Course Title: Entrepreneurship

Week No. 002 / Module 002

Lesson 2 – DEVELOPING A BUSINESS PLAN;

MARKET OPPRTUNITIES

Content of the Module

Lesson 2: DEVELOPING A BUSINESS PLAN; MARKET OPPORTUNITIES

Knowing Market Needs and Opportunities
a. Viability
b. Profitability
c. Customer’s Requirements

KNOWING MARKET NEEDS AND OPPROTUNITIES

Before delving into the market, let us first understand what a business plan is. What is a business
plan?

A business plan is an argumentative document that aims to convince and encourage one to invest
money in a business, company or a project. The plan presentation must be able to answer the
following questions:

 Who are you (legal structure, ownership, location, etc.)?

 What do you sell (product, service)?
 Who do you sell to (customers)?
 How do you sell (distribution channels, marketing plan)?
 Who is the competition?
 What is the roadmap (milestones, timetable)?
 How is it made (manufacturing process, suppliers, technology, etc.)?
 What are the funding requirements (amount, source of financing)?

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 What is the expected return on investment (cash flow forecast)?

A. VIABILITY

A viable business plan is based on a viable business model. If a person is an entrepreneur,

it is important to determine whether the business idea they have in mind is viable or not. So
when evaluating the viability of the business opportunity, the following factors must be taken
into consideration: Potential for growth: An opportunity is said to be viable, when it has the
ability to grow and expand.

In presenting the business plan, it should outline ways that the company will produce
and market its products and services to keep its customers satisfied and earn a sustainable
profit, not just at present but in the far future. To know the business idea can be viable, your
business plan should present a value proposition and then explore the details of potential
market size along with product and distribution channels and cost structure.

FACTORS TO CONSIDER
WHEN EVALUATING VIABLE BUSINESS OPPORTUNITIES

• Potential for growth:

An opportunity is said to be viable, when there is an opportunity and ability to grow and
expand.

• Infrastructure:
The business may have an easy access to infrastructure like roads, water, electricity, telephone,
internet or wifi services and even postal services that will enable business enterprises to easily
have access to ordering goods and deliver them. This will help trim down the operating
expenses, and in return maximize the profit.

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• Market for the goods and services:

An entrepreneur has to have an access to potential market for the goods and services he would
like to sell and provide. There must be a clearly defined market if the opportunity is to be
considered.

• Rewarding to the investor:

The opportunity should be rewarding to the investor through cost-benefit consideration. He

should consider the expected returns against the expected cost to ensure that the benefits
outweigh the cost.

• Price structure:

It is important to define the price-structure of the goods and services to offer. Taking into
consideration that goods and services are subject to constant inflation, are likely to change in
terms of price.

• Competition and Competitive advantage:

Competition always a threat but it is also advantageous. Competition is regarded as a threat to

business of the one with similar kind especially when operating in a similar location but it can
help in controlling the price of goods offered. It is crucial for entrepreneurs to consider
opportunities where competition is not high as this will enable them to get reasonable market
share. They should venture where competitive advantage is.

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• Incentives:

Offered by the government and Non-Governmental Organizations, incentives are legitimate

business opportunities to exploit as they save on costs. E.g. duty-free importation of sugar and
maize, tax waivers, etc..

• Legal Consideration:

New ideas are great opportunities but must always consider what the law approved and
dictates. The new idea should be in line with the legal regulatory framework of the
government. For instance, selling drugs may not be viable, though profitable, because it is
illegal.

• Financial viability:

The assessment of financial viability is significant when looking at the viability of the business.
Capital investment requirements break even analysis, cash flow projections, profitability of the
business have to be analyzed. This is because they determine the sustenance of the business in
the market-mix.

• Personnel, Training and Management:

Before starting a business, it is necessary to assess the required personnel training and
management. Look at the ability, cost of hiring and training human resource. Management
efficiency will enable the business to succeed.

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B. PROFITABILITY

WHAT IS A BUSINESS OPPORTUNITY?

A business opportunity can be defined as a sound business idea which forms the basis upon
which an entrepreneur makes a firm investment decision.

C. COSTUMER’S REQUIREMENTS

To gauge if your Business Model is Viable, consider the following:

1. Uniqueness

What makes your business stand out from the rest? Uniqueness does not necessarily mean
you have to invent something although it is an advantage, it also just means that you have
to set yourself apart and different from the competitors.

For instance, how do you make a bakeshop different and stand out from the other offering
the same product? The most successful businesses have a strong and unique concept that
makes them have a clearer identity.

2. Upstart Funds

How much should be your start-up cost? Every business has some expenses at the start,
whether you're paying for equipment, rent or even for the marketing materials. Make a
realistic estimate; you'll need concrete figure in order to assess the specific loan needed or
to budget if paying these expenses out of your personal fund.

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3. Customer

Who is your target customer? Knowing who will be buying your product or service is vital
to the business’ success. Will you be catering to busy professionals, stay-at-home moms or
dads, students of different levels or general adults? It is best to first and foremost define
your customer.

If you do not have your own space and will be renting which is costly, make sure the know
the l demographic profile of the location.

4. Competition
All businesses have competitors. Competitors can be a great resource to you as an upstart;
you can see how much they charge, what marketing strategy they use and the location they
chose. The question now is how your business can be better. Go back to uniqueness and
identify ways to outshine your competitors.

5. Economic Mood

Your business' success would often depend on economic mood. It is important to know the
economic status and stability. What if you are starting a new estate business at the start of
the housing crisis. Gauge the state of the economy, and think of how it relates to your
upstart: where are consumers' mind right now? Are they cutting back?

But an economic downturn can be an opportunity if you can meet the mood of the
consumer. It all depends on the situation. If your business idea does not match the current
trends in spending, there could be other ways to tap into other needs.

6. Timing
Timing is crucial for upstarting businesses. For instance, will you be opening an ice cream
shop in the month of January were the weather is extremely cold? But there are businesses
that are seasonal and may be strongest to consumer demand.

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7. Marketing
Develop a marketing strategy to make sure that your target buyers know about your great
new business. In this modern time, the internet has the capacity to help you advertise your
products and services with a relatively low-cost.

8. Continuing Cash Flow

Even if the business is hitting, you still have a need for money to purchase supplies and
other costs, and when you ran out of cash, your business may stumble because you can not
meet demand the demand. Always be ready with cash.

STEPS ON OPENING A BUSINESS

Step 1: Define Your Business

Two things that you need to consider when you define your business:
1. Marketing position statement; and
2. unique selling proposition

A marketing position statement is a one- to two-sentence statement that says what you do and for
whom you do it to uniquely solve an urgent need or fulfill a desire. A unique selling proposition
is a statement that shows the reader how your product or service stands out and is different than
other substitutes on the market. Your USP must be strong enough to attract customers and compel
them to buy your product or service.

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Image Source: Philip Wilson

Customer’s Requirements:

However good your product or service is, it is best to know and understand what the customer
needs, that is the enter of a successful business. With this you can easily persuade potential and
existing customers that buying from you is in their best interests.

Why do your customers need you?

Every business needs a reason for their customers to buy from them and not their competitors. This
is called a Unique Sales Proposition (USP). Your USP can be identified by completing the phrase
"Customers will buy from me because my business is the only..."

Your USP can change as your business or your market changes, and you can have different USPs
for different types of customer.

Step 2: Determine Your Target Audience

Knowing your target audience is an important part of the business plan’s success; of course the
products and services are what really appeals to the audience, reason why you should know who
you are targeting to buy. A one-size-fits-all marketing and sales approach is not focused enough.
The more you know about the audience, the better able you are to reach and communicate with
them. Know the demographic and psychographic segments of your prospective customers and

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clients that you think can benefit from the products and services; their gender, age range, income
bracket and the common attitudes, opinions, values and behaviors they have.

Start by narrowing down the target audience and focus in marketing. On the other hand, if you are
tempted to serve more than one target market it can be costly, and you may not succeed.

Step 3: Understand the 5 Forces that impact Your Business

There are 5 forces that may affect a business. These forces include existing competitors, threat of
new competitors, substitute products or services, bargaining power of its suppliers, and bargaining
power of its customers, according to Michael Porter of Harvard Business School.

“By understanding these five forces, you are able to comprehend the environment that impacts
your business. If your company is in an industry that requires government approval of its products,
such as pharmaceuticals or medical devices, then you operate in an environment that makes it
difficult for new competitors to enter your market. Yet, if your company is in an industry that does
not require proprietary products, special know-how or high investment, then you may have new
competitors as you grow.”

Knowing the industry of your business is important but also you need to understand the demand
and supply of raw materials, manufacturing and labor. Include comprehending political and legal
related issues as well. These factors can affect the bargaining power of suppliers or customers.

Step 4: Create a Competitive Strategy

To demonstrate the viability of your business, your plan needs to demonstrate how you will sustain
a competitive advantage. According to Porter, there are three unique strategies a business could
choose from to sustain competitive advantage; the cost leadership, differentiation and focus.

Your strategy needs to indicate how you will gain your target market and what strategies must be
used. What would be the most effective advertising campaign for the target buyers and compel

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them to purchase your products. It is important also to have a marketing team to help materialize
the business plan.

Step 5: Project Your Financial Performance

The business’s financial performance is the measurement of success. It may include projection of
how you expect your company must perform based on what you discover developing the first four
steps of your plan.

Know the price and profitability of your products and services. Your projections include the
expected number of customers you. As a rule of thumb, underestimate your expected revenues
and overestimate your company expenses. Try to know the type of delays that may occur in
receiving revenues from the sale of your products or services.

Remember that cash flow is more important than profits. Cash is what loosens the flow of
business. You can always manipulate profits through various accounting techniques, such as
deciding if you record inventory as first in-first out or last in-first out. But you can’t do this with
cash flow.

Your projected financial performance is also a factor that can influence investors. Higher operating
profit margins can attract more investors. However, the reality of your ability to achieve these
projections comes from the quality of your plan and execution.

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Knowing your customers

The more you know about your customers, the more effective your sales and marketing efforts
will be. It's well worth making the effort to find out:

 who they are

 what they buy
 why they buy it

Customer Requirements

Characteristics or specifications that should be present in a product for it to be desirable by the

consumer.

Service Requirements: Intangible aspects of purchasing a product that a customer expects to be

fulfilled. It consists of elements like on-time delivery, service with a smile, easy-payment etc. It
encompasses all aspects of how a customer expects to be treated while purchasing a product and
how smooth his buying process goes.

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Output Requirements: These are mostly the tangible characteristics, features or specifications that
a consumer expects to be fulfilled in the product. If a consumer is availing a service as a product,
then various service requirements can take the form of output requirements. For example, if the
consumer is hailing a metro cab, then on-time arrival becomes an output requirement. For other
products such as gadgets, the product specifications like the loudness and clarity of a pair of
speakers becomes its output requirements.

3 levels of customer requirements:

1. Must Haves
2. Satisfiers
3. Delighters

Must Haves: These are the bare minimum requirements expected by the customers; if fulfilled
customers will be not show any exceptional appreciation but if not fulfilled, the customer will
show dissatisfaction. The customers do not explicitly express their desire for these but expect it to
be understood. For example, a washroom in a restaurant; the customer will feel that it is imperative
to have a washroom in a decent restaurant where families or people from business organisations
come to dine.

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Satisfiers: There are the requirements that customers express their desire for, explicitly. If you
offer better or more of these satisfiers, then the customers will appreciate it more and will be more
satisfied. For example, the assortment of desserts in a buffet; the customers might feel that they’re
entitled to at least two as they’ve paid heavily for the buffet and will be happier if they get four.

Delighters: These are the extras or the add ons. Absence of these will not leave the customer
dissatisfied; in fact, the absence of these characteristics might not even be noticed. But adding
these would increase the customer’s satisfaction greatly and will leave them delighted. For
example, you order a-la-carte in a restaurant and get complimentary wine.

References
https://www.thebusinessplanshop.com/blog/en/entry/what_is_a_business_plan
https://bizfluent.com/facts-5762891-viable-business-plan-.html
https://www.i7marketing.com/blog/small-business/5-steps-develop-viable-business-plan
https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/11884-customer-
requirements.html
https://www.infoentrepreneurs.org/en/guides/know-your-customers--needs/

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