Entrepreneurship Study Guide PDF

4 ms\ **manpower\ **types of workers: direct & indirect **Method** **Machine** **Materials**\ types of materials: direct & indirect SETTING UP THE BUSINESS\ \ 1. DEVELOP A PRODUCT DESCRIPTION\ 2.1. CREATE A PROTOTYPE OF THE PRODUCT\ 2.2. TEST THE PRODUCT PROTOTYPE\ 2.3.  VALIDATE THE SERVICE DES...

4 ms\ **manpower\ **types of workers: direct & indirect **Method** **Machine** **Materials**\ types of materials: direct & indirect SETTING UP THE BUSINESS\ \ 1. DEVELOP A PRODUCT DESCRIPTION\ 2.1. CREATE A PROTOTYPE OF THE PRODUCT\ 2.2. TEST THE PRODUCT PROTOTYPE\ 2.3.  VALIDATE THE SERVICE DESCRIPTION OF THE PRODUCT WITH POTENTIAL CUSTOMERS TO DETERMINE ITS MARKET ACCEPTABILITY\ 3. SELECT/PINPOINT POTENTIAL SUPPLIERS OF RAW MATERIALS AND OTHER INPUTS NECESSARY FOR THE PRODUCTION OF THE PRODUCT OR SERVICE\ 4. DISCUSS THE VALUE/SUPPLY CHAIN IN RELATION TO THE BUSINESS ENTERPRISE\ **Supply Chain** -- the process of all parties involved in **fulfilling a customer request** **Value Chain** -- a set of interrelated activities a **business uses to create competitive advantage** VALUE CHAIN IN RELATION TO THE BUSINESS ENTERPRISE \ The idea of value chain was pioneered by **Michael Porter**. Value chain gives the company the ability to **create value** that **exceeds the cost** of providing its good and services to customers.\ \ **Inbound logistics** -- receiving supplies/ materials, warehousing or safekeeping and inventory control of the items\ **Operations** -- value creating processes that transform inputs into products (these are the methods/processes of your business)\ **Marketing and sales** -- activities that are related to getting a buyer or customer to purchase a product/service **Outbound logistics** -- activities required to get a finished product to a customer such as transportation and delivery **Services** -- activities include those that maintain and enhance a product's value (giving customers more than what they paid for - such as after-sales customer support) SUPPLY CHAIN IN RELATION TO THE BUSINESS ENTERPRISE A supply chain comprises the flow of all activities associated with the different stages of creating and selling a product or service. Supply chain functions include: 1. 2. 3. 5\. Recruit qualified people for your business. Job description - usually lists out the job title, location, job summary, working environment, duties to be performed on the job, salary, benefits, etc. Job specification - lists out the qualifications, experience, training, skills, emotional attributes, mental capabilities of an individual to perform the job. 6\. Develop your business model. - also called Brick and Mortar Business Model.  - Example is a company that has physical store, establishment, stall, kiosk, or retail outlet. Reselling -- business makes something which is resold by other businesses with or without modifications. Example: drop shipping business Franchising -- practice of using another firm's successful business model in exchange for a royalty or franchise fee. 7.1. Forecast (estimate/assumption/prediction) the costs to be incurred of the business. 7.2. Forecast (estimate/assumption/prediction) the revenue of the business. 7.3. Deduct your Cost of Goods Sold/Cost of Sales/Cost of Merchandise from your estimated sales and you will have your gross profit.\ Cost of Goods Sold -- for agriculture/manufacturing business Cost of Sales -- for service type of business Cost of Merchandise -- for trading type of business Gross Profit -- the profit a business makes after deducting all the direct costs from the sales. Factory overhead -- costs incurred during the manufacturing process, not including the costs of direct labor and direct materials. - Examples of factory overhead costs are Production supervisor salaries, Factory rent, Factory utilities, Equipment maintenance, Factory small tools charged to expense, etc. 7.4. Compute for net income. Net income before tax -- monetary gain that you earn after deducting the cost of sales and operating expenses Operating Expenses -- costs related to marketing expenses and administrative expenses Net income after -- income after paying the taxes, which are computed based on your net income before tax 8\. Create a five-year projected income statement