A BUSINESS

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Learner Guide Introduction

About the Learner This Learner Guide provides a comprehensive overview of the
Guide… START AND RUN A BUSINESS man forms part of a series of Learner

Guides that have been developed for FURTHER EDUCATION AND

TRAINING CERTIFICATE: NEW VENTURE CREATION ID 66249 LEVEL 4 –
149 CREDITS.The series of Learner Guides are conceptualized in

modular’s format and developed for FURTHER EDUCATION AND

TRAINING CERTIFICATE: NEW VENTURE CREATION.. They are
designed to improve the skills and knowledge of learners, and
thus enabling them to effectively and efficiently complete
specific tasks.
Learners are required to attend training workshops as a group
or as specified by their organization. These workshops are
presented in modules, and conducted by a qualified
facilitator.
Purpose The purpose of this Learner Guide is to provide learners with the
necessary knowledge related to START AND RUN A BUSINESS.
Exit Level • Demonstrate an ability to identify and create a
Outcomes new venture.
• Demonstrate knowledge of interpersonal skills
required in a business environment.
• Manage a new venture by applying business
principles and techniques.
Outcomes • Tender to secure business for a new venture
• Demonstrate an understanding of an entrepreneurial
profile
• Implement an action plan for a new venture
• Produce business plans for a new venture
• Research the viability of new venture ideas/opportunities
• Apply innovative thinking to the development of a small
business
Assessment Criteria The only way to establish whether a learner is competent

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 and has accomplished the specific outcomes is through
an assessment process.
Assessment involves collecting and interpreting evidence
about the learner’s ability to perform a task.
This guide may include assessments in the form of
activities, assignments, tasks or projects, as well as
workplace practical tasks. Learners are required to
perform tasks on the job to collect enough and
appropriate evidence for their portfolio of evidence,
proof signed by their supervisor that the tasks were
performed successfully.
To qualify To qualify and receive credits towards the learning
programme, a registered assessor will conduct an
evaluation and assessment of the learner’s portfolio of
evidence and competency
Range of Learning Range statements are neither comprehensive nor
necessarily appropriate to all contexts. Alternatives must
however be comparable in scope and complexity. These
are only as a general guide to scope and complexity of
what is required.
Responsibility The responsibility of learning rest with the learner, so:
• Be proactive and ask questions,
• Seek assistance and help from your facilitators, if
required.

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 Apply innovative thinking to the

1
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

This Unit Standard is aimed at giving the learners a fundamental understanding of

the importance of innovation in business success. The learner will gain knowledge
PURPOSE:
of specific techniques for releasing creativity in the development a viable business
venture.
It will also address the behavioural (psycho-social) barriers that contribute to failure
in starting and sustaining an enterprise.

The qualifying learner will be able to:

Develop specific techniques for releasing creativity in developing
ideas/opportunities for a new venture.
• Determine the role of innovation in the development and growth of a new
venture.
Apply principles and practices of innovation in the development and growth of a
new venture.

LEARNING ASSUMED TO BE IN PLACE:

Learners accessing this qualification will have demonstrated competence in Computer Literacy,
Mathematical Literacy and Communications at NQF level 3 or equivalent.

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 SESSION 1.
Develop specific techniques for releasing creativity in
developing ideas/opportunities.

Learning Outcomes
• The concept and application of creativity is demonstrated through business
related activities.
• The difference between analytical and creative thinking is demonstrated with
examples through problem-solving activities in a new venture creation context.
• Barriers to creative thinking are identified with examples of their effect on
creative thinking.
• Lateral thinking exercises are applied to generate new ideas.
ESSENTIAL EMBEDDED KNOWLEDGE
• Thinking skills
• Definition of creativity
• Analytical and creative thinking
• The barriers of creative thinking
• The concept of innovation
• Entrepreneurship and innovation
• Types and causes of innovation
• Idea generation techniques
• Principles and practices of innovation.

1.1 Introduction – 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

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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.

1.2 Problem Solving

Definition - A problem is defined as something difficult to deal with or understand. It

needs to be dealt with or solved.
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.

Example

A practical business problem that illustrates this follows:

Assume a company employee is put in charge of a particular asset in the

organisation. However, his manager and the other managers on the same level as
his boos ignore him and simply use the asset when they want to. Appeals to his
manager make no difference. What is the problem?
The first comment is always that his manager is at fault for not supporting him.
However, this is the symptom and the real issue is that the organisational structure is
wrong and by simple re-arranging the structure, the employee will have the
authority to control the asset. The problem has now been correctly identified and
now the correct solution can be implemented.
Herein is the first step of problem solving.

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1. 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.

Note Well

Essentially what is done is that we write down the problem in a few words. We then
draw a box around it. Then we attempt to write down all the issues that could have
a potential effect on the issue in the box. Each of these is written down and placed
in their own box and connected.

The process is repeated for each of the new boxes and continues until there are no
new issues generated. Then each box is analyzed, from the first to the last box, until
the real problem is found. Begin with the most likely problem area first.

In management we have problems relating to all aspects of business. These include

financial problems, human resource problems, operations problems, marketing
problems and strategic problems. The one thing you can be sure of in management
is the necessity to make decisions on an ongoing regular basis and your
appointment as a manager is dependent on your ability to make consistently good
decisions.
At times the simple methodology of identifying problems with block diagrams does
not necessarily offer up the solution we need to really solve the problem. However,
this methodology can be very useful for many of our problems within a business so
do not discard it.
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So let us consider what to do when more creativity is required or when the problem
requires a creative approach.
Now that we understand this first level of problem solving, we can see that it is not as
difficult as we perhaps assumed it to be and that as a manager it is easily within our
reach to solve process-related problems.
1.3 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.
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.
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.

Barriers to creative thinking

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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
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.

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
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none at all. This barrier is a 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'.

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

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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.

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.
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.
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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?
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

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 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?
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.

Once it has been decided to start a new business or find new products for an
existing business, we need to attempt to find the business area that we would like to
trade within. These are important decisions and very often we tend to trade in those
areas where we already have skills. While this may appear to be a simple statement,
it is in fact a critical statement in the sense that too often people try to start
businesses in which they have no skills whatsoever. The natural result being that they
fail in their business because they have no technical skill.

Bear in mind at all times that there are five legs to every business. The legs are:
Administration skills Finances Sales Marketing Technical

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There is no business that doesn’t require some form of technical skill and a lack of
experience with that technical skill endangers the potential for success in that
business. Do not loose sight of this however, on the assumption that you are going to
go into an area where your business partner may have these technical skills.
Service is a very difficult concept to implement in a new business such that it makes
your business stand out from competitors. While it is definitely possible, it does not
require a determined effort by both the owners and the staff. It takes time for those
efforts to become a reality because the problem with service is that everybody sells
it in their advertising but it is only in delivery that word of mouth begins to tell
everybody that you are delivering on your promise in your advertising. This makes it
very difficult for new businesses, as they generally don’t have the time or the capital
to wait for the word of mouth to spread. Thus we have to look for different ways of
running a business that will immediately create a differentiating factor that is
noticeable with immediate effect.
Your positioning statement will come from the characteristic of your business that
sets it apart from your competitors. So try and think before you launch what your
positioning statement will be and what you want people to think of when they think
of your business. All these things are important and define how you are going to run
your business.

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 SESSION 2.
Determine the role of innovation in the development and
growth of a new venture.

Learning Outcomes
• The concept of innovation is described and discussed in relation to new venture
creation.
• Types of innovation are identified and explained with examples.
• The impact of innovation on a new venture is explained with examples.
• The relationship between successful entrepreneurship and innovation is explained
with examples.
• Factors that contribute to the development and growth of a new venture are
identified and explained with examples.

ESSENTIAL EMBEDDED KNOWLEDGE

• The concept of innovation

• Entrepreneurship and innovation
• Types and causes of innovation
• Idea generation techniques
• Principles and practices of innovation.

1. Innovation

Innovation starts before the start of a new venture and should never, through the
lifespan of the business, be left behind.
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
Types of innovators
Two different types
ofinnovators:
• Idea generators
• Idea adaptors

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.
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.
Example of innovation being the reason of a new venture:
A new plastic moulding process is discovered in Germany. The German firm allows
experimentation with their machines in order to allow entrepreneurs the opportunity to

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find unique uses for the methodology and thereby create a market for their machines.
Sibongile cc. found a new way to make car dashboards utilizing the German
technology and sets up a new enterprise to sell to the motor industry.
We can distinguish between two broad opposing categories of innovation, namely:
• Incremental innovation
• Radical innovation.

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.
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.
Factors that contribute to the development and growth of a 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.

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.

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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.
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.
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

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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.
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.
SCAMP
(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

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for compressing dried wheat fibres into biscuits. John and Will Kellogg adapted this
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.
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

22 | P a g e
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.

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.

For example an employee may suggest a possible option and a more senior person will
say “No we tried that before” or something similar. The employee may even feel
intimidated to speak his mind. Therefore, the first step towards creativity is to form
smaller groups of employees. There must NOT be a hierarchical environment in the
group. Each group must receive a written instruction on the task at hand with clear
instructions that anything and everything goes and there are no constraints. An
independent facilitator must be used to move between the groups to encourage
freethinking without constraints.
Look at how the problem is addressed by other people or businesses in the same
industry and record it. Record all other options. Then do the same for other industries,
irrespective of whether or not they are in any way related. Then try to mix and match
various components within the recorded information and discuss whether they might

23 | P a g e
be solutions for the problem at hand. Similarly look at the new trends and fads and see
if they can be used to your advantage.
How do you get your business to think creatively? It begins with problem definition. We
need to carefully and accurately define the problem, or potential problem. The next
step is to attempt to define every other possible influence and write them down
irrespective of whether or not they are related to your industry.
Unfortunately this is where the creativity begins and often ends. People tend to apply
constraints whether to themselves or to others.

SESSION 3.
Apply principles and practices of innovation to the
development and growth of a new venture.
Learning Outcomes
• Innovative thinking is applied to generate new products that the business can make
and/or new services it can provide for greater profitability and/or viability.
• Innovative thinking is applied to generate alternative ways the business can run its
operations to cut costs and increase income.
• Innovative thinking is applied to generate ways in which the business can generate
more employment opportunities without putting the business at risk.
• Innovate thinking is used to generate ways in which the skills needs of employees
can be addressed without risking the venture.
• Innovative thinking is applied to find ways to minimise the impact of opposition firms
on the venture.
ESSENTIAL EMBEDDED KNOWLEDGE

• The concept of innovation

• Entrepreneurship and innovation
• Types and causes of innovation
• Idea generation techniques
• Principles and practices of innovation.

24 | P a g e
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.
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
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.
Innovative thinking to minimize the impact of opposition

25 | P a g e
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.
SCAMP
(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
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.

26 | P a g e
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.
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
preparing a corporate strategy.

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

27 | P a g e
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.

For example an employee may suggest a possible option and a more senior person will
say “No we tried that before” or something similar. The employee may even feel
intimidated to speak his mind. Therefore, the first step towards creativity is to form
smaller groups of employees. There must NOT be a hierarchical environment in the
group. Each group must receive a written instruction on the task at hand with clear
instructions that anything and everything goes and there are no constraints. An
independent facilitator must be used to move between the groups to encourage
freethinking without constraints.
Look at how the problem is addressed by other people or businesses in the same
industry and record it. Record all other options. Then do the same for other industries,
irrespective of whether or not they are in any way related. Then try to mix and match
various components within the recorded information and discuss whether they might
be solutions for the problem at hand. Similarly look at the new trends and fads and see
if they can be used to your advantage.
How do you get your business to think creatively? It begins with problem definition. We
need to carefully and accurately define the problem, or potential problem. The next
step is to attempt to define every other possible influence and write them down
irrespective of whether or not they are related to your industry.
Unfortunately this is where the creativity begins and often ends. People tend to apply
constraints whether to themselves or to others.

28 | P a g e
 Produce business plans for a new

2
venture

Learning Unit

UNIT STANDARD NUMBER : 114592

LEVEL ON THE NQF : 4
CREDITS : 8
FIELD : Business, Commerce and Management Studies
SUB FIELD : Public Administration

This Unit Standard has as its core purpose to equip learners with the necessary
knowledge and skills to produce business, financial and/or operations plans for
PURPOSE:
implementing a new venture. It will also address the economic and administrative
issues that prevent the starting of a new venture and contribute to the inability of
an entrepreneur to sustain a new venture
The qualifying learner will be able to:
Identify, gather and analyse the relevant information needed to compile a business
plan.
• Formulate an ethical framework for the operational plans of a new venture.
• Establish and prioritise business, financial and/or operational goals and
objectives for a new venture.

• Design and present business, financial and/or marketing plans based on a

budget for a new venture.

LEARNING ASSUMED TO BE IN PLACE:

Learners accessing this qualification will be competent in Computer Literacy, Mathematical Literacy and
Communications and NQF level 3 or equivalent.

29 | P a g e
 SESSION 1.
Identify, gather and analyse the relevant information
needed to compile a plan for a new venture.

Learning Outcomes
• The purpose and importance of a business plan is discussed in terms of its
contribution to a successful business.
• The different elements of a successful business plan are listed and described with
examples.
• Information on the resources needed and procedures to be followed to achieve
the plan is compiled.
• The industry specific and legal requirements for own venture are identified and
explained in terms of how they will affect the venture.
ESSENTIAL EMBEDDED KNOWLEDGE
• Principles of designing and developing plans (finance, marketing,
operational, administrative, management)
• Elements of a business plan include: Description of the business, market
research of product, need or service, proposed business structure,
location of the new venture, analysis of competition, projected budget
income statements, projected cash flow data, personal investment and
skills.
• The importance of planning according to time frames and priorities.
• The importance of monitoring and revising implementation plans.
• Evaluate relevant human, physical, human and financial resources.

The purpose and importance of a business plan

30 | P a g e
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.

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.
The objectives of a business plan.
A business plan is a planning document that summarises a business opportunity. It
tells us why the opportunity exists and why the opportunity is being pursued. It also
explains and defines how the management team expects to undertake the
identified opportunity.

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.

31 | P a g e
• 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

But why use a business plan?

A business plan helps you to consider all aspects involved in your business. Drafting a
business plan can give you more confidence in your business if you are just starting
out, and can help you think through strategies and recognise limits or problems that
may occur, even if your business is well underway. 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.

If a business needs additional capital, a business plan can help to convince investors
that the business has an identified opportunity, has the entrepreneurial and
managerial support to pursue the opportunity, and has a rational goal and plan for
achieving targets and revenue levels. 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.

32 | P a g e
Information on the resources needed and procedures to be followed to achieve the
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.

Procedure Explanation
Detailed market Know and understand your target market, how you intend to reach them and
research the competitive advantage your product or service brings to consumers.

Clear and realistic Every business plan should contain forecasted balance sheets, income
financial statements and cash flow statements. All significant features of these
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
competitor analysis become wary of your business plan. Every business has competitors and your
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
management team will be impressed by. Use the business plan to illustrate the different elements of
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.
An understanding If you are considering alternative sources of finance, such as a loan, your
of financial options. business plan needs to explain why the business needs this financing, how
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
writing style well organised with the table of contents pointing a reader towards the
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.

33 | P a g e
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.

It is clear the use of a business plan is significant and it not only plays an important
part in the start-up of a new business, but also in planning the direction of an existing
business. We will now move on to the next chapter, which will outline the format and
process for writing a business plan. You can use this as a basis when you decide to
write your own business plan.

The elements of a business plan

Not all business plans are similar. A business plan for a corner café will differ greatly
to a business plan for a multinational corporation. Also, there is no definite ‘standard
structure’ to a business plan, because they are written for a variety of reasons, and
each of these reasons has their own specific requirements. However, all business
plans serve a similar purpose and should be based on the same elements described
in this chapter.
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.

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
34 | P a g e
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 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
withthe 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.
35 | P a g e
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 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.
36 | P a g e
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
andinvestors 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.
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

37 | P a g e
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.

Market analysis techniques

Let us now take a look at the market analysis techniques mentioned earlier in this
chapter.

Pestel analysis
Is an extended version of the PEST analysis? Both of these techniques analyse the
environment in which the business operates. 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.

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.
38 | P a g e
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
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.

SWOT Analysis
39 | P a g e
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.

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.
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.
Opportunities and threats are external factors that need to be considered
andexamined
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 barriers or even an unfulfilled customer need.
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.
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
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products or services, but also to compile the business plan. By including this
information 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.
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
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
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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 business concept and should include salesand 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
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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.

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.
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.

SESSION 2.
Formulate an ethical framework for the operational plans
of a venture.

Learning Outcomes
• Legislation and relevant regulations relating to the type of venture are identified

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 for use in drawing up a code of ethics for the business.
• Non-statutory regulations applicable to the sector are identified and used for use
in drawing up a code of ethics for the business.
• Codes of conduct that are used by similar organisations in the sector are
evaluated and elements identified for inclusion in an ethical framework for then
business.
• Social and ethnic considerations are identified for inclusion in the ethical
framework of a new venture.
• Personal values are identified for modifying an ethical framework for a new
venture.
ESSENTIAL EMBEDDED KNOWLEDGE

• The importance of monitoring and revising implementation plans.

• Evaluate relevant human, physical, human and financial
resources.

Accepted norms and ethics of a business plan

Now that you have acquired knowledge and understanding about the importance
of a business plan, you are well on your way to writing your own business plan. There
are a few issues that need to be addressed before you formulate a winning business
plan for your business. There is strong evidence that high ethical standards and
integrity are the backbones to entrepreneurial success. But what exactly are ethical
standards?
Ethics is defined as the study of the moral value of human behaviour. Business ethics
relates to moral behaviour in the business environment. There are a number of
ethical issues and problems that can be found in the workplace. Internal ethical
issues such as those that occur in relationships between employers and their
employees, as well as external issues that concern relationships between a
company and the society, need to be analysed.

There are a few values and norms of ethical behaviour. Most businesses conduct
their decisions and actions based on these values.

Values and norms Explanation

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 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.

As a business owner, you will be responsible for the conduct of your business and its
employees. There are many opportunities for unethical behaviour to
creep into your business, so you should analyse the different sections of your business
where ethical behaviour is highly important, and you should have an outline of what
you and your business perceive as being good ethical behaviour. By
communicating this to employees, you will safeguard yourself against possible
problematic situations in the future.

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 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

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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.

Monitoring and Revising implementation plans

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 the plan
implementation is monitoring – taking a periodic look at "how it's going."
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.
• 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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 SESSION 3.
Establish and prioritise business, financial and/or
operations goals and objectives for new venture.

Learning Outcomes
• Personal objectives are clearly articulated and aligned to the plans of own
venture.
• Business objectives are analysed and specific goals formulated to achieve
objectives set out for own business.
• A vision statement of a new venture is compiled to represent goals and
objectives set for own venture.
• Specific short and long term goals are formulated allowing flexibility for possible
changing circumstances.
• Possible contribution to community and regional growth objectives are identified
and considered.
• Cultural values and beliefs of prospective employees and expected consumers
are incorporated into the plans of own venture.
ESSENTIAL EMBEDDED KNOWLEDGE

• The importance of planning according to time frames and

priorities.
• The importance of monitoring and revising implementation plans.
• Evaluate relevant human, physical, human and financial
resources.

Personal objectives are clearly articulated and aligned to the plans of own 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.
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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
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.

Business objectives are analysed and specific goals formulated to achieve

objectives set out for own business.
Business analysis is the discipline of identifying business needs and determining
solutions to business problems. Solutions often include a systems development
component, but may also consist of process improvement, organizational change or
strategic planning and policy development. The person who carries out this task is
called a business analyst or BA.
Business analysts who work solely on developing software systems may be called IT
business analysts, technical business analysts, online business analysts, business
systems analysts, or systems analysts.
When you start the analysis of a business process, you want to have clear goals and
objectives etc.
he best way to start modeling your process is to begin with identifying the business
functions/capabilities and the decomposition (the WHAT of the business process), so
you have a clear understanding what the business process does, instead of starting
with modeling the HOW and get into the details.

Once you know, at the high-level, what the problem is you now need to come up
with the solution. The solution does come in the context of existing processes and
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you need to ensure that you understand the existing processes or otherwise changes
to the process, procedures, and systems may have undesired consequences.

Remember it is your business with your orginal idea and purpose. The purpose may
not change as much as how you react to the market place.
When going into business, it is important to have clear business objectives defined so
that the business knows where it is going. It is essential to have these goals written out
so that the company can work together towards these end points as a unit and not
flail about without direction. It makes sense for a business owner to sit down and
craft a statement of business objectives for the company to ensure that the whole
business is on the same page. Here is an overview of business objectives.
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.

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.

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
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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.
A vision statement of a new venture is compiled to represent goals and objectives
set for own venture.
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.
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.

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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).
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.

4
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.
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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.

Specific short and long term goals are formulated allowing flexibility for possible
changing circumstances.
Short-term and Long-term Goals
Not only should you set useful goals, you should also set both short-term and long-
term goals.
• 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).
Long-term goals often are our most meaningful and important goals. One problem,
however, is that the achievement of these goals is usually far in the future. As a
result, we often have trouble staying focused and maintaining a positive attitude
toward reaching these goals. This is why it is helpful to set up what we call enabling
goals.
• 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.

Cultural values and beliefs of prospective employees and expected consumers are
incorporated into the plans of own venture.

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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.

SESSION 4.
Design and present business, financial and/or marketing
plans based on a budget for a new venture.
Learning Outcomes
• The business of the venture is introduced and described based on research and
analyses of competitors.
• Structure and layout of the business plan is designed to be compatible with the
nature of own venture.
• Marketing and promotion of the own venture is concisely presented in the

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 business plan.
• Finance requirements for the business are stated in the business plan.
• The projected income and expense items for own venture are tabulated in the
business plan.
• The costs, risks and proposed infrastructure of the operations plan is presented in
the business plan of own venture.
• Relevant documentation is compiled to support the business plan.
• Business plan information is presented in relevant and clear format.
• Procedures to present the business plan for own venture to a financier is
explained.
ESSENTIAL EMBEDDED KNOWLEDGE
• Principles of designing and developing plans (finance, marketing,
operational, administrative, management)
• Elements of a business plan include: Description of the business, market
research of product, need or service, proposed business structure,
location of the new venture, analysis of competition, projected budget
income statements, projected cash flow data, personal investment and
skills.
• The importance of planning according to time frames and priorities.
• The importance of monitoring and revising implementation plans.
Evaluate relevant human, physical, human and financial resources.
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

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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.

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.
Structure and layout of the business plan is designed to be compatible with the
nature of own venture.
What is a Business Plan?
Your first-ever decision to start a new venture, or your decision to expand your
existing venture into a new line of business, is always preceded by some careful
analysis of your own thoughts and an analysis of the various discussions you have
had with people close to you. In a large majority of cases, you must have made a
mental note of this analysis as well as the discussions you have had, and on that
basis decided to plunge into the new business or to diversify into the new line of
business. A written document, in addition to your mental recording, needless to say,

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will go a long way in helping you review your performance at some future date, vis-
à-vis what you want to achieve.
Essentially, therefore, a business plan is a written document – a blueprint, if you like –
recording whatever you want to achieve in your new venture or new line of
business. You will realize that as soon as you begin to put your plan in writing. The
dimension of time assumes critical significance, in as much as everything you want
to do has to have a target date associated with that activity. 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?
While there may be several reasons behind writing a business plan, the most
important reason would be that a formal business plan gives you a structure for
writing out what you want to achieve, and with this structure, all your questions will
be answered systematically. Most important, your mental picture helps you very
succinctly in answering the question of what to include in the 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 marketing plan along with the revenue forecasts, the sales manpower
plan and the promotion plan necessary to achieve the revenue forecast.
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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

The next two elements in the business plan structure include the manpower plan,
which will define your management team and the other support staff required.
Putting all these together, you will also then need to define what assets you will
invest in to start with, and how you will augment those assets – the capital
expenditure Plan. Once you have gone through all these above steps, you are now
ready to superimpose the administrative and general expenses, and on that basis
prepare the financial projections which should include, ideally a 3-year projected
profit & loss statement, balance sheet, and the cash flow statements.

The layout of your business plan is as important as content when writing your business
plans and on this page we show you some of the requirements for the style and
content following on from the layout of your plan.

Reasons 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.

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• 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
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.

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.
• 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.

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• 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.
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.
Sole trader
A sole trader is the simplest form of business structure and relatively easy and
inexpensive to start and maintain.
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
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. Association
An incorporated association offers a relatively simple alternative to forming a
company for small non-profit groups such as charities and hobbyists along with
sporting, cultural and recreational organisations.
Each structure has advantages, disadvantages and responsibilities, which need to
be considered before making a decision. Your accountant or business advisor can
help you make the right decision, but some of the factors to consider include:

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• taxation requirements and liabilities;
• legal liability;
• costs;
• capital; and
• Management requirements.
Your structure should accommodate the potential for changing circumstances with
minimal disruption; provide adequate asset protection; opportunities for legitimate
tax reduction and efficient distribution of profits.

Marketing and promotion of the own venture is concisely presented in the business
plan.
Have a marketing campaign
So incredibly important and also one that is often terribly overlooked. A marketing
campaign is your business and it will only work if you have determined your target
market. It's the bread and butter (or vegan chips and hummus) that'll put the vegan
bacon on the table. You must have a marketing campaign and strategy to get your
products and services found in the marketplace.
Your marketing plan is actually a statement, supported by relevant financial data, of
how you are going to develop your business. Plans should be based on actions, not
masses of historical data. The historical and market information should be sufficient
just to explain and justify the opportunities, direction, strategy, and most importantly,
the marketing actions, methods and measures - not to tell the story of the past 20
years of your particular industry.
"What you are going to sell to whom, when and how you are going to sell it, how
much contribution (gross profit) the sales produce, what the marketing cost will be,
and what will be the return on investment."
As stated above it is easiest and best to assemble all of this data onto a
spreadsheet, which then allows data to be manipulated through the planning
process, and then changed and re-projected when the trading year is under way.
The spreadsheet then becomes the basis of your sales and marketing forecasting
and results reporting tool.
As well as sales and marketing data, in most types of businesses it is also useful to
include measurable aims concerning customer service and satisfaction.

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The marketing plan will have costs that relate to a marketing budget in the overall
business plan. The marketing plan will also have revenue and gross
margin/profitability targets that relate to the turnover and profitability in the overall
business plan. This data is essentially numerical, and so needs also some supporting
narrative as to how the numbers will be achieved - the actions - but keep the
narrative concise; if it extends to more than a half-dozen sheets make sure you put a
succinct executive summary on the front.
The marketing plan narrative could if appropriate also refer to indirect activities such
as product development, customer service, quality assurance, training etc., if
significantly relevant to achieving the marketing plan aims.
Be pragmatic - marketing plans vary enormously depending on the type, size and
maturity of business. Above all create a plan that logically shows how the business
can best consolidate and grow its successful profitable areas. The marketing plan
should be a working and truly useful tool - if it is, then it's probably a good one.

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.

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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.

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

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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.

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
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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

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.
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
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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.

Finance requirements for the business are stated in the business plan.
Starting a new business is tough; and it may even demand that you change your
lifestyle. Here are the biggest financial concerns that you need to consider when
planning to start a business:
Do you have alternative sources of capital?
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
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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

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

Purpose of a Financial Plan

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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.
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.
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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 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.
Are you prepared to go into debt?
Whether you will max out your credit cards, avail of every possible line of credit you
can get your hands on, the reality is that you could soon find yourself neck deep in
debt.
Being in debt for your business can have two implications: (a) first, you may need to
temporarily push aside your other financial goals (e.g. save for retirement or college
education of your children); and (b) oftentimes, you will personally guarantee any
loans or credit extended to your business.
You will find it hard to combine securing resources for your business along with your
other financial goals. With resources so tight and every single spare cent thrown into
the business, it will be extremely hard to dedicate any resources for retirement
savings, plans to buy a house, or college education funds for your kids. If things go
well with your new business, you will be able to afford all your financial goals and all
your sacrifices will be well worth it.
Even if you get approved for credit, you need to consider that the lender can look
at the debt you will use for your business as your own personal debt. You may be
asked to personally guarantee the loan. If the business goes south, you can end up
facing huge amounts of debt and a tarnished credit record.
Within that space, you'll need to provide a synopsis of your entire business plan. 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.

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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.
The projected income and expense items for own venture is tabulated in the
business plan.
Starting a new business requires accomplishing dozens of tasks, from finding the right
location to getting all the proper permits and licenses to setting up an accounting
system including appropriate income fields and a business expense ledger. Keeping
track of business expenses can be one of the most difficult parts of running a
business, especially if you own a retail business with issues such as frequent stock
turnover, constant cleaning, maintenance and so forth. Faithfully using a business
ledger can help make sure no expenses get overlooked.

Purchase a physical ledger book to keep track of your expenses unless your business
expenses are very few and very regular and you plan to enter all expenses directly
into your accounting software database. Ledger books can be bought online or at
most business or office supply stores.
Set up categories of business expenses. Start with larger categories such as utilities,
cleaning supplies and office supplies and then break down into subcategories such
as gas, electric, water and telephone (under utilities) as appropriate. Leave room for
a few extra categories of expenses; new needs are bound to crop up over time.
Preparing for Financing

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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 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

Business plan information is presented in relevant and clear format.

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 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.
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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 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

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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.
Procedures to present the business plan for own venture to a financier is explained.

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.

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

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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.

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.

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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.

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.

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 Tender to secure business for a new

3
venture

Learning Unit

UNIT STANDARD NUMBER : 114593

LEVEL ON THE NQF : 4
CREDITS : 6
FIELD : Business, Commerce and Management Studies
SUB FIELD : Public Administration

This Unit Standard is intended for people who use the tendering process to secure
new business for their own business venture.
PURPOSE:
The qualifying learner will be able to:

• Dentify information resources of available business and new markets accessed

through tendering processes.
• Analyse tender documents for viability in the new venture context.
• Demonstrate an understanding of the relationship between costs, revenue and
profits in securing the tender.

• Negotiate with suppliers and investigate new products/services to apply

competitive tender costing.

LEARNING ASSUMED TO BE IN PLACE:

Learners accessing this Unit Standard should be competent in Mathematical Literacy and Communication
at NQF Level 3.

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 SESSION 1.
Identify information sources of available business and new
markets that can be accessed.
Learning Outcomes
• Electronic media sites are investigated for possible tenders.
• The printed media containing new business or calls for tenders for new business in are
identified for own business context.
• New markets are researched for potential tendering opportunities.
• Other sources of information for tender opportunities are identified and investigated for
own business opportunities.
ESSENTIAL EMBEDDED KNOWLEDGE
• Tendering procedures and principles
• Application of commonly-used information gathering techniques.
• Application of financial concepts.
• Price negotiating skills
• Appropriate use of financial analysis in making accurate decisions.
• Presentation of tenders and completion of tender documents.

Introduction
A tender is an offer to do work or supply goods at a fixed price. Getting goods or services is
also known as ‘procurement’. Since January 2004, government began referring to tenders as
‘bids’. When government ‘puts out a tender’ or ‘invites bids’ this means government asks the
public for price offers to supply work or goods to the government. The government then
assesses who to choose based on the prices offered and the nature of the person or
company making the tender.
The tender or bid process is designed to ensure that the work to be done for government is
given out in a fair way. There are a number of policies (known as ‘procurement policies’),
which guide government on how to make decisions on which tender to accept. Although
price is very important in the decision on which tender or bid to accept, it is not the only
factor taken into account.
Once government accepts a tender, it is binding on both parties. This means that the person
or company that won the tender has to provide the goods or services in the manner agreed
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to and at the price offered, and government must pay the agreed price at the agreed time.
In other words, once accepted, a tender is a binding contract.

Who runs tenders or bids?

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?
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
The conditions that need to be fulfilled will be in terms of:
• The product or service
• The price
• The delivery terms and project plan
• Contract duration
Financial viability

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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.

A typical tender process

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

suppliers to pre-qualify and help to narrow down the
Evaluating the tenders The tenders are then evaluated against set standards. This
tenders.
process is where the tender is clarified before acceptance

Awarding the tender
contract
Managing the contract
Review and testing
The contract is accepted and awarded to the supplier whose
bid offers the best value for money
Both parties involved work together according to the
specifications in the contract
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.

Other sources of information for tender opportunities are identified and investigated for own
business 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.
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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.

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 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.
ESSENTIAL EMBEDDED KNOWLEDGE

• Costs, revenue, pricing, tendering and profits.

• Determination of break-even point
• Costing and pricing methods
• Direct and indirect costs
• Tendering procedures and principles
• Application of commonly-used information gathering techniques.
• Application of financial concepts.
• Price negotiating skills
• Appropriate use of financial analysis in making accurate decisions.
• Presentation of tenders and completion of tender documents.

Analyse tender documents for viability in the new venture context.

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.

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 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 todispose 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 nonnegotiable
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.

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

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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 understan d
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.
Options could be:
• To pay in full, up front.
• To deposit deferred payments.
• To lease.

The breakeven point outlines the price below which your company will begin to lose
money. Profitability is what business is all about. However, some businesses choose to sell
below their breakeven point in order to get the business for the first time. This is dangerous
because the next time the tender is available, another business may tender below your
price and you will lose out on all the profit. You should not accept a price below your
breakeven point so that you make sure you do not lose money.
Before submitting your response to the tender, you should check all your pricing and
costing. It is even suggested to get someone else to check it for you. Also check that all
the requirements called for in the tender, are met in your proposal.
Internal factors impacting upon pricing decisions The internal factors that impact upon
price are:
• Product
• Promotion
• Distribution
• Cost

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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?

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Organizational objectives
• Income = achieving maximum profits
• Sales = maintaining or enhancing market share
• Competitive = meet, avoid, or undercut competitors
• Social concern

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?

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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?
Review costing and pricing methods
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.
Assume you are the manufacturer of steel fences. Your financial analysis showed the
following:
Variable costs: R60
Fixed costs: R15 000
Expected sales 5000 fences
The unit cost for each fence is:
U =
n
V
i
a
t r
i
c a
o b
l
s e
t
c
o
s
t

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 F
i
x
e
d

c
o
s
t

C
u
r
r
e
n
t

s
a
l
e
s

= R60 + 15 000

5 000
= R63

Assume you want a profit margin of 40% (also called a mark-up)

Cost plus price = unit cost

(profit margin) = R63

40
= R105

You will charge customers R105 for each fence and make a profit of R42 per unit (R105-63 =
R42)
Rate of return pricing

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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.
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
Target return price =unit cost + target rate of return x total money invested: estimated sales.

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.

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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).
Assess suppliers and new products in terms of potential contribution to profit and securing the
tender
In your groups, referring to a tender document, make a list of your suppliers and their new
products. Assess these suppliers and products to see if they will make a contribution to profit
and securing the tender. Identify the one’s that will make the biggest contribution to your
profit and market share. Motivate why you would give preference to that particular supplier.

Suppliers Products Assessments

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 SESSION 3.
Calculate costs, revenue and profits of a specific tender.

SESSION 4.

Complete tender documentation.

ESSENTIAL EMBEDDED KNOWLEDGE

• Costs, revenue, pricing, tendering and profits.

• Determination of break-even point
• Costing and pricing methods
• Direct and indirect costs
• Tendering procedures and principles
• Application of commonly-used information gathering techniques.
• Application of financial concepts.
• Price negotiating skills
• Appropriate use of financial analysis in making accurate decisions.

• Presentation of tenders and completion of tender documents.

Complete Tender documents accurately

One of the conditions spelt out clearly in the “special conditions of tendering” is that it is the
responsibility of the tenderer to ensure that all the documents are included in the package.
Should documents be missing, please ask the issuer.
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.
Carry out checks and balances on the costing and the input into the documents

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As in all areas of your business, attention to detail is the key to success. Tendering carries a
particularly heavy paper component, involving official forms and many other documents,
depending of the nature of the tender.

Try to stick to the order and format adopted on the tender specification form. This will make
your tender document easier to read than if you attach reams of information, which the
adjudicator will struggle to find.
Ensure the following:
➢ All costs must be taken into account.
➢ All prices must be VAT inclusive.
➢ The tender price must include a profit.
➢ It is important that tender prices are calculated properly as any changes to the Tender
price after the closing date, will result in the Tender being disqualified or the Tender
incurring losses.
➢ Fill in and sign all forms in ink.
➢ Ensure that you address the documents correctly as stipulated in the tender documents.
➢ Supply the correct address for correspondence.
➢ State clearly, where requested, that you are authorised to offer the tender, and give
proof of such authority.
➢ Seal the package/envelope and ensure that you clearly mark the tender number and
the closing date and time on the outside.

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.

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Rules of engagement in the Tender process
The rules of engagement in the Tender process, as stipulated below must be adhered to at
all times. Failure to do so will result in disqualification from the Tender process.
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

The Tender documentation may be posted to SARS (for attention of Mr. M Buthelezi, Block D)
or be placed in the tender box at the main gate entrance, LeHae La SARS, 299 Bronkhorst
Street, Nieu Muckleneuk, Pretoria before the closing time.

No extensions for return of the response and submissions will be granted.

Questions for clarification of issues must be directed in writing to the SARS Procurement
Centre: Ms N.Dlambewu Tel 012 422 4057
Any attempt to gain information in a manner deemed to be unfair or disadvantageous to
other respondents or any attempt to influence the outcome of the response evaluation will
result in immediate disqualification from the Tender process. Failure to comply with the
completion regulations listed in section 5.1 will result in disqualification from the selection
process.
The front page of this document must be completed and attached to the Response Sheet
and the submissions.
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.

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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.
Example:
Sorry, I've already had a better offer that.
I was offered twice that price only last week.
A better offer from elsewhere is a walk-away alternative that you can deploy at any time.
The other person does not know whether you actually do have a better offer or whether you
are bluffing. The problem for them is that if they call your bluff then you might actually have
such an offer. If you actually do have a better offer, you are indeed in a stronger position if
you do need to conclude the deal. As a part of developing your walk-away, you would
have also better understood the overall situation and built your own confidence -- which
alone is worth the effort of looking elsewhere beforehand
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”.
Example:
A person buying a car asks for the price. The sales person says it. The buyer raises an eyebrow
and mutters 'You'll have to do better than that.' and looks, appraisingly at the sales person.
Oh, come one. I'm not a fool. You'll have to do better than that.
When you say 'You'll have to do better than that', you are actually implying that you know
that the other person is trying to deceive you, for example with an exorbitantly high price.
Having been 'found out' (although you actually may not know what a fair price is), this puts
them under social pressure to conform to norms of decency and fair pricing.
2. Cards on the table

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 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.

Example:

Look, I'll put my cards on the table. What I really want is...

I think I can trust you. The full story of why I need the ticket is that...

Sorry, the truth of the matter is that Mike says I have to do this.

In card games, putting your cards on the table is showing others exactly what you
have. When a person 'puts their cards on the table' they are asking the other person to
believe them. By using such a gesture and also talking about why they are doing it, they
are asking the other person to accept that they are being trustworthy. Which they
may not be, of course

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.

Example:

I must have your answer before we leave today.

I am talking to Steve later. He will want to know what we have agreed.

The product will be released at the end of the week. If you can't deliver by Thursday, it
will be too late.

A deadline creates tension in the scarcity of time that it gives and the imagined
consequences of not reaching the deadline. Hurrying people up reduce the time they have
for reflection and considered thought. If you can occupy them with worries about what

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 may happen if the deadline is not met, then they will spend less time thinking of objections
and counter-arguments to your suggestions.

Deadlines can easily be challenged, but it is surprising how often they are not
questioned.

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.
Example:

Two business competitors on an industry standards committee agree to settle

differences and promote the standard as this will help increase the number of total
customers, thereby giving each a greater market value.

A husband and wife who are negotiating about holidays and the ability to take time
off work reframe the situation as 'getting away together' and end up with a decision
that when one goes away on business the other will go along too.

In many negotiations there is an assumption that it is win-lose, and with every gain that one
person makes the other person will lose an equal amount. In a worst-case scenario (which is
surprisingly common), it becomes personal and the sense of fair play (or even getting what I
need) goes out of the window as each player seeks to harm the other before they get
harmed themselves.
This is a limiting perception and it is often possible for both people to gain, especially if they
collaborate. 'Expanding the Pie' comes from the metaphor where people are negotiating
about a single pie; such that where one person gets more of the pie it is clear that the other
person gets less. If both parties work together to get a bigger pie, then both can have more.

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

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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

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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.

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 Research the viability of new venture

4
ideas/opportunities

Learning Unit

UNIT STANDARD NUMBER : 114596

LEVEL ON THE NQF : 4
CREDITS : 5
FIELD : Business, Commerce and Management Studies
SUB FIELD : Public Administration

This Unit Standard is aimed at learners who wish to identify and screen new ideas and/or
opportunities with the intention of establishing and/or participating in a new venture.
PURPOSE:
The qualifying learner is capable of finding information about different industry sectors;
explaining the purpose of potential new ventures; identifying characteristics of successful
ventures and evaluating new venture opportunities.
The qualifying learner will be able to:
Identify and assess own business ideas/opportunities for a new venture.
• Analyse the viability of a selected idea/opportunity against specific screening variables.
• Research the potential of a particular idea/opportunity as a new venture.
• Analyse a range of risks associated with a new venture.

• Evaluate new venture ideas/opportunities based on research findings.

LEARNING ASSUMED TO BE IN PLACE:

Learners accessing this qualification will have demonstrated competence in Computer Literacy,
Mathematical Literacy and Communications at NQF level 3 or equivalent.

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 SESSION 1.
Identify and assess own business ideas/opportunities for a new
venture.
Learning Outcomes
• An own business is discussed in terms of its advantages and disadvantages for the owner,
the labour market and the business sector.
• Sources and methods of access to general and commercial business information are
identified for proposed business venture.
• Reasons for selecting or rejecting a particular new venture idea/opportunity are
explained with examples.
• Essential features of the new venture are identified in terms of market share, sales volume,
asset value, and extent of independence from outside control.

ESSENTIAL EMBEDDED KNOWLEDGE

• Methods and techniques for assessing and analysing information associated with
new venture opportunities.
• How to evaluate new venture opportunities.
• The types of new ventures and opportunities.
• The Labour Market study
• Researching the industry and the broad market
• Consumer, competitors and supplier research
• Interpreting research findings
• Identifying your target market
• Estimating the size of the market
• Conducting own research
• Risk management, insurance and security

This course is dedicated to helping you analyze the viability of your business ideas in order to
decide whether they are feasible opportunities for you to pursue. It is important for you to
realize that you should thoroughly research and understand your ideas and the environment

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in which they operate. What may seem like a ‘brilliant and unique opportunity’ may turn into
an absolute nightmare if you have not fully understood what the idea involves.
Take your time as you work through this course. You will learn how to choose the best
business start up, as well as how to choose the most viable business idea. You will also learn
how to minimize risk in your chosen business environment.
Identifying Business Ideas or Opportunities
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 decisionmay 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. The various reasons why small businesses fail are outlined below:
Uncontrollable factors:
These factors are mostly related to the political and economic situation of the country. South
Africa in particular has problems that are unique, making it more difficult for the small
business to be successful. These problems include strikes and boycotts, high inflation and the
weak Rand.
Let us take a brief look at a few of these.
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

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 does not keep up-to-date with these changes, it can have a severe impact on the
business.
Controllable factors:
These are usually based on the business experience of the small business operator. Examples
of controllable factors follow.
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.
There are three phases of establishing your own small 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.
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.

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• 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.
Sources of information for ideas and opportunities
There are various sources of information that can be used to develop an idea or opportunity
for a business venture. Let us look at a few of these.
• 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.
Choosing a suitable idea
The following procedure is usually used when a decision needs to be made on a small
business idea.

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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:

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 arediscussed. 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.
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.

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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.
The types of new ventures and opportunities 100 Low-Cost Business Ideas
By Stephanie Chandler
The following is a list of 100 business start-up ideas. Whether you want to start a home-based
business, launch a part-time business or a full-time business, this list can help you seize your
entrepreneurial dreams!

Business ideas:

Dinner to Go Service 2. Catering

3. Personal Chef 4. Canning (sell goods such as jamsand pickles

5. Cooking Class Instructor 6.Baked Goods (pastries, customcakes, etc.)

7. Cart/Kiosk Operator 8. Resume Writer

9. Business Plan Developer 10. Custom Letter Service

11. Press Release Writer 12. Newsletter Creator & Distributor

13. Custom Poem Service 14. Freelance Writer

15. Publish Books 16. Publish E-books & InformationProducts

17. Copy Writer 18. Technical Writer

19. Editing & Proofreading Service 20. Ghost Writing

21. Virtual Assistant 22. Bookkeeper

23. Personal Assistant 24. Invitations (Calligraphy)

25. Typing Service 26. Medical Transcriber

27. Translator 28. Theme Party Planner

29. Transportation Service (Kid Cab) 30. Play Date Group Planner

31. Tutoring Service 32. Babysitting Class Instructor for Teens

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33. After School Care 34. Kids Fitness Instructor

35. eBay Business 36. eBay Trading Assistant

37. Bookseller 38. Website Designer

39. Babysitting Referral Service 40. Computer Tutor

41. Computer Technician 42. Infopreneur

43. Online Boutique/Store Owner 44. Alterations Service

45. Knit/Crocheted Items for Sale 46. Costume Designer

47. Portrait Artist 48. Custom Scrapbook Service

49. Greeting Card Business 50. Custom Woodworking

51. Bookmarks 52. Jewellery

53. Ornaments 54. Purses

55. Curtains 56. Recipe Book Collections

57. Fitness Instructor 58. Acting Classes

59. Music Lessons 60. Personal Coach

61. Business Coach 62. Career Coach

63. Image Consultant 64. Personal Trainer

65. Life Coach 66. Doula

67. Pet Sitter 68. Doggie Day Care Provider

69. Mobile Grooming Service 70. Dog Walker

71. Dog Trainer 72. Pooper Scooper Service

73. Landscaper/Gardener 74. General Contractor

75. Hauling Service 76. Handyman/Repair Service

77. House Painter 78. Window Washer Service

79. Carpet Cleaning Service 80. Janitorial Service

81. Delivery Service 82. Errand Service

83. Furniture Restoration 84. Genealogy Research Service

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85. Private Investigator 86. Public Speaker

87. Notary 88. Photographer

89. Clothing Exchange Service 90. Laundry Service

91. Gift Baskets 92. Yard Sign Rental Service

93. Gift Delivery Service 94. Massage Therapist

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

95. Home Grown Produce (sell at 96. Flier Delivery Service

farmer’s markets)

97. House Cleaner 98. Professional Organizer

99. Personal Shopper 100. Makeup Artist

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 SESSION 2.
Analyse the viability of a selected idea/opportunity against
specific screening variables.
Learning Outcomes
• The aptitude, interests and values of the potential owner are screened for suitability to
the new venture.
• The market conditions are assessed to determine the viability of the new venture.
• An assessment is made of the competition the new venture is up against.
• The access to relevant technology and other resources needed for the new venture is
analysed to aid a decision on the viability of the new venture.
ESSENTIAL EMBEDDED KNOWLEDGE
• Methods and techniques for assessing and analysing information associated with
new venture opportunities.
• How to evaluate new venture opportunities.
• The types of new ventures and opportunities.
• Researching the industry and the broad market
• Consumer, competitors and supplier research
• Interpreting research findings
• Identifying your target market
• Estimating the size of the market
• Conducting own research
• Risk management, insurance and security

Evaluating the viability of ideas or opportunities

You have just taken a closer look at how you can identify a business idea. In order to make
this idea a reality and a successful reality at that, you will need to find the idea that has
sufficient value to serve as a base for a successful business. You will find this idea by
completing a full viability study on all your ideas. This study should enable you to answer the
following questions:
1. What competitive advantage does your business have to offer?
2. How profitable will your business be?

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 3. What threats and opportunities influence your business idea?
In order to determine whether an idea is viable or not, you will first need to determine what
type of industry your idea can be categorised into. This will help you to visualise the extent of
its viability in terms of other products, technology and geographic markets.
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.
Training needs to ensure success of the new venture
As an entrepreneur, you may not have all the skills required to run a business, therefore some
sort of training is required.
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.
PEST analysis researches the following environments:
The political environment
The economic environment
The social environment

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The technological environment

How does the political environment affect my business? Consider any new laws, whether
local, national or even provincial. If any laws are about to change, you will need to
understand how these changes could possibly affect your business. What about international
laws. How will they affect the business?
Understand your economic environment. Have I created a demand for my product or
service and are there funds available to purchase my product or service? How do the
markets impact on my business and what about increasing or decreasing interest rates?
Consider the social environment. What about upper income groups as opposed to lower
income groups? What are the differences in their approach to purchasing? What social
trends exist that could impact on the business?
Technological changes could also affect the business. You therefore need to keep up-to-
date with these changes. What new technology could either make my business more
successful, or could destroy and outdate my product or service?
A SWOT analysis analyses the:
Strengths
Weaknesses
Opportunities
Threats
This is an analysis of the internal and external environment.
Strengths: What elements of your business are performed successfully? What elements help
you to stand out from your competitors? List some of your advantages.
Weaknesses: These are the areas where your business struggles.
What complaints do you continually hear from your customers?
Opportunities: An opportunity is an area that you can change into strength. Are there any
trends that could become strength in your business?
Threats: These are internal and external factors that could ultimately damage your
business. Is there a trend that could highlight and one of your weaknesses, which would send
most of your customers to your competition? Is your competition stronger? You will then
need to formulate a vision for your business in order to determine your market potential and
to give your idea worth. A vision for a large business usually arises from a consumer need. This
need could have already been an existing need, or it could have just arisen with the

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creation of this business idea. You should thus determine the need for your product or
service.
Lastly, you will need to take an in-depth look at various aspects of starting the business in
order to decide whether or not to go ahead with the idea.

Location
Deciding on the location of your business is very important. It can determine whether your
business will be a success or not. If you are a manufacturing business, you will require a
location close to suppliers and modes of transport, such as boats in a harbour, for shipping,
or a railway. If you are in the retail business, a location where many customers will see your
product or service is the best bet.
Consider the following:
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?
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.

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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?
What innovations can I offer and raise the standard in theMarketplace, counting on most of
my competitors' reluctancealso to innovate or to put capital into growing their businesses?

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.

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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.

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 SESSION 3.
Research the potential of a particular idea/opportunity as a
new venture.

Learning Outcomes
• A personal profile of an entrepreneur is matched to the type of work, product or service
that has potential as a new venture to ensure compatibility.
• Training needs to ensure success of the new venture are identified for all persons involved
in the venture.
• The most suitable location of the new venture is investigated to aid a decision on the
location of the new venture.
• Constraints on trade and applicable by-laws are investigated to ensure that there are no
legal obstacles to the establishment of the new venture.
ESSENTIAL EMBEDDED KNOWLEDGE
• Conducting own research
• Risk management, insurance and security

Criteria for evaluating the success of new ventures

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.

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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.

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

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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.

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 Financial services - travel insurance, commercial banks, foreign exchange, etc.
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 ofstyle, 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?
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

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 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

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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.

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

Learning Outcomes
• Analyse a range of risks associated with a new venture.
• The potential risks and factors that may threaten the new venture are identified and
analysed with a view to eliminating and/or minimising them.
• The risks associated with being an employer are explained.
• The possible measures to reduce risk are explained with examples from a real or
simulated new venture.
• The insurance and security needs associated to risks in the new venture are investigated.
ESSENTIAL EMBEDDED KNOWLEDGE
• Conducting own research
• Risk management, insurance and security

Risk Management
One of the most important factors to consider when starting your own business is whether or
not it will be successful. This is more of a future uncertainty. Risk is thought of as an actual
possibility of a loss or exposure to a loss. “Loss refers to any accident or occurrence that will
result in injuries, death, property damage, destruction, and damage to public image,
damage to reputation, claims and lawsuits.” (Tassiopoulos, 2000, 236)
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.
Risk can also be differentiated into objective risk and subjective risk. Objective risk is
measured through statistical research, while subjective risk is related to the opinions and
perceptions of various people.
Risk Factors
There are a number of factors that play a role in determining the likelihood of a loss
occurring. These factors can be grouped into four main categories.
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 1 . Perils
2 . Hazards
3 . Threats
4 . Vulnerabilities
The distinction between these different factors relates primarily to the ability to manage
these risk factors. It may not always be possible to manage a peril risk factor, such as fire or
floods, however the necessary steps and measures can be put in place to accommodate
and minimise the risk. Risk management strategies will be discussed later in detail.
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.
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.

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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.
Risk management strategies
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.
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.

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 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.
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.

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

Learning Outcomes
• Criteria are established for evaluating the success of a new venture.
• A preliminary evaluation of the proposed new venture is produced in the form of a
written report, using the identified criteria.
ESSENTIAL EMBEDDED KNOWLEDGE
• How to evaluate new venture opportunities.
• The types of new ventures and opportunities.
• Researching the industry and the broad market
• Consumer, competitors and supplier research
• Interpreting research findings
• Identifying your target market
• Estimating the size of the market

Evaluate new venture ideas/opportunities based on research findings.

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
Market evaluation
• Competitive advantage
• “USP”: Unique Selling Proposition Differentiate on quality, service, or innovation
• Market Pull vs. Market Push
• Solves customer problems
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• Sunrise vs. Sunset market
• Significant market niche
• Market plan/strategy
• Distribution channels available
• Repeat sales likely
• Year-round vs. Seasonal demand

A preliminary evaluation of the proposed new venture

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.

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▪ List who will use your product/services.

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 5
Demonstrate an understanding of an
entrepreneurial profile
Learning Unit

UNIT STANDARD NUMBER : 263356

LEVEL ON THE NQF : 4
CREDITS : 5
FIELD : Business, Commerce and Management Studies
SUB FIELD : Public Administration

This unit standard is for learners who are required to identify and develop within
themselves, the personal characteristics of an entrepreneur that ensure the
PURPOSE:
successful operation of a new venture. The unit standard also introduces the
learner to the economic, administrative and behavioural (psycho-social) barriers
that contribute to the success in starting and sustaining an enterprise. The learner
will develop strategies to work effectively in a group and set personal goals in an
entrepreneurial context.
Learners credited with this unit standard will be able to:
Describe entrepreneurship.
• Describe the characteristics of a successful entrepreneur.
• Develop individual entrepreneurial characteristics.

• Explain methods to enhance an entrepreneurial profile.

LEARNING ASSUMED TO BE IN PLACE:

It is assumed that the learner has the following knowledge and skills:
Communication at NQF Level 3.

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 SESSION 1.
Entrepreneurship is discussed in terms of employment
opportunities.
Learning Outcomes
• Entrepreneurial opportunities are identified and described within a specific economic
area related to the interest of the learner.
• An explanation is given of the advantages and disadvantages of entrepreneurship.
• Reasons for business failure are identified and discussed with examples.
• An explanation is given of the role of entrepreneurship in social development.
ESSENTIAL EMBEDDED KNOWLEDGE
• ESSENTIAL EMBEDDED KNOWLEDGE

• Definitions of skills, aptitudes, personality and values.

• Reasons for business failure as a result of personal profile/attitude.

Abraham Lincoln said the following: ‘We cannot strengthen the weak by weakening the
strong. We cannot help small men by tearing big men down. We cannot help the average
wage earner by pulling down the payer. We cannot establish security on borrowed money.
We cannot further brotherhood of men by inciting class hatred. We cannot help men
permanently by doing for them what they can do for themselves.’
These wise words also apply to the South African situation. In our changing times, wealth
cannot be obtained through economic dependence, but only by creating it ourselves. The
promotion of entrepreneurship is one of the most important ways that growth can be
stimulated in the South African economy and jobs can be created for all people.

What is entrepreneurship?
There is no generally accepted definition or model of what the entrepreneur is or what he
does. However one of the accepted principals of entrepreneurship is that it is not a
phenomenon which occurs in new enterprises only, it also occurs in existing enterprises. The
focus on entrepreneurship should not be on who the entrepreneur is, but on what the
entrepreneur does.
The terms ‘entrepreneur’ and ‘entrepreneurship’ are freely used to describe someone with a
small business, or the small business enterprise. This association is apparent in statements such
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as ‘entrepreneurship is the key to wealth’; ‘the informal sector is the starting point for many
entrepreneurs, South Africa does not have enough entrepreneurs’; and ‘South Africa’s
entrepreneurs are now entering the best phase.’
The term ‘entrepreneur ‘is often associated with the founder of a new enterprise or with a
person who establishes a new enterprise which previously did not exist. From this point of
view anyone who inherits or buys an existing enterprise or starts a concession (franchise) is
not an entrepreneur.
An entrepreneur is a business owner who sees an opportunity in the market gathers
resources and creates and grows a business venture to satisfy these market needs.
It is important to distinguish between entrepreneurial ventures and small businesses. An
entrepreneurial venture is established and managed for the principal purposes of profit and
growth. The business is characterised by innovation and strategic management practices.
A small business is any business that is independently owned and operated, is not dominant
in its field and is not characterised by new or innovative practices ( Carland, J.W., Hoy,F.,
W.S. & Carland, J.C. Differentiating entrepreneurs from small business owners : a
conceptualisation. Academy of management review 9 (2), 1984 pp354 – 359)
Both are of critical importance to the economy. They create new opportunities differently
and present challenges. Both need entrepreneurial action for start – up but the small
business venture will tend to stabilise at a certain stage and only grow withinflation. Small
business owners establish and manage their businesses for the principal purposes of
furthering personal goals and to ensure security. They are not necessarily interested in growth
as an objective. They see themselves as successful when their businesses are profitable even
if their income does not match what they would have earned as an employee. Autonomy
and security are the primary objectives of most owners of small businesses
The distinction between an entrepreneur and an entrepreneur and between
entrepreneurship 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 hasentrepreneurial potential. However this must
be pursued consciously. Certain elements in an enterprise are conducive to

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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.
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

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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

Principal reasons for entering the informal sector in South Africa

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

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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.
The existence of informal economic activities can generally be attributed to the level of
economic development of a country and its inhabitants
The legal activities in the South African informal sector can be divided into the following
main categories:
• 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.
The informal sector is one of the fastest growing sectors in South Africa. However it is also one
of the sectors that is experiencing the most difficulties. 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
The person in the informal sector has a responsibility to develop his/her full entrepreneurial
potential and management skills so that his/her enterprise can be converted from and
informal enterprise to a formal enterprise that can contribute to the economy as a whole.

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Entrepreneurship in the establishment of a formal small business enterpriseMany people
possess entrepreneurial potential but neglect to develop it further. They constantly generate
innovative ideas but do nothing to convert these ideas to reality.

Possibly they do not really know how to do so. In certain cases people may indeed
believe that they know how to establish their own enterprises, but they insist on re-
inventing the wheel and in the process apply practices which have already failed
elsewhere.
Advantages and Disadvantages of establishing a formal small business enterprise
Advantages of a small business enterprise
People establish formal small business enterprises mainly for the following reasons:
• They have a desire to be independent: in other words, they want to be their own boss.
• They feel that they will be better financially.
• They feel that they will have achieved something if they manage to take a risk and
create a successful enterprise.
• They can express their creativity, which is not always possible when they work for
someone else.
• Full control. All the decisions are yours.
• Unlimited future. The business you create is limited only by your imagination and your
ability to run the business professionally.
• Boundless financial opportunities.
• All victories are yours
• Your time is your own.
Disadvantages of a formal small business enterprise entrepreneur Establishing one’s own
enterprise not only offers the above advantages, but also holds many risks. The prospective
small business entrepreneur not only takes afinancial risk, but also places his or her own
happiness and that of his or her family at risk.
The disadvantages of establishing a small enterprise may be summarised as follows:
• Being a small business person requires hard work and difficult decisions and involves
sacrificing free time and holidays.
• A business person often feels alone. The demands of a small business enterprise isolate
the business person from family and friends, weakening this source of support.
• Business people are inclined to be very ambitious. Their fear that they will not be able to
achieve their high self imposed objectives causes stress.

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• A hard uphill battle to establish a business. All the defeats are yours. All the risks are yours.
The establishment of an entrepreneurial formal small business enterprise can be divided into
the following three phases:
• Identification of an opportunity (the idea phase)
• Investigation of the viability of a small business idea and the drawing up of a business
plan (the plan phase)
• Implementation of the business plan and the exploitation of the opportunity (the
implementation phase)

Reasons why entrepreneurs fail

Entrepreneurs fail mainly because of certain factors, which may or may not be controllable.
The uncontrollable factors are chiefly related to the economic and political situation of a
country, while the controllable factors are usually based on the experience of the small
business operator.
Discrimination against entrepreneurs
Because the owner of a small business has difficulty in accessing resources like finance,
expertise the small business owner frequently feels that he or she is discriminated against. It
often happens that a small business entrepreneur has to pay more for goods and services,
and is subject to higher rent tariffs and interest rates because he or she does not have the
same bargaining power.
Changes in the economic climate
Since the small business entrepreneur does not have easy access to finance etc, it will be
harder hit by an economic downward trend. In these times, sources of finance are limited
and the small business enterprise is forced to pay higher interest rates.
Demographic changes
Urbanisation is an example of demographic change. The small business enterprise which is
responsible for providing essential goods and services is severely affected when people
leave the rural villages for urban areas.
Changes in the buying patterns of buyers
Today, shopping centres are a common phenomenon. Although these centres offer
considerable opportunities for many small business entrepreneurs they also pose a threat to
other already established small business enterprises in that they influence the buying patterns
of consumers. Other changes, such as the development of the infrastructure, may also result
in changes in buying patterns.

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Changes in consumer behaviour
Human beings are always changing. Their needs, behaviour, preferences and demands
change with time. If small business entrepreneurs do not keep abreast of these changes, this
can have a severe impact on his or her enterprise.
Controllable factors
A small business entrepreneur usually has inadequate business experience if he or she does
not have enough technical, management and financial skills.
Technical skills
The technical skill of small business owners implies their ability to carry out the management
task effectively, namely planning, organisation, leadership and control. As the business
grows, greater demands are made on the technical skills of the entrepreneur. Whereas it
was previously easy for them to manage the enterprise on their own with their limited skills,
they become exposed to additional and more difficult problems as the enterprise grows and
requires better technical skills. Sooner or later the enterprise will be confronted with a
situation which cannot be handled by the small business person and this may cause the
enterprise to fail.

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 SESSION 2.
Describe the characteristics of a successful entrepreneur.
Learning Outcomes
• Examples of successful entrepreneurs are discussed in terms of their characteristics.
• Skills, aptitudes, personality and values of entrepreneurial behaviour are clearly
differentiated with examples.
• The importance of each characteristic is analysed in the context of a specific new
venture.
• The technical, business, managerial and personal strategies required for establishing a
successful venture are explained with examples.
ESSENTIAL EMBEDDED KNOWLEDGE
• ESSENTIAL EMBEDDED KNOWLEDGE

• Definitions of skills, aptitudes, personality and values.

• Reasons for business failure as a result of personal profile/attitude.

The Characteristics of an Entrepreneur

Researchers have identified the following business characteristics and management skills of
successful entrepreneurs:
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

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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.
Human relations
Good long-term relationships with suppliers, clients and others involved in the enterprise can
be the difference between success and failure. Entrepreneurs realise they cannot be
successful in isolation.
Perseverance
Setbacks, difficult situations and problems do not influence entrepreneurs negatively. They
regard these as part of the process and remain positive. They have confidence in
themselves and their enterprises.
Commitment to the enterprise
Entrepreneurs dedicate their resources to establishing and building the enterprise by, for
example, using their own money in the enterprise, even taking a mortgage on a property,
and working long hours.
Involvement in the enterprise
Successful entrepreneurs are personally and actively involved in the operations of their
enterprise.
Positive attitude and approach
Failure is seen as a learning experience by successful entrepreneurs. They are realistic and
accept that disappointments are inevitable, and are not discouraged when problems
occur. They are able to identify opportunities even in adverse and difficult situations.
Financial insight
To be successful entrepreneurs need to distinguish between income and profit. Furthermore
they need to know which costs are essential and understand the impact of increased
expenses.
Financial management
Successful entrepreneurs exercise financial discipline and understand when to spend money
on what and how. They possess and develop the ability to make the right decisions to ensure
growth.

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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.

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 SESSION 3.
Develop individual entrepreneurial characteristics.

Learning Outcomes
• Base-line knowledge of self in respect of personality, interests and aptitude is
established by the learner.
• The characteristics of a successful entrepreneur are identified and listed in the
individual`s own context.
• Own strengths and weaknesses as an entrepreneur is determined with examples.
• Strategies to address shortcomings are developed and implemented where possible
• Enabling programmes for the new entrepreneur are identified and explained in terms
of their benefits and limitations.
• Short term goals are articulated and discussed for self in entrepreneurial context
medium and long term goals are planned and determined in the context of
sustainability.
ESSENTIAL EMBEDDED KNOWLEDGE
• ESSENTIAL EMBEDDED KNOWLEDGE

• Definitions of skills, aptitudes, personality and values.

• Reasons for business failure as a result of personal profile/attitude.

Individual entrepreneurial characteristics

We have identified the business characteristics and management skills of successful
entrepreneurs. In evaluating your own abilities it is important to remember that only very few,
if any, successful entrepreneurs possess all these characteristics

Analysing strengths and weaknesses

Use the following checklist and tick off your strong (S) and your weak (W) points. This activity
will assist you in compiling a report on your strengths and weaknesses.
Business Characteristics S W
Risk taking
Creativity
Human relations
Perseverance
Commitment to the enterprise
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Involvement in the enterprise
Positive attitude and approach
Management skills
Bookkeeping for own purposes
Financial insight
Financial management
Management skills
Use experts where necessary
Customer service orientated
Knowledge of competitors
Market orientated
The importance of quality products/services
Planning
Now you can identify your limitations and work on improving them. It is however, more
important that you realise what your strengths are and think about using them to the
advantage of your enterprise

Skills vs. expertise vs. aptitude of an entrepreneur

1. The ability to perform a specific manual task is a skill. Skills can be learned, e.g. are the
ability to do needlework, to manufacture products such as jewellery or shoes, to do
plumbing, hairdressing or provide any physical service. Skills can be acquired through
work related experiences as well as through hobbies or other non-career activities.
These kills may enable you to start your own business.
Think for example about a scholar who loves music. He plays CD’s for his friends at parties
and is soon discovered by other teenagers who invite him to be a disc jockey at their parties,
for which he charges a fee. Soon he becomes popular and is requested to arrange discos at
school functions, weddings, 21stbirthday parties and other special occasions. His hobby
becomes a valuable business.
2. Expertise is based on knowledge. Expertise and knowledge are obtained by studying
and/or experience. There are experts in fields such as taxation, computer systems and
business consultancy. Your experience and exposure to business and to a specific field is
extremely important when planning your own business. It is important to consider
business opportunities in which you have some experience or knowledge.

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An example is the women who worked as a clerk in a factory in which wooden products are
manufactured. The factory went bankrupt and she started her own small business,
manufacturing wooden products with the knowledge she acquired while working as a clerk.
Within two years the business developed into a successful much larger factory.
Do not think you can only start your own business if you were a manager or held a senior
position in another similar or related business. Good observation skills, a willingness to learn
and related experience determine your expertise a specific field.
Each person is born with particular aptitudes and talents. Some are artistic,
some have a talent for communicating and others have a flair for figures. Usually, skills,
expertise and knowledge are a product of natural aptitude, talent and interest. Someone
who has a strong analytical aptitude will be able to learn computer skills easily and so
develop a sound knowledge of computers. Such a person would be able to start a business
for example to assist other people withtheir computer problems in computer programming or
in developing web pages for other small businesses.

People who are artistic should consider art as a career or a hobby. They could design make
or paint product such as interesting cutlery, crockery, jewellery or clothing or even become
interior decorators or specialist painters. Let’s consider the example of a dress designer who
worked for a studio which designed, manufactured and sold or rented bridal gowns. He
soon realised that customers had a need for extensive services related to weddings and
learned a lot by listening to their problems. He started a business to provide a
comprehensive wedding service including the planning, invitations, catering, venue hire,
decorations, flowers, music etc.
In this business he could apply his artistic talent in various ways as well as his experience and
knowledge of the bridal market
Analysis yourself
As an entrepreneur, you need to analyze yourself in terms of skills, expertise and aptitudes
you have towards your venture.
Once you have completed an analysis of your own abilities as an entrepreneur you need to
move on to the next step on deciding on various short-term, medium and long- term goals
and objectives.
Goals are broad targets that a person wishes to accomplish, while objectives are more
specific performance targets. By creating specific goals and objectives, you are creating a
target to aim for and a basis for evaluating your company’s true performance.

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Enabling programmers for the entrepreneur
There are many programmers offered by different training institutions. The entrepreneur
benefits a lot from role models and other people. One can call it an “Apprenticeship”.
Entrepreneurial apprenticeship refers to the preparation process that prospective
entrepreneurs undergo to develop attitudes, behavior and skills by sharing business
experiences with role models. Role models include parents, family or employees who are
successful entrepreneurs.
The motivation for apprenticeship is found in the fact that experience, abilities, technical
and managerial knowledge, wisdom and discretion are formed through experiences in the
relevant industry, market or technology. An apprenticeship period of ten years or longer is
not uncommon to gain experience, gather technical knowledge, and establish networks
and credibility. Two years experience is generally viewed as the minimum experience
needed to be successful.
The essence of successful entrepreneurial preparation is to know where to undergo the
applicable experience and knowledge. Formal training is one aspect and practical
experience another.
Effective Strategies
Teams, instead of jobs, have become the critical building blocks of future organisations.
Teams and teaming are seen as one of the primary means of creating the high
performance, high flexibility and high commitment organisation. Many South African
organisations have gone the route of teams and teaming: Old Mutual, Denel, and Billiton,
some diamond mines in the De Beers Group, Iscor, Sasol, and Eskom. Mounting evidence
demonstrates that designing organisations around teams provides the necessary leverage
for an organisation to become world-class from a people perspective
Why teams have become so popular?
Twenty years ago when companies like Volvo introduced teams into their production
processes it made news because no one else was doing it. Today it is just the opposite. Pick
up almost any business periodical today and you’ll read how teams have become an
essential part of the way business is being done in companies like Iscor, Toyota, Dimension
data, Nissan, Hewlett-Packard.
How do we explain the current popularity of teams?
The evidence suggest that teams typically out-perform individuals when the task being done
require multiple skills, judgement, and experience. As organisations have restructured

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themselves to compete more effectively and efficiently they have turned to teams as a way
to better utilise employee talents.
Management has found that teams are more flexible and responsive to changing events
than are traditional departments or other forms of permanent groupings. Teams have the
capability to quickly assemble, deploy, refocus and disband.
Group Dynamics and Teams
Group dynamics is viewed from the perspective of the internal nature of groups, how they
form, they structure and processes, and how they function and affect individual members,
other groups and the organisation. When looking at groups of people in a working
environment, they go through a number of stages of development.
These stages can be briefly summarised as follows:
1. Forming. This initial stage is marked by uncertainty and even confusion. Group members
are not sure about the purpose, structure, task, or leadership of the group.
Storming. This stage of development, as indicated by the team, is characterised by conflict
and confrontation. (In the usually emotionally charged atmosphere, there may be
considerable disagreement and conflict among members about their roles.
2. Norming. Finally in this stage the members begin to settle into cooperation and
collaboration. They have a “we” feeling with high cohesion, group identity, and
camaraderie.

3. Performing. This is the stage where the group is fully functioning and devoted to
effectively accomplishing the task agreed upon in the norming stage.

4. Adjourning. This represents the end of the group, which in ongoing permanent
groups will never be reached. However for project teams or task forces with a specific
objective, once the objective is accomplished, the group will disband or have a new
composition, and the stages will start over again.

Roles in teams
For a team to work well, several roles must be played –not independently but collectively.
The leader’s role is to develop a team that thinks and acts together with individual and team
interests aligned.
Assigning roles
The efficient team consists of people who can play several key roles (including coordinator,
critic, ideas person, implementer, external contact, inspector, and team builder) in addition
to the skills they bring to the basic tasks of the team. As leader, ensure that all these roles are

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played, sometimes with people combining roles. When organising the team, fit the roles to
the talents available, and provide training if necessary.
Key team roles
Co-coordinator pulls together the work of a team as a whole Critic Guardian and
analyst of the team’s effectiveness
Ideas person encourages the team’s innovative vitality External contact
Looks after the teams external contacts
Inspector ensures the high standards are maintained
Team builder develops the team working spirit Ensuring effective teamwork
Types of teams
Multi-skilling teams
Teams can function well in a situation where each member has a specific task and does
nothing else. But in many cases you need more flexibility, which is when multiskilling becomes
important. Teams function better when people understand each other’s job. Allocate time
for your team members to work with others on the team. For example encourage a
production worker to accompany a salesperson to see a customer, or sit a marketing person
next to an engineer. This broadens perceptions as well as skills and promotes co-operation.
Empowering teams
Empower team members by giving them whole tasks and allowing them to find the best way
of performing them, but make suggestions you feel necessary for improvement. In this way
you are enabling them to use their talents more fully. Let everybody exercise the right to think
and contribute their intelligence to the team.
The effectiveness of teams in organisations
Effective teams need to work together and take collective responsibility to complete
significant task. They must be more than a team in name only. The freedom and autonomy,
the opportunity to utilise different skills and talents, the ability to complete a task that has a
substantial impact on others ensure effective teams.
The most effective teams are neither very small (under 4 or 5) nor very large (over 12). Very
small teams are likely to lack in diversity of views. But when teams have more than about 10
to 12 members, it becomes difficult to get much done. Group members have trouble
interacting constructively and agreeing on much, and large numbers of people usually
can’t develop the cohesiveness, commitment and mutual accountability necessary to
achieve high performance. Therefore in de-signing effective teams, managers should keep

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them in the range of 5 to 12 people. If a natural working unit is larger and you want a team
effort, consider breaking the group into sub teams.
Teams made up of flexible individuals have members who can complete each others task.
This is an obvious plus to a team because it greatly improves its adaptability and makes it less
reliant on any single member.
Let’s look at teams in South Africa
• South Africa only become part of the global arena after 1994, thus teams are still
adapting to doing business in the global market.
• We still have a long way to go with the implementation of fully self directed teams.
• Managing diversity (race, gender, culture) is more complex because of our history- we
still need to develop the “south Africa Way”
• Understanding and implementing empowerment on financial, organisational, team, and
intrapersonal levels need improvement.
• A large proportion of managers don’t understand team dynamics. Developing business
acumen within teams is a challenge
The following are specific behavioural problems within most South African teams: lack of
communication, poor planning for the future, little or no corporation, poor conflict
management, unclear priorities and a lack of learning from successes and mistakes. Team
members are unwilling to put conflict on the table and solve it in a constructive way. In South
Africa, one finds that teams do not spend enough time evaluating their own successes or
failures.
Effective teams are based on mutual trust by all team members. In the South African
context, team effectiveness is a lot more difficult to accomplish due to various factors
ranging the mistrust between blacks and whites. The lack of interaction between different
race groups has made it very difficult for teams to function efficiently. As an entrepreneur
establishing a new business these factors must all be take into consideration in the
establishment of teams to carry out specific task.

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 SESSION 4.
Explain methods to enhance an entrepreneurial profile.

Learning Outcomes
• Methods of mind programming are explained within the context of career paradigm
shift.
• An understanding of mental laws are explained using applicable theories.
• Techniques and principles to implement a paradigm shift from employment paradigm to
entrepreneurial paradigm are described in the context of development of business
opportunities.
• Personal strategic plan is designed and developed in order to select a feasible and
viable new venture.
ESSENTIAL EMBEDDED KNOWLEDGE
• ESSENTIAL EMBEDDED KNOWLEDGE

• Definitions of skills, aptitudes, personality and values.

• Reasons for business failure as a result of personal profile/attitude.
• Group dynamics and effective team strategies.

Methods to enhance an entrepreneurial profile

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. The following are two methods of mind programming which can help
you achieve this goal:
• Visualization
• Affirmation
Visualisation
Visualization is a proven subconscious mind technique used to help you change habits or
achieve your goals. The idea behind this technique is to visualize what you want. It involves

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relaxation techniques combined with positive imaging. Research has shown that visualization
works, whether or not you believe that it will.
Visualization can help boost your self-confidence by improving your own self-image. If you
see yourself as meek or helpless you can use visualization to visualize yourself as strong and
capable. If you think of yourself as unworthy or undeserving; you will use visualizations that
show you as a worthy person making valuable contributions. If you feel you are often
depressed you will use visualization that you are happy. Whatever your issues are there is a
visualization you can use to help build your confidence in that area.
Another way you can use subconscious mind visualization is to help change how you
interact with others. If you are meek and shy you will use visualize yourself in situations with
others where you are more outgoing. You may have issues with assertiveness in which case
you will visualize yourself being more assertive with others. This technique can be used for
many relationships that you have issues with. The key is to imagine yourself acting in a
situation as you wish you acted.
You can also use visualization to reach specific goals. Think about the goal you want to
obtain, and then visualize yourself already having obtained the goal. You picture yourself
being what you want, doing what you want and achieving what you want.
Visualization is something you already do; however, if you have low self-confidence you are
doing it negatively.
You now need to train yourself to swap any negative thoughts for positive ones. With
practice, you can train yourself to use your mental energy towards positive visualizations.
Here are some things to remember when using visualization.
Visualize what you consider to be your biggest issues. Start with the larger issues, and as you
become better at the process you can incorporate smaller issues.
• Choose visualizations that directly tie into your self-esteem. If you want to bemore
assertive, choose a situation where you are assertive to visualize.
In your visualizations, picture yourself as having the quality you desire andshow yourself
positive consequences of the behaviours.
• When you visualize yourself make sure you are using assertive body language in the
scene.
• Look at self-confidence as something you already have but just need to get back in tune
with.
Affirmation

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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
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.
An understanding of mental laws
Mental laws of life
According to Napoleon Hill and Dennis Kimbro in Think and Grow Rich: A Black Choice, there
are 8 mental laws. These laws are the laws that govern all thinking.

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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.
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

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 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!
Design a personal strategic plan
Some suggestions for employees who want to make the leap to entrepreneur:
1) Spend time thinking about what is it you're valuing about your own career.
2)If you're an entrepreneur who's hiring, take time to consider whether your location is a
barrier to employment, and whether your compensation aligns with what a candidate is
looking for. If those things aren't aligned, odds are your candidate will either turn the job
down or won't last long as an employee.
Those considerations can also affect whether you quit your job to start a business or stay
employed and do it on the side. How much time do you have in your day? How much is
already devoted to other pursuits? For some people, it's feasible to do a part-time business. For
others, it isn't.
3) Are you going to like wearing many hats? If you worked in a large organization, you likely
had many resources. As an entrepreneur, you'll find yourself doing things that other
people were responsible for in your previous organization, or things you used to delegate.
You can have control over your time. You can prioritize the things you think aremost
important and the business opportunities I think are most relevant to the top of the list. In a
corporation, your time often is dictated around other people's calendars.
4) Don't be afraid to ask people for help or to seek out resources online and elsewhere. You
can go to the bookstore and look at books around small businesses. There are also DVDs
and charts and plans available. If you go online, there are lots of resources available.
Find them, and don't be afraid to ask.
5) Don't wait until you start your business to get involved in the industry. Start interacting with
professional organizations and networking groups ahead of time. People will be happy to
help you.

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Join an organization to be around people who have done this. You hear the good, the bad
and the ugly. There are no words to describe how valuable that can be."

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 6
Implement an action plan for a new
venture
Learning Unit

UNIT STANDARD NUMBER : 263534

LEVEL ON THE NQF : 4
CREDITS : 4
FIELD : Business, Commerce and Management Studies
SUB FIELD : Public Administration

This Unit Standard is intended for learners within Small, Micro and Medium Enterprise
Sector. The learner will be able to implement an action plan, in terms of the
PURPOSE:
practical and physical aspects, derived from a business plan for establishing a new
venture.
Learners credited with this unit standard will be able to:

• Design an action plan for a new venture.

• Set up business premises and operational systems.
• Implement business financial systems.

• Identify the risks associated with the new venture.

LEARNING ASSUMED TO BE IN PLACE:

It is assumed that the learner has the following knowledge and skills:
Communication at NQF Level 3.

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

Learning Outcomes
• Actions to be taken to establish a business are listed according to priority.
• An explanation is given of the reason for the priority assigned to each action.
• Time frames are scheduled for prioritised actions.
• Deadlines are determined for scheduled actions.
ESSENTIAL EMBEDDED KNOWLEDGE

• Planning according to time frames and priorities.

• Monitoring and revising implementation plans.

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.
In drawing up your action plan you should ask yourself the following questions:
1. What has to be done?
2. When should it be done?
3. Who should do it?
4. Where should it be done?
5. What priority should it have?
6. How much time it will require?
When drawing up an action plan checks that the following has been done:
• Has the project been broken down in a logical sequence
• Has the special action plan form or copy of it been used.

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• Is the action plan brief, but with relevant detail (i.e. is it clear what must be done,by whom
and by when)?
• Has every step your task been included?
• Is the particular person to whom you have allocated the task available?
• Have deadline dates for completion and follow up dates been allotted to eachtask or
project.
• Has there been mutual agreement on the deadline and follow up dates?
• Are the deadline dates realistic and achievable?
• Have action words (verbs) been used to describe each task.
• Has a description been given how each task will be completed?
• Have comment been written for each task.

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.

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.

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 SESSION 2.
Set up business premises and operational systems.

Learning Outcomes
• A comparison is conducted of the leasing or purchasing of premises by means of
analysing the advantages and disadvantages of each option.
• A suitable location and premises are identified for the new venture.
• Operating and communication systems are put into place for the new venture.
• A brand is established for a the new venture.
• Legal issues and safety regulations for the premises are adhered to in terms of the
relevant legislation.
• Resources are procured according to the business requirement.
ESSENTIAL EMBEDDED KNOWLEDGE

• Implementation of finance, marketing, operational, administrative,

management plans.
• Business name and registration, market research of product, need or
service, proposed business structure, location of the new venture,
analysis of competition, projected budget income statements,
projected cash flow data, personal investment and skills.
• Evaluation of relevant resources.

Setting up business premises and operational systems

Lease or Own?
Although the value of a business has little affect on the value of the real estate, owning real
estate as a business asset offers some positive financial advantages. For instance, financing
options are more numerous for real estate than for other capital assets. Because real estate
is viewed as an investment with a virtually unlimited lifespan, it can be financed with equity,
mortgage loans, or sale-leaseback financing. This last option which is somewhat analogous
to an interest-only loan with no requirement to ever repay the principal is not available for
equipment, which, in comparison, has a brief lifespan and is more subject to functional
obsolescence.
The best way to compare the value of owning commercial real estate to leasing it is to
create a purchase versus lease model, similar to comparisons for other business investments.
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However, being able to either own or lease real estate makes analysing financing
alternatives more complex. With equipment, options are often limited to loans or capitalised
leases, which are both debt equivalents. Therefore, comparisons are based on one factor:
rate. We can also make rate comparisons for real estate mortgages and operating leases.
However, the analysis is complicated by the different tax ramifications and the need to
factor in real estate appreciation and lease escalations.
In addition, real estate ownership carries a potential opportunity cost. Owning real estate
through either equity or mortgage loan financing is likely to exclude further investment in the
business, such as expansion or renovation. Further operations investment might produce
greater returns than the real estate investment, thus creating an opportunity cost that
accompanies real estate ownership. As a result, any comparisons made between owning
and leasing should include an opportunity cost comparison as well as a rate comparison.

It is important to determine the best place to establish a specific type of business because
this will influence the competitiveness of the business. Market research and a thorough study
are therefore important before you sign a rental or purchase contract. Contracts must be
handled with great care and the assistance of an attorney, as they are long-term
agreements and ignorance has cost many a business dearly. Read the fine print carefully.
You can also negotiate an agreement that will be more beneficial for the business.
Factors that play a role in the choice of the place of establishment
There are many factors that play a role in identifying a place of establishment for the
business. As an entrepreneur ready to establish your own business you will have to look at the
different considerations in terms of a manufacturing and commercial business. It is important
to choose the right place for the establishment. It is a good idea to read widely on the topic,
to make enquiries and ask experts for advice.
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

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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.
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
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

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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

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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.
A brand is established for a new venture.
One of the biggest reasons business entrepreneurs often fail to attract customers is that they
also fail to create a professional image.

➢A professional image is an element of your credibility and without credibility

winning customers is an uphill battle

➢A professional image of a business should reflect through all aspects of the

business that comes into contact with the outside world.
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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
Another means of maintaining a professional image is by keeping your promises that you
made to the customers. A person will not go back to you for business if you or your product
did not do as promised.

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 SESSION 3.
Implement business financial systems.
Learning Outcomes
• A banking scheme is selected which is most suitable to the new venture.
• Financial systems are established to eliminate fraud and to ensure efficient control of
money, debtors, creditors, cash flow and the budget.
• Financial control and auditing systems are applied in the financial system.
• Screening procedures for debtors are established to ensure bad debts are eliminated or
kept to a minimum.
ESSENTIAL EMBEDDED KNOWLEDGE

• Implementation of finance, marketing, operational, administrative,

management plans.
• Business name and registration, market research of product, need or
service, proposed business structure, location of the new venture,
analysis of competition, projected budget income statements,
projected cash flow data, personal investment and skills.
• Evaluation of relevant resources.

Business financial systems are arranged

Financial control
By law, you must keep financial records which are reliable and provide an accurate view of
your business. SARS has the right to view these records in the event they want to audit your
business’s (or your personal) tax return. If they do not like what they find, the penalties can
be deadly to your business and your own personal financial well-being.
Common sense demands financial records as well. Without financial systems you are
probably going to lose deductions and have much less control over how much money you
make (or lose). For those of you with no accounting experience or training, record keeping
may seem like a daunting and burdensome task, but it does not have to be. In this section
we will discuss ways to make it simpler and, hopefully, less expensive.
Do it yourself or Hire Someone Else?
Many small business owners hire someone to ―keep the books‖ rather than do this work
themselves.

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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.

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(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.).
Income/Revenue Records
Hopefully, like many enterprises, your business will make money as well as spend it. Just like
expenses, you need to record all income (revenue) of your business. Your business’s income,
or ―gross receipts‖, needs to be carefully tracked because not all money your business
receives will be taxable income. Money you receive from clients in return for your business’s
goods or services is taxable income. Money you receive from the bank as a loan is NOT. At
the end of the year when you are figuring out your tax bill, it is vitally important for you to be
able to separate the two and pay tax only on the former. Different businesses use different
methods of recording their business income. Your local grocery store probably uses
electronic cash registers which feed their totals into a central system.
It is absolutely vital that your records of income received (or other moneys received, such as
loans) give you at least some indication of precisely where the money came from and why
you received it. You see, if SARS audits you and it finds that your business’s bank records
show deposits totalling R200,000 but your tax return shows reported income of R150,000, a
stern SARS auditor is going to ask you how your business came to posses that unreported
R50,000. if you cannot say precisely what its was (e.g., money lent by your bank, return of
money lent to a relative, money inherited by you and put into your business, etc.), the SARS
will label it ―unreported income‖ and you will have to pay taxes on it as if this was business
income.

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Your record of revenues received should, at the least, record similar information:
• The type and amount of payment.
• Date of the transaction.
• The party who paid the money.
• The work performed or goods provided.
Asset Records
All equipment (e.g., computers, fax machine, copiers, etc.) and other assets which have a
life span of more than a year must be recorded and the cost deducted over the life span of
the asset. Thus, you need to keep records concerning your business’s asset.
You must keep asset records providing the following information:
• Description of the asset.
• Date of acquisition.
• What month you started using the asset (usually the same as purchase).
• Total amount paid for the item, including taxes, delivery charges and fees.
• Sales price of any asset sold.
• Date of sale of any asset.
Cost of selling the asset (advertisement, broker’s fees, etc.)

Whether you use the assets for personal use and, if so, how much time the asset is employed
for such uses.
A banking scheme is selected which is most suitable to the new venture First National Bank
can offer the following:
The Progress Fund
• 18-35 year old previously disadvantaged individuals (PDIs) that require financing to start-
up or expand their businesses.
• 18-35 year old PDIs that on their own, or as a part of a management team, want to buy
an existing business, either in whole (acquisition or management buy-out) or in part
(management buy-in).

Enterprise Solutions
• Businesses with low equity and/or collateral bases that require financing to start-up or
expand their businesses;

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• Individuals or management teams that want to buy an existing business, either in whole
(acquisition or management buy-out) or in part (management buy-in), particularly BEE
transactions;

ABSA can offer the following:

Commercial Property Finance

Absa's Commercial Property Finance provides initial advice and throughout project
guidance in creating relationships in property finance.

Business Asset Finance

Absa Asset Finance will assist in the financing of all business assets with a number of solutions
to address the particular financing requirements.

Term Loans
Term Loans address medium to long-term finance requirements with flexible repayment and
usability options.

Structured Finance
Structured Finance assists businesses in reducing investment risk while improving cash flow.

Debtor Finance
Debtor finance offers working capital solutions to high growth businesses through the
discounting of domestic and international debtors.

Standard Bank can offer the following:

• Our business account is simple to manage, and allows you to transact in the way that is
most convenient for you, from traditional branch banking to using our advanced
electronic services.
• The account is linked to a Business AutoBank card which is the key to business remote
banking. This enables you to:
• Access all our banking channels
• Do your banking on the Internet, by telephone, cellphone and at our AutoBank centres
• Pay for business purchases at merchants displaying the Maestro sign

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• The security features built into your Business AutoBank card let you issue cards to as many
employees as you want.
Screening procedures for debtors are established to ensure bad debts are eliminated or kept
to a minimum
• There are a number of regulatory bodies that can give information on persons who are
black listed
• It is always considered a high risk to allow customers paying on credit.

Applying ethical procedures

A code of conduct should be established for your new venture which should include ethical
procedures and the fair treatment of internal and external clients. Let’s look at some business
ethics that you can apply.
Business ethics apply to every aspect of the business. Although many ethical issues emerge
daily in businesses, the following broad examples have already been identified in the various
functional components of a business:
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

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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.

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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.

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 SESSION 4.
Identify the risks associated with the new venture.
Learning Outcomes
• A security system is established according to the identified financial risks.
• Emergency procedures are established according to the evaluated safety and security
risk.
• The most suitable insurance scheme is selected based on investigated needs.
• A stock and business assets loss plan is developed according to the identified risk.
ESSENTIAL EMBEDDED KNOWLEDGE

• Implementation of finance, marketing, operational, administrative,

management plans.
• Business name and registration, market research of product, need or
service, proposed business structure, location of the new venture,
analysis of competition, projected budget income statements,
projected cash flow data, personal investment and skills.
• Evaluation of relevant resources.

Identify the risks associated with the specific business

When starting a business venture the entrepreneur is taking certain business risks, some of
which are unavoidable, but others can be covered by insurance. In any business the
possibility that years of hard work might be lost owing to theft, accidents or a fire should not
be ignored. Insurance is usually voluntary but nevertheless important. The entrepreneur
should thus develop a well planned insurance policy, which can cover these losses by
means of insurance payments.
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

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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.
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.
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.
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.

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Unemployment insurance (Act 30 of 1966)
The unemployment insurance fund is administered by the Department of Labour. If an
employee was obliged to contribute to the fund, he is entitled to claim from the fund for a
certain period of time, while he cannot find other employment. The maximum time that a
person can claim for is 6 months, but this is also linked to the time that contributions were
paid to the fund.

Workmen’s compensation (Act 30 of 1941)

Employers are forced to contribute to a fund which will compensate employees against
medical disability or death, which might happen while they are performing their jobs.
Motor vehicle accidents
Innocent victims of motor vehicles accidents as a result of negligence or reckless driving can
be compensated if the driver of the vehicle was not insured and therefore could not
compensated for the damage. The contributions to this fund are made from the levies that
are built into fuel sales.
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.

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(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
Emergency procedures are established according to the evaluated safety and security risk
The guidelines as stipulated in the Occupational Health and Safety Act 85 of 1993 should be
followed to ensure the safety of employees.
An emergency evacuation plan should be established and communicated to all
employees.
Response to emergency situations
Evacuation
Every store should have an evacuation policy and procedure and every single staff, whether
full time or part time should know these procedures and their role in the event of an
evacuation. There is no time to be lost in the event of an evacuation and panic has proven
to be the main reason for injury and death. It is your responsibility as a staff member to know
what to do and ensure the customers are shown what to do in a calm manner.
The Planning
Even in a small store with just the owner and another person, this is necessary. It might be a
simple plan, but is still necessary. In a large wholesale or a supermarket, this is even more
necessary and would require detailed training of all the staff. Usually the manager would
make the decision and, in some organisations this would be communicated to the head or
regional office, if there is time.
Notifying all Staff

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The first step would be to notify all staff – this is usually done via a code announced over the
loudspeaker. Every staff member would have designated duties and on hearing this
announcement, would commence their duties.
Stop more customers entering
The first thing to do would be to stop more people entering the store. So some staff would go
immediately to the front doors, close them and stand at the doors explaining to customers
who want to come in that the store is closed. Very often, rather than cause panic, they
would tell shoppers that they are having an evacuation practice.
Behind the Scenes
Behind the scenes the person in receiving would stop taking in deliveries and would either
close the receiving door or stand by it in case it is to be used as one of the emergency exits.
In the office, staff would put any monies they are busy with, into a safe and also stop what
they are doing.
Marshals
Marshals would take up their position at the emergency exits ready to open doors.
Communicating with Customers
Designated staff would make their way onto the shop floor and it is usual for each aisle to be
allocated some staff to start at one end and work their way to the other. It is the duty of
these people to ask customers to leave their baskets and trolleys just where they are and to
leave the store immediately. This is an extremely important role. If this is not done correctly,
panic can set in.
What to Say to Customers
Every organisation will have a set statement for the staff to use but it is usually something
along the lines of telling the people that this is an evacuation and asking them to please
leave the store immediately.

However, it is how this is said that can either cause panic or instill calm in the customers. It is
very important that the staff doing this remain calm themselves. If they panic, the customers
will panic.
Difficult Customers
The other problem is that you will come across the customer who does not believe that the
evacuation is real and wants to finish their shopping before leaving the store. These people
must be handled politely (they are still customers) but firmly and you must insist they leave
their things just where they are and make their way to the designated exits.

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Staff Meeting Point
Once all the customers are out the staff will start to leave the store and make their way to
the designated meeting point. This is usually a point in the open, far away from the store so it
is safe but within sight of the store in case the police or fire services are on the way and need
to be let in.
Roll Call
It is important that the organisation check that all staff have evacuated the building. While
there are a few ways of doing this, many stores still using clock cards would have someone
gather the clock cards and when everyone meets at the designated meeting point, ensure
everyone is present and nobody missing. Another way of doing this is to have every section
supervisor checks that all his/her team is at the meeting point.
Maintaining Security
Management would ensure the doors to the store are locked but be ready to open the store
for the emergency services, when they arrive.
Example: Evacuation Procedure (Fire)

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 On discovery of a fire the main responsibility is to raise the alarm, Follow the steps below in the
case of a fire occurring in your organisation.

1. Keep calm – you need to be able to think clearly. Make sure you have the following
information:
• Where the fire is;
• What type of fire it is (what is burning);
• How big the fire is.

2. Sound the fire alarm.

3. Instruct Switchboard to notify the Duty Manager and General Manager, who will decide if
it is necessary to inform Security and/or the Fire Brigade.
4. Assist in contacting all customers and tell them the following:
• That there is a fire;
• That they must evacuate the building and proceed to the assembly point;
• Where the assembly point is;
5. Close the doors and windows in the designated work area, and switch off any electrical
equipment, as well as the air-conditioning, before proceeding to the assembly area.
6. If the fire is in the designated work area, and is too big to control, leave the area and
make sure that nobody is left in the area. Staff should only use the appropriate fire
fighting equipment if he/ she is confident that he/ she can use it safely.
7. Once the alarm has been alerted, evacuate the area and proceed to thenominated
Assembly Area
8. Do not wait to clear your desk/office or locker.
9. Switch off any electrical or gas equipment.
10. Close the doors and windows before leaving, and make sure the door is closed behind you.
11. Walk briskly – do not run. Remove high-heeled shoes as they slow you down. Calmly assist
guests and staff who may need help.
12. If there is a great deal of smoke, cover your nose and mouth with a wet towel,

and crawl on hands and knees.

13. Work your way towards the ground floor and the outside of the building.
14. If you are trapped, ensure that all the windows and doors are closed and stop the gaps with
wet linen. Stay near the windows so that you can be seen.
15. Once outside the building, make your way to the assembly point and await roll
call and further instructions.

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To ensure the security of the equipment, a security system should be installed by a security
company that will come out when the alarm is set of so that they handle the situation in a
professional manner.
A stock and business assets loss plan is developed according to the identified risk
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
Monitoring and revising implementation plans
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

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operation of your business. It demonstrates to all that "you really are managing the business
according to your plan".

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