Chapter 5 ENTREP New Book

CHAPTER 5
BUSINESS
IMPLEMENTATION
Learning Objectives
After studying this chapter, the reader should be able to:
1. Identify factors to consider prior to operating a small

business.
2. Identify and apply segmentation, targeting and positioning
in marketing a business.
3. Learn how to prepare, analyze, and interpret a financial
statement or report and use it to make efficient
management decisions.
4. Prepare a business plan for a small enterprise.
5. 1 BUSINESS IMPLEMENTATION
AND OPERATIONS
At this stage, the entrepreneur will now implement the contents of
the business plan. The blueprint for operations undergoes validation
and evaluation to determine whether or not the business will be a
success. Below are some pointers you should consider before
implementing an enterprise to minimize the risk of failure:
You must secure the required business permits. This will ensure
that you avoid legal complications that may arise before and
during operations.
All documents, records, and control parameters must be readily
available, as these can serve as reference for decision-making
and policy formulation.
5. 1 BUSINESS IMPLEMENTATION
AND OPERATIONS
Prepare contingency plans for human resources and
financial concerns that may arise during operations.
Identifying the best and worst case scenarios in the
business plan may help direct you away from failure
liabilities and business difficulties.
During the initial period of operations, work within your set
budget, Going beyond your budget may lead to difficulties
in the future.
5.2 Identification of Potential Customers
Using Segment-Targeting-Position (STP)
According to McDaniel, Lamb, and Hair (2012), customers

generate revenues for the organization and in exchange, they
expect that goods and services are of high quality and are delivered
on time. Customer satisfaction leads to higher revenues and the
ability to enhance the satisfaction of other stakeholders.
Customers are very important, as they are the ultimate
reason why any business exists and thrives. Businesses that are
able to property identify and treat their customers well can easily
achieve success. However, to reach this stage, the entrepreneur
should first clearly specify the customers they will serve. This can be
done using market segmentation and targeting.
5.2.1 Segmentation
Segmentation refers to the division of the total
market (which can be individuals, groups
organizations) into segments based on their
characteristics. The most important task in this phase
is to identify a market segment that will produce
substantial, measurable, and accessible segments
that will respond to marketing mix.
Market Segmentation can be done
based on the following characteristics:
 Geographic segmentation – refers to segmenting markets by region of a
country or the world, market size, market density or climate.
 Demographic segmentation – refers to demographic information such as
age, gender, income, ethnic background, and family life cycle.
 Psychographic segmentation – refers to personality, motives, lifestyles,
and geodemographics.
 Benefit segmentation – refers to the process of grouping customers into
market segments according to benefits they seek from the product.
 Usage rate segmentation – refers to dividing the market by the amount of
product bought or consumed. Segmenting by usage rate enables marketers
to focus their efforts on heavy users or to develop multiple marketing mixers
aimed at different segments.
5.2.2 Targeting
Target market refers to a group of people or

organizations for which an enterprise designs,
implements, and maintains a marketing mix intended
to meet the needs of that group, resulting in mutually
satisfying exchanges.
Three General Strategies used in
selecting target markets
1. Undifferentiated - refers to a mass-market philosophy,
where the market is viewed as one big market with no
individual segments.
2. Concentrated – refers to a firm’s strategy of selecting a
market niche (one segment of a market) as a target of its
marketing efforts.
3. Multi-segment targeting – refers to a firm’s strategy of
choosing two or more well-defined market segments and
developing a distinct marketing mix for each.
5.3.2 Positioning
Positioning refers to the process of influencing

potential customers’ overall perception of a brand, product
line or organization. It is also the place a product, brand, or
group of products occupies in consumers’ minds relative to
competing offers.
Examples :
 “We find ways”- BDO
 Let’s make it easy – BPI
 The Olympic Energy drink - Milo
5.3 Financial Statement Preparation
Entrepreneurs must be familiar with various aspects of

their business, especially accounting. This part is difficult
for many, particularly those who are unfamiliar with
accounting features.
According to Moore and his co-authors (2012), it reflects a
firm’s financial performance and resources and include
statement, balance sheet, and cash flow statement.
Case Study 1: Audrey and Aeyah’s
Sago’t Gulaman Business
Assets Debt and owner's equity
Cash ₱600.00 Audrey & Aeyah's equity ₱600.00
Total Assets ₱600.00 Total Loans & Equity ₱600.00
Assets Loan (Debt) and Owner's Equity

Cash ₱2,600.00 Loan From Mom ₱2,000.00
Total Assets ₱2,600.00 Audrey & Aeyah's equity ₱600.00
Total Loans & Equity ₱2,600.00
Cash ₱600.00 Loan From Mom ₱2,000.00
Inventory ₱2,000.00 Audrey & Aeyah's equity ₱600.00
Total Assets ₱2,600.00 Total Loans & Equity ₱2,600.00
Sales (60 cuos x P50.00) ₱3,000.00

Cost of Sago't gulaman sold
(60 cups x P12.50 cost per cup) -₱750.00
Profits ₱2,250.00
Balance Sheet at the end of the Day:

Accounts Receivable ₱1,500.00 Audrey & Aeyah's equity ₱2,850.00
Inventory ₱1,250.00 Total Loans & Equity ₱4,850.00
Total Assets ₱4,850.00
Thus, reconciling their profits with these
changes required the following calculations:
Profits ₱2,250.00
Increase in Accounts Receivable -₱1,550.00
Decrease in Inventory (a) ₱750.00
Net increase in assets -₱750.00
Change in Cash ₱1,500.00
Accounts Receivable ₱0.00 Audrey & Aeyah's equity ₱2,850.00
Inventory ₱1,250.00 Total Loans & Equity ₱4,850.00
Their income statement looked like this:
Sales (100 cups x P50.00) ₱5,000.00

Cost of Sago't gulaman sold (100cups x P12.50 cost per cup) -₱1,250.00
Salaries -₱1,250.00
Profits ₱2,500.00
Balance Sheet at the end of the Day:

Accounts Receivable ₱0.00 Audrey & Aeyah's equity ₱5,350.00
Inventory ₱0.00 Total Loans & Equity ₱7,350.00
Cash inflows and outflows should be
listed as follows:
Audrey and Aeyah's initial investment 600

Loan from Mom 2000
Purchased inventory -2000
Cash Collected from the first Saturday's sales 1500
Collection from Account receivable 1500
Cash Collected from the second Saturday's sales 5000
Salaries -1250
Ending cash 7350
5.4 Requirements for Registering Your
Business
For Single/Sole proprietorship:
Certificate of business name registration from the
Department of Trade and Industry (DTI)
Barangay/municipal/regional clearance (depending on the
intended scale and scope of operations)
Business permit from the mayor’s office
Business tax identification number (TIN) from the Bureau
of Internal Revenue (BIR)
The detailed registration procedure is
as follows:
1. Register your business with the DTI and obtain a business name
registration certificate.
2. Obtain a barangay/municipal/regional clearance from the local
government where you will set up your office or business. The
requirements are:
a) Business name registration certificate
b)Two valid IDs
c)Proof of address of business location. If you will be operating
your business from your home, your home address will suffice.
as follows:
3. Secure a business permit from the mayor’s office. Be sure to
bring the following:
a) Business name registration certificate
b) Two valid IDs
c) Community tax certificate (in some cases)
4. Go to the BIR district office of your target business location and
submit the following requirements:
a)Business name registration certificate
b)Mayor’s permit
c)Barangay Clearance
as follows:
d) Proof of your business address (e.g., lease/rental agreement, land
title)
e) Book accounts, receipts and invoices. The book of accounts can be
purchased from office supplies stores. Receipts and invoices can be
obtained from BIR-accredited print shops.
5. Obtain a tax identification number (TIN).
6. Fill out an application form for a Certificate of Authority to print Receipts
and Invoices.
7. Have your book of accounts, receipts and invoices stamped by the BIR.
8. Apply as a self-employed member of the SSS. This is compulsory for all
business owners in the Philippines

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CHAPTER 5

1. Identify factors to consider prior to operating a small

According to McDaniel, Lamb, and Hair (2012), customers

Target market refers to a group of people or

Positioning refers to the process of influencing

Entrepreneurs must be familiar with various aspects of

Assets Loan (Debt) and Owner's Equity

Sales (60 cuos x P50.00) ₱3,000.00

Assets Loan (Debt) and Owner's Equity

Sales (100 cups x P50.00) ₱5,000.00

Assets Loan (Debt) and Owner's Equity

Audrey and Aeyah's initial investment 600

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