Module 3: Entrepreneurship

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1 SWOT analysis One of the best ways to test if your business idea is a viable one is to use a tool called the SWOT analysis. It draws out strengths, weakness, opportunities and threats. Strengths and weaknesses are part of the internal environment and can be controlled within the business and opportunities and threats are part of the external environment and can not be controlled but can be taken advantage of or stopped. A SWOT analysis looks like this: Strengths Weaknesses Opportunities Threats Activity 1 Get into groups of 3 or 4 and draw up a SWOT analysis for your group. Look at everyone s skills and weak areas to help you fill this in. Business Ideas Entrepreneurs are not all born entrepreneurs. All the characteristics of an entrepreneur can be learnt and with hard work and lateral thinking an entrepreneur can be born. One way of generating ideas is by brainstorming. Brainstorming is writing down all the ideas that you have without judging them and shortlisting the best ones. Next you need to write a business plan to get all your thoughts in order and to borrow money. No financial institution will lend you money unless you have a solid business plan. 1

2 The main thing that you need to remember is your original VISION. This is your long term goal. Next you create a mission statement. A mission statement is a summary of the aims and values of your business. Activity 2 Let s start our own business. Name Logo Mission statement Vision and SWOT analysis On a separate piece of paper write down 3 headings; short term goals, medium term goals and long term goals. Your vision is your short term goals and your mission statement is more medium to long term goals and how you attend to achieve this. Marketing Campaign In Grade 8 you did Market Research which included a questionnaire and a customer needs analysis and these are both tools to collect information from the market which will help you make informed decisions about your business. Activity 3 Design a questionnaire and a customer needs analysis. Customer is king. So in order to find out whether the customer wants your product you have to ask them and then sell it to them. Before you design a marketing plan you must consider these things: Who is your target market? Private individuals Who will buy it? Why will they buy it? Where do they live? How much free time do they have? How much disposable income do they have? Do they watch tv, listen to the radio or have access to the internet? Businesses which businesses will buy it? Where are they located? Will they buy in bulk? How can you get their attention? 2

3 Tenders Are there tenders for this kind of product? Where can you find out about tenders? Trends What is fashionable? How can your product affect the environment? Blackberrys? Petrol prices? The 4 P s of marketing are the foundation of any marketing campaign: Product Activity 4 Design your product and the packaging for the product. Packaging is a huge part of your product. Your product might be excellent but if the packaging does not reflect the same quality, you might loose sales. 3

4 Price We have completed the product now we need to focus on the price: All the costs to make the product or to get the finished product need to be considered. Do not leave ANYTHING out, include things such as transport, VAT and postage. Retail businesses buy goods at a certain price and then sell these goods at a higher rice to their customers. These businesses charge a sales (selling) price to their customers. The difference between the cost price and the selling price is called the mark up. The mark up on all the goods sold is known as the gross profit from which all the operating expenses are deduced to calculate net profit. Activity 5 New Era p84 Task 4.1 A and B Calculating Cost of Sales, Gross Profit and Selling Price The equation to be used is: Cost of sales + Gross Profit = Selling Price The other equation we use is: Cost of sales x mark up = ( ) + Cost of sales = Selling Price 4

5 There are two types of costs involved in a business and theses are : 1. Fixed Costs fixed costs are constant, they remain unchanged for up to a year. 2. Variable Costs variable costs changed according to the quantity of product produced. Another definition that we need to look at, at this stage is: Break even point is when total income equal total costs. Hiding the cost price amount 5

6 Activity 7 New Era p87 Task 4.3 Activity 8 1. Calculate the selling price of your product. 2. Which method of cost coding are you going to use for your product? 3. Calculate the selling price of your product. 4. Draw a picture of your price label. This must include the cost price in a way that the customer can not detect it. Activity 9 New Era p46 Task to 4 Part of the price section is a decision about market penetration and market skimming. Market Penetration: this is when your prices are low and you depend on large sales to make a profit. Market Skimming: This is when you have a high price on your product. You are going to sell to a few people that can afford your product. You will need a product that is very different or has a strong brand name. Place We have discussed the product and price of the marketing campaign. Now, lets look at place. Place refers to the actual distribution of the product and where you will sell it. The distribution of your product will depend on te product that you are selling, the market that you are aiming at and the price strategy you have decided. If you are looking at market penetration you will have a low profit margin hoping that you will sell a large quantity of goods. Activity 10 Write a paragraph for your business plan explaining where you would sel your products and how you would go about this. 6

7 Promotion The last of the 4 p s is promotion. Although we have dealt with each of the 4 p s separately, they are all interconnected. That means that a decision made in one p will affect the other p s. Another word for promotion is advertising. How are you going to make your target market aware of your product? Most businesses advertise in newspapers, magazines, the internet and on tv. If you are starting a business you might not have enough money to pay for this type of advertising. Activity 10 Design an advertisement to promote your product. Forms of Ownership Activity 11 New Era p50 Task 2.19 Financial Recording There are two areas with record keeping that must be regarded as very important. Money transaction and stock control. All money that is received and spent must be recorded accurately. Records of how much stock is purchased and sold must be recorded accurately. The difference will be what should be in the store or the shop. Financial Analysis At least once a year an Income Statement and Balance Sheet are drawn up. These are used to calculate how much income tax is needed to be paid to the receiver of revenue. It is a photograph of the financial situation of the business. It will show whether or not the business is doing well or not. T will answer questions such as: 7

8 Did we make a profit? Have we made enough profit to continue with the business Would it be better to close and invest our money elsewhere? Are there any expenses that are higher than they should be? What is the difference between the gross profit and the net profit? Is it acceptable? THE BUSINESS PLAN 8

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