THE BUSINESS MANAGEMENT TRAINING

MODULE 4

BUSINESS MANAGEMENT FUNDAMENTALS

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TABLE OF CONTENT
CONTENT PAGE
MODULE 4.1 DEVELOPING A MARKET STRATEGY AND PLAN 3
Sub Module 4.1.1 Introduction to Marketing Strategy and Plan 3
Sub Module 4.1.2 Identifying and Stating Marketing Goals 3
Sub Module 4.1.3 Marketing Mix 4
Sub Module 4.1.4 Key Performance Indicators (KPIs) 4-5
Sub Module 4.1.5 Researching the Market 5
Sub Module 4.1.6 How to Make Market Research 5-6
Sub Module 4.1.7 Modalities for conducting Market Research 6-8
Sub Module 4.1.8 Developing Strategies to Support the Marketing Goals 8-9
MODULE 4.2 BUDGET PREPARATION AND MONITORING 9
Sub Module 4.2.1 Budgeting 9
Sub Module 4.2.2 Developing a Budget 10-11
Sub Module 4.2.3 Managing the Budget 11
Sub Module 4.2.4 Financial Monitoring 12
Sub Module 4.2.5 Performance Management & Variance Analysis 12-13
Sub Module 4.2.6 Variance Analysis 13-14
MODULE 4.3 CASH FLOW MANAGEMENT AND MONITORING 14
Sub Module 4.3.1 Cash Flow Management 14-15
Sub Module 4.3.2 Financial Ratios Formula 15-17
Sub Module 4.3.3 Cash flow Management 17-19
MODULE 4.4 ENTREPRENUERIAL FINANCE AND ACCESS TO CAPITAL 19
Sub Module 4.4.1 Entrepreneurial Process 19-20
Sub Module 4.4.2 Accessing Financial Capital from Venture Capital and Investors 20-21

Sub Module 4.4.3 How to Access Capital from Venture Capitalist 21-22
Sub Module 4.4.4 Establishing the Right Funding Model for Your Business 22-24

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MODULE 4.1 - DEVELOPING A MARKET STRATEGY AND PLAN

SUB MODULE 4.1.1 - INTRODUCTION TO MARKETING STRATEGY AND PLAN

In every business, the aim is to maximize profit and minimize cost. Consequently, business
management helps design a blueprint on how to achieve this given limited resources.
Business management generally involves organizing, analyzing and planning the present and
the future operations of a business. The business process includes supervising business
operations, efficient and effective allocation of resources to achieve set goals, staffing,
leading and controlling workforce to achieve set goals

Marketing is simply convincing your consumers/customers or prospective customer on why

they should buy your product or subscribe to your service as against the ones of your
competitors. It is however important to clearly understand the relationship between
marketing and advertising. In the general sense, marketing is a superset of advertising and
advertising is a subset of marketing.

How do I mean?
Marketing involves all the activities engaged in order to promote one’s product or services
and advertisement is one of the marketing tools towards the achievement of desired goals.

Advertising is defined as making new or existing products known to new or existing customers.
It involves the use of Internet Ads, Television, Radio, Newspaper, etc. Marketing encompasses
all of these and also include public relations, market research, etc. It involves a process of
planning, implementing, controlling a mix of activities intended to achieve a desired goal
and gain advantage over one’s competitors.

Marketing strategy is a carefully outlined futuristic plan aimed at achieving the desired goals
and gaining competitive advantage. The strategy has to be Specific, measurable, realistic
and time–bound. A marketing strategy is planned with a goal in mind. Every marketing
component functions separately but are all channeled to achieve a common general goal.

SUB MODULE 4.1.2 - IDENTIFYING AND STATING MARKETING GOALS

Marketing goals must be specific, measurable, accurate, realistic and time bounded. They
are intended to be achieved following a winning marketing strategy. The goals must outline
the intentions of the marketing team and must be SMART.

S- Specific: That is, they must be clearly defined.

M- Measurable: It must have benchmarks that allow it to be measurable.
A-Attainable: It must be within the ability of the firm’s resources.
R- Relevant: Must be relevant to your business
T- Time-Bound: The goals must have a beginning and end-line i.e. there must be a time range
for it to start and end.

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SUB MODULE 4.1.3 - MARKETING MIX

Marketing mix is a blend of some controllable tactical tools that is used to achieve the
marketing goals of a firm. These are;

SUB MODULE 4.1.4 - KEY PERFORMANCE INDICATORS (KPIS)

After setting your goals, there is need to place KPIs and Benchmarks on your plans. This
involves assigning numbers, deadlines, and metrics to each of your goals. This will allow you
evaluate your progress and assess your result at the end. These KPls include; sales growth,
changes in profit, market share, etc. A KPI is a type of performance measurement that helps
you understands how your organization or department is performing.

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SUB MODULE 4.1.5 - RESEARCHING THE MARKET

Market research is the process of gathering data (information) about your business target
audience and customers as well as the product in order to test the viability and potency of
your product/services and its perception by existing and potential consumers. Market
research is a continuous process in business and can be conducted before the
commencement of the business, at growing stage and maturity stage. The main aim is to
ensure that the organisation is constantly repositioned to take advantage of every
opportunity and to constantly review its threats and weaknesses at every given stage of its
operation.

SUB MODULE 4.1.6 - HOW TO CONDUCT MARKET RESEARCH

Define Your Target Audience: You must first understand who your target audience are, their
age, gender, location, job title, family size, income, and major challenges. This will aid in
reading & learning more about your actual customers in the industry.

Identify a Portion of Your Target Audience to Engage: Choose a portion of your target
audience you wish to engage. This would help you have a better picture of who your target
audience are.

Select A Portion of The Total Target Market as Sample: However, this portion must be enough
to make a general conclusion of the total target market in a particular area of coverage.

Engage Your Sample Audience: This involves engaging the already sampled market research
participants. Prepare your research question; the best way to get the best result is to be ready.

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So, there is need to prepare your research question in a well-structured manner. Hence your
questionnaire must contain the questions on the kind of information you are looking to get.

Summarize Your Findings: Collate all information, summarize them and then predict and
explain the reasons behind their buying behavior.

SUB MODULE 4.1.7 - MODALITIES FOR CONDUCTING MARKET RESEARCH

Customer Profiling
According to Sprotles and Kendall (1996), there exists three ways to profile consumer styles:
• the psychographic/lifestyle approach;
• the consumer typology approach;
• the consumer characteristics approach.

Customer profile is a model of the customer. Based on this profile the marketer decides on
the right strategies and tactics to meet the needs of that customer. From a marketing
perspective it is one of the vital pieces of information that a marketer needs to know or equip
himself with a view to making the right marketing decisions.

Generally, there are 8 ways of profiling ideal customers. These creative ways are:

• Use Demographics and Psychographics - According to various studies, there are

several terrific sources for descriptive demographic data. These sources can help
produce the demographics and psychographics needed to profile a customer.

• Describe your Customers as Characters in a Story - Storytelling has proven to be a

smart way of profiling customers. On the complete opposite end of the profiling
spectrum, consider describing your ideal customer as if they were a character in a
story. Get inside their head and spend time understanding what makes them behave
in a particular way.

• Create a Magazine Cover - It is said that if you're better with pictures than you are with
words, consider creating a magazine cover featuring your target audience. Head
over to the magazine rack, select the magazines that your target audience reads. Go
through them and select pictures of people who look mostly like your audience. Then
create headlines that speak to their emotional triggers and around what's important
to them. You'll start to see a pattern in graphics, words and emotions and be able to
create a composite representative of your audience. This will help you visualize them
and focus on delivering what matters in a way they will appreciate.

• Analyze Past Success - You are expected to simply go through and analyze the sales
events from your favorite customers and note what it was that triggered them to
choose you. What happened just before they purchased from you? What changed
in their business or their life? What triggered them to start searching for the solution that
you provide?

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 • Look at Your Financials - What are financials? Your financials are your profit or loss
statements, statements of equity, balance sheet and value-added statements. If you
fall on the analytical side of the spectrum, take a look at your sales and profitability
figures. Run a financial report that includes your most profitable customer and product
combinations and see what patterns pop up for you. Focus on your most profitable
customers and then analyze the details behind the sale; profile the demographics of
the customer, what triggered the purchase and how your company fit into the
solution.

• Analyze Complaints - If you've done some market research or collected customer

satisfaction/dissatisfaction data, some of the pains your customers are having will be
found there. Customer complaints are a terrific resource for pain points. When you
think about it, a complaint actually uncovers what your customer is "committed to" or
is trying to do but doesn't succeed. So, if you uncover complaints about late deliveries,
you have customers who are having very tight time commitments and that is a
powerful profiling attribute.

• Analyze your Web Traffic - You would be amazed at what you can find out about your
audience from their Web searches or their behavior on your website. Google Analytics
is extremely powerful, but you may have to get some professional help in
understanding the data. Another tool that gives you an audience profile
is (Alexa.com). Simply enter your website address and then check out your audience
profile.

• Research Facebook Ads - With several hundred million people sharing their personal
information and preferences daily, Facebook is about as good and cost-effective
demographic and psychographic profiling that you’re going to get at any price.
Simply go to the Facebook Ads section and start clicking away at the profile options.
The system will tell you exactly how many users fit that profile.

I hope you’re inspired to use all of these methods to better identify, profile and target your
ideal customer better than ever before.

Competitors Profiling
Competitor profiling consists of finding out and processing data about competing businesses
or products in order to generate the key information about them, categorizing them and
identifying their key competitive differences.
According to B2B International, profiling competitors play an important role in four decision
making areas. These areas are product planning, setting future strategies, pricing and
acquisition policy.

• Product Planning: In determining the product range, the chief executive needs a
detailed knowledge of all competitors’ products and their prices in order to make
comparisons and determine options for improvement. This must, of course, be
undertaken in conjunction with the technical and production departments who will

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 indicate what they think can be produced efficiently. However, it is the marketing
department that gives the guidelines on what will sell and for how much. Knowledge
of the competition’s new products before they are launched strengthens every
marketer’s arm. This information need not be so difficult to obtain if the sales force is
alerted to keep their eyes and ears open for news of products out on test.

• Strategic Planning: There is high need for strategic planning. According to B2B
International, there is no point drawing up fancy marketing plans which show an
increase in market share unless you can show where the extra share will come from.
And you cannot make those judgments without understanding the strengths and
weaknesses of the competition.

• Pricing Policy: Pricing policy is an area where most companies have some knowledge
of their competitors. There are, nevertheless, problems in making comparisons if heavy
discounting takes place or if no price lists are published. It is advisable to establish a
pricing policy that would keep you at a competitive advantage over your
competitors. Additionally, price reduction or discounting may not necessarily give you
an edge. A competitor selling at a very low cost may be doing so because they can
afford to make a loss.

• Acquisition Policy: Market share can be built up the long hard way by fighting the
competition or, alternatively, it can be bought through acquisitions. Building up a list
of potential acquisitions needs more information than can be found in financial
statements. The image of a competitor in the eyes of the users and the relationship it
has with its staff and distributors could materially influence whether or not it is a suitable
candidate for a takeover.

SUB MODULE 4.1.8 - DEVELOPING STRATEGIES TO SUPPORT THE MARKETING GOALS

We know that adopting a marketing plan can be sometimes challenging. However, there 5
promotional strategies you can employ to support your marketing goals. These promotional
strategies are:

• Use Content Marketing to Drive More Traffic - Content marketing is one of the most
famous marketing strategies. Writing a good content can help drive more traffic. Write
contents that make your customers and clients see you as king. Let’s say you are a
company that is selling tires. And you start blogging about the importance of choosing
the standard tires, safety and so on. Your audience will start trusting you more, thus,
making your brand a good candidate for their next tire purchase. If you are an
accounting firm, you can blog about Inventory Management and Expenses Tracking.
This will help your audience see you as someone with value adding content and could
thus generate trust.

• Explore Social Media & Email Marketing for Skyrocket Engagement- Each social media
platform has a different audience, which makes their usage more fun for brands.
Snapchat is associated with youngsters while LinkedIn with a more professional

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 public. Social media has a unique way of helping you reach millions of customers.
You must learn how to use the Social Media to support your marketing goals.

• Run Referrals for Building Trust – Studies have shown that most people will
rather believe a product or service recommendation from a friend, rather than any
other form of marketing. Word of mouth advertising, also known as WOM is one of the
most valuable examples of pull promotion strategies. While experts consider it the
strongest strategy out there, it is also the most difficult to obtain. You must find a way,
as an entrepreneur, to get your customers refer new clients to you. You can decide to
give them some of your products for free, buy airtimes for them or give them money
when they refer a client. Whichever that is desirable in any given circumstance should
be explored.

• Work with Brand Ambassadors to Increase Brand Awareness - According

to Studies, ambassadorships are the most effective form of influencer marketing. This
may be a very expensive strategy, but it is worth it. Get a brand ambassador for your
business. This can help support your marketing goals. The choice of brand ambassador
must align with your target audience.

• Guarantee Quality and Money-Back Warranty - This is a very important strategy of

supporting your marketing goals. Giving a money-back guarantee will always do the
magic especially if you sell a good product. This is one of the most effective marketing
strategies.

MODULE 4.2 - BUDGET PREPARATION AND MONITORING

SUB MODULE 4.2.1 - BUDGETING

Budgeting is the process of preparing detailed future financial plans of an organization. A

budget is a tool used by business owners to plan and control the use of scarce resources
effectively and efficiently. Given the fact that maximizing profit is the main objective of any
firm, budgeting helps keep firms in line with their objectives and keep employees and
managers on the same page on their targeted goals, when to achieve it and how to achieve
it. It also gives the firm a standard to measure its performances over a period of it.

It is paramount to prepare a budget because of the uncertainty attached to the future;

Budget represents past experiences adjusted for future expectations. Budgeting involves the
coordination of financial and non-financial planning to satisfy organizational goals and
objectives. It helps business to operate within their means.

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SUB MODULE 4.2.2 - BUDGET PLANNING & PREPARATIONS

During budget preparation, trade-offs and prioritization among programs must be made to
ensure that the budget fits government policies and priorities. Next, the most cost-effective
variants must be selected.

In developing a budget, the following processes are followed:

Illustration 1
You are working as a Business Analyst in a Small Consulting firm and your CEO has asked
you to present a Budget for the coming year reflecting the Company’s quarterly sales,
operating expenses so as to help guide the operating activities for the coming year. In a
simple and lucid manner, how will you go about doing this?

Solution
Sales and Expenses Budget for XYZ Limited
Income Budget ($)
Operating income
1st quarter sales 50,000
2nd quarter sales 70,000
3rd quarter sales 100,000
4 quarter sales
th 84,000
Total Operating Income $304,000

Non-Operating Income
Interest 700
Others 500
Total non-operating income $12,000

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 Total income $316,000

Expenses Budget
Operating expenses
Rent 10,000
Insurance 5,000
Electricity 2,000
Gas 3,000
Internet 4,000
Advertising 20,000
Salaries and wages 40,000
Office supplies 25,000
Others 5,000
Total operating expenses $114,000

Non-Operating Expenses
Smart phones 20,000
Tablets 30,000
Total non-operating expenses 50,000

Total expenses $164,000

Net Expected income $152,000

This clearly shows the size of XYZ Limited Company. According to the Business Analyst, over
$164,000 is expected to be spent on operating and non-operating expenses while over
$316,000 is expected as income.

SUB MODULE 4.2.3 - MANAGING THE BUDGET

➢ Once approved, adopted and prepared, a budget should be closely managed.

➢ Set and maintain a minimum cash balance.
➢ Formulate policies and procedures needed to achieve objectives.
➢ Keep an accurate log of financial transactions (income and expenses): maintain the
log in your organization record book.
➢ Set up internal control designed for safeguards and accurate accounting data. This
encourages adherence to accountability.
➢ Control cost – allow only approved expenditures.
➢ Assess budget at any given point of time during the budgeted period.

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SUB MODULE 4.2.4 - FINANCIAL MONITORING

Financial Monitoring is the process of comparing the actual cost to the planned cost of a
project. There are many ways of measuring the financial performance of one’s business using
available data. Through the use of Financial Ratio, one can assess the general performance
of any business.

Some commonly used financial ratios include:

Profitability: This uses gross profit margin and net profit margin as 2 key indicators of business
performance and likelihood of success. This is used to indicate the percentage of profit on
sales i.e. what amount of profit was earned from the total sales.

Cash flow and Liquidity: These ratios are used to assess the amount of working capital in a
business and works out how solvent the business is in its short to medium term.

Risk and Return: These ratios are used to judge how successful investments in your business is,
and what effect further investment may have in specific parts of the business.

Stock Turnover and Sales: These ratios are used to identify overstocking or deficiencies in your
production or marketing strategies.
Gross Profit Margin=gross profit ×100÷ sales
Net profit margin= (net profit before tax ×100) ÷sales
Working Capital = current asset÷ current liability
Liquidity Ratio = (current asset – stock) ÷ current liabilities
Stock Turnover = cost of goods sold ÷ (opening + closing stock) ×0.5
Labor to Sales = direct labor ×100÷ sales. This is the percentage of sales spent on labor. This
can be used to monitor the effectiveness of labor in production.

SUB MODULE 4.2.5 - PERFORMANCE MANAGEMENT & VARIANCE ANALYSIS

Performance Management is a continuous process of identifying, measuring and developing

performance in organization by linking each individual’s performance and objectives to the
organization overall mission and goals. It involves a never-ending process of setting goals and
objectives, observing performance and giving and receiving feedbacks. It ensures that
employees’ activities and output are in line with the goals and objectives of the organization
which will help the organization gain a competitive business advantage. Performance
management helps create a link between employees’ performance and organizational
goals.
Advantages of Performance Management
• It inspires motivation and provides the zeal for future accomplishments.
• It helps increase self-esteem. Receiving feedback about one’s performance fulfills a
basic need to be appreciated and valued at work.

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 • It helps define job and clarify criteria. The job of the person being appraised may be
clarified and defined more clearly, which makes employees gain better
understanding of the behavior and results required of their position.
• It also helps enhance self-insight and development. Participants in the system have
better chances of developing a better understanding of themselves and the kind of
developmental activities that is of value to them.
• Employees become more competent. As the performance of employee is improved,
there is a solid foundation for developing and improving employees by establishing
developmental plans.
• There is better and timelier differentiation between good and poor performers.

Disadvantages of Performance Management

• Employees may quit due to results expectations.
• False misleading information may be used.
• Relationships might be damaged.
• Employees might suffer from job tension and job dissatisfaction

SUB MODULE 4.2.6 - VARIANCE ANALYSIS

Variance analysis compares the actual performances with the standard (i.e. budget). The
sum of all variance gives a picture of the overall over-performance or under-performance for
a particular reporting period. For example, if the actual cost is lower than the standard cost
for raw material, it would lead to a favorable price variance (saves cost).

When standards are compared to actual performance numbers, the difference is what we
call a VARIANCE. Variance quantity of materials, labor and variable overhead, and are
reported to management.

Types of Variances
• Sales Quantity Variance: This is variance in the quantum sales. It is directly affected by
sudden rise or fall in demand for the product or services offered by the firm.
• Sales Mix Variance: This is variance in the proportion of various products sold. This may
happen due to change in the demand curve.

• Sales Prices Variance: This is variance in selling price of a product. And this may
happen due to higher competition or achievement of higher market share.

• Raw Materials Price Variance: This is variance in the direct cost of raw materials used.
And, this may happen due to changes in external factors.

• Raw Material Usage Variance. This is variance in the quantity of raw materials used up.
There are so many reasons that may result to this. E.g.: Sales Volume.
• Raw Material Mix Variance: This is the variance in the cost of standard proportion of
raw materials used by the company to produce goods.

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 • Labor Rate Variance: This is variance in the cost of labor paid to produce the goods.
This may happen due to unplanned recruitments.

• Labor Efficiency Variance: This is variance in the number of hours utilized by the labor
resources of the firm.

• Fixed Overhead Expenditure Variance: This is variance in fixed expenditure incurred

by the company. Examples are rent, electricity, machineries, etc. Fixed Overhead
refers to your indirect manufacturing costs that do not vary with production. This
variance tends to calculate the difference between actual and budgeted fixed
production overhead.
• Variance Overhead Expenditure Variance: This is variance in variable costs like indirect
material cost. This is the difference between variable production overhead expenses
incurred during a period and the standard variable overhead expenditures. This is
essentially the cost associated with running a business that varies with fluctuations in
operational activity. The variable overhead spending variance is basically the
difference between what the variable production overheads were supposed to cost
and how much they actually end up costing.

Importance of Variance Analysis

• It aids efficient budgeting activity as it is the wish of every management to have lower
deviation from the planned budget.
• It acts as a control mechanism.
• Variance analysis helps facilities assigning responsibilities and engages control
mechanism on departments where it is required.

MODULE 4.3 - CASH FLOW MANAGEMENT AND MONITORING

1.3.1 CASH FLOW MANAGEMENT AND FINANCIAL RATIOS

Cash flow management is the process whereby a company maintains control and ensure
constant analysis of the inflow and outflow of funds. This is necessary to maintains constant
financial discipline as well as regular financial surplus status.

It worthy of note that cash flows are clearly different from profit. A firm can have a positive
cash flow and still runs at a loss. Cash flow seeks to coordinate the payment and receipt in a
manner that the payments cycle of customers can be ascertained and analyzed. The
ultimate goal of cash flow management is to ensure that the business does not run into cash
shortages or crisis.

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SUB MODULE 4.3.2 - FINANCIAL RATIOS

These are comparison between financial statement accounts to show relationships between
accounts. It helps stakeholders, creditors and investors alike make informed decision based
on the performance of the firm given the results shown by the ratios. Financial ratios are the
most common tools used to analyze a business financial position.

Some of the Most Commonly Used Financial Ratios Are:

• Liquidity Ratios: Shows the cash level of a company and the ability to turn other assets
into cash to pay off liabilities and other current obligations. Examples include:

o Quick Ratio: measures the ability of a firm to pay its current liabilities.
current assets− (inventory + prepaid expenses)
Quick ratio= current liabilities
. It is also known as acid test ratio.

• Current Ratio-: this measures a firm’s ability to pay off its current term liabilities
with its current assets
current assets
Current ratio= = current liabilities . It is also called working capital ratio

• Cash Ratio-: This measures the ability of a company to pay its current liability
using cash and marketable securities. Marketable securities are investment
that can be easily traded in exchange for immediate cash e.g. stock, bonds
cash+marketable securities
etc. Cash ratio== current liabilities

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 • Solvency Ratio: This measures a company’s ability to sustain operations by
companying debt levels with equity assets and earnings.
Examples are:
• Debt to Equity Ratio-: This compares a company’s total debt to total
equity. It shows the percentage of a firm’s financing that come from
Total liability
creditors and investors. Debt to equity ratio=
Total equity

o Debt Ratio-: This measures a company’s total liabilities as a percentage

of its total asset. It shows the ability of a firm to pay up its debt with its
Total assets
assets. Debt ratio = total asset ÷ total liabilities = total liabilities

o Equity Ratio-: This determines the portion of total assets provided by

owner’s contribution and the firm’s accumulated profit.
total equity
Equity ratio==
total asset
Alternatively; Equity ratio = 1- debt ratio

• Times Interest Earned -: This measures the number of times interest expenses is
converted to income, and if the company can pay its interest expenses using
Earning Before Interest and Tax
the profit generated. Times interest earned = interest expenses

• Efficiency Ratios: This measure how well companies utilize their assets to
generate income. It looks at the time period it takes a company to collect
cash from customers.
Examples are;
o Account Receivable Turnover-: it measures how many times a business
turns its account receivable into cash during a period.
net credit sales
Account receivable turnover= average account receivables

o Inventory Turnover-: this shows how effectively inventory is manages by

comparing cost of goods sold with average inventory for a period.
cost of goods sold
Inventory turnover ratio=
average inventory

o Operating Cycle: This measures the number the number of days a

company makes one complete business operation. That is, how long it
takes to purchase merchandise, sell them, and collect amount due
from customers. A shorter operating cycle means that the company
generates sales and collects cash faster.
Operating cycle= days inventory outstanding + days sales outstanding

o Cash Conversion Cycle: This measure how fast a company converts

cash into more cash. It represents the number of days a company pays

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 for purchases, sells them, and collects the amount due. The shorter the
cash conversion cycles the better.
Cash conversion cycle= operating cycle – days payable outstanding

• Profitability Ratio: Profitability ratio compare income statement accounts to

show a company’s ability to generate profit from its operation. It focuses on
company’s return on investment in inventory and other assets.
Examples include:
• Profit Margin: it measures the measures the amount of net income
earned with each naira of sales generated by comparing the net
net income
income and net sales of a company. Profit margin = net sales

• Return on Equity (ROE): it measures the ability of a firm to generate

profits from its shareholders funds.
net income
ROE = shareholders equity

SUB MODULE 4.3.3 - CASHFLOW MANAGEMENT SYSTEM

A cash management system is an automated solution designed to help

you manage your cash handling from end to end. It is also the process of tracking
how much money coming into and going out of your business. This helps you predict
how much money will be available to your business in the future. It also helps you
identify how much money your business needs to cover debts, like paying staff and
suppliers. There are several cashflow management tools that are available for use.
Some of these tools are:

QuickBooks: QuickBooks is an accounting software package developed and

marketed by Intuit. QuickBooks products are geared mainly toward small and
medium-sized businesses and offer on-premises accounting applications as well as
cloud-based versions that accept business payments, manage and pay bills, and
payroll functions.

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PlanGuru: Designed for the small to medium sized business, PlanGuru's sophisticated methods
allow you to budget and forecast for up to 10 years without having to create formulas. With
PlanGuru, you get cash flow analysis, financial ratios and other analytical tools to help you
evaluate and improve your business performance.

Sage: Sage is a British multinational enterprise software company that provides accounting
and bookkeeping support to firms and organizations. The software has a cloud-based system
that allows you properly manage the cashflow of your business with varying devices and
provides real-time financial information.

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Any of these tools can work. However, there are other cashflow management tools you can
employ as an entrepreneur.

MODULE 4.4 - ENTREPRENUERIAL FINANCE AND ACCESS TO CAPITAL

SUB MODULE 4.4.1 ENTREPRENUERIAL PROCESS

These are the set of procedures that are followed by an entrepreneur for establishing a new
business. These phases are carefully explained below:

• Identification of Opportunity - This phase of entrepreneurial process deals with the

entrepreneur identifying problem in the society. So, identifying a problem that needs
a solution is on the forefront of the entrepreneurial process.

• Having a Clear Vision - The next phase is to look beyond the idea or plan. He or she
should have a vision and a creative mind to factor out a new and innovative way of
solving different problems.

• Infusing Others to Your Vision -It is not complete when an entrepreneur has a clear
vision; he has to form a team of skilled individual who will work in-line with the vision to
make it a reality. He has persuaded others to see the same vision and also work to
make it become a reality.

• Resources Gathering - In this phase, an entrepreneur has to come up with a strong

business plan and a good pitching capability to make his or her audience understand
the potential of the idea. The business plan should be able to attract venture capitalist,
investors and financial institutions, partner as well as promoters.
• Creating the Venture -This is then the phase where the plan is being brought into
reality. It involves using all the resources (both materials, financial and human)
gathered in right proportion as identified in the business plan in creating the venture.

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 • Bring Adaptivity with Time –Entrepreneurs think out of the box and adapt changing
market conditions that stay relevant. It is paramount for an entrepreneur to keep on
adding value, else someone will take away the market and hence the profit. This
phase is where entrepreneurs monitor and realized when an upgrade is necessary.

SUB MODULE 4.4.2 - ACCESSING FINANCIAL CAPITAL FROM VENTURE CAPITAL & ANGEL
INVESTORS

Venture Capital is a capital invested in a project in which there is a substantial element of risk,
typically a new or expanding business. It is also those funds invested in business that are small
or exist only as an initiative but have huge potential to grow.

Those who invest this money are called venture capitalist (VC). A venture capital investment
is made when a venture capitalist buys shares of a company and becomes a financial
partner in the business. Venture capital typically comes from institutional investors and high
net-worth individuals. It is the money provided by an investor to finance a new growing or
troubled business.

For many small businesses, the original sources of fund are the owner’s equity but
alternatively, small businesses can raise financial capital from investment venture capitalist or
well-to-do individuals known as “angel investors” who will put their own money into small new
companies at an early stage of development, in exchange for owing some portion of the
firm.

Accessing financial capital from venture capital and angel investors is not as hard as it seems
and not as complex as expected. This has been summarized into 3 stages;

➢ Be an Entrepreneur: You must be able to source for opportunities that exist in the
society. Look for problems that need solution and factor out innovative ways of
providing that solution. Being an entrepreneur comes with smart thinking and being
innovative. You must be able to see opportunities where there are problems and
solutions where everybody sees impossibilities.

➢ Write a Good Business Plan: - This is a very critical stage in attracting venture capitalists
and angel investors. This is a paperwork that presents your dream and vision to
prospective investors. Your business plan should be written with flawlessness, it will
determine the viability or otherwise of the business on paper. It represents your
blueprint on your step by step procedure on how you intend to make your vision come
to reality.

Beyond having a good business plan, you should be able to pitch your business with
confidence to your investors, convince them on why your business has growth
potentials. What is Key is the ability of your business plan to truly represent your vision.

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 ➢ Search: - You can approach well-to-do individuals to pitch your idea to them or visit
venture capitalist platforms. This process, however, can be slow and can take some
time but it is surly reliable if you have a good business idea. Some of these venture
capitalists include: EchoVC, Microtraction, IFC capital, etc.

SUB MODULE 4.4.3 - HOW TO ACCESS CAPITAL ON MICROTRACTION AND ECHOVC

To access capital from Microtraction and EchoVC, log onto their website on
www.microtraction.com and www.ifc.org respectively and follow the instructions on applying
for funding. However, your business idea must have some certain criteria before it can be
termed viable and investible. These criteria are:

• Product Must Solve a Clear Problem-: This is one of the most important criteria for
accessing capital from Microtraction and EchoVC. People will always search for
better, faster and smarter ways of accomplishing everyday task. So, your business idea
must solve a particular problem.

• Identified Target Market-: You should identify your target market i.e. those that are
going to be your customers and will be dealing with you in your day to day running of
your business. These are the specific group of people you will reach out to with your
marketing message. You need to clearly identify them.

• Capital Efficiency with Clear Revenue Model-: Your business plan must show a
conceptual structure that states and explains the revenue strategy of the business. This
must show that your business can fund itself and yield higher return in the future.

• Build a Minimum Viable Product-: The first version of a product is often called Minimum
Viable Product (MVP). It is the product that has only the core features that makes a
product work. To build MVP, you must do the following:

• Figure out what problem you are solving and for whom. Start by evaluating your
business idea; ask yourself these questions while putting yourself in your customer’s
shoes: why do I need this product? And how it can help me? Answering these
questions will help you understand the needs of your future customers.

• Analyze your competitors. You have to conduct a competitive analysis to check if

there are already similar products in the market. Many entrepreneurs ignore this
because of blind faith in the uniqueness of their product. However, there is need
for you to understand your market and those that dwell in it and how they have
been performing.

• Define your user flow. This involves defining all the steps your customers should take
while using your product.

• List all necessary feature and prioritize them. After defining your user flow, then
highlight all the features you think are good about the product and prioritize them.

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 • Build, test and learn. This point is the development stage. When the product
development is almost completed, the product needs to be tested. Testing via
alpha testing or beta testing. Alpha testing means goods are tested by family and
friends while beta testing means testing the product in the real world to real users.

• Validate the Market Demand-: This is to check whether there is a sizeable demand to
justify entry into the market. It helps check the size of the existing market, the growth
rate of the overall market, the popularity of the existing products, if your product is
futuristic, is there a trend that would create future demand for your product and what
people are searching for.

• Founding Partners with Provision of a Technical Founder-: A technical founder is a

person who is responsible for all the technology related processes and have a share
of overall profit. You should provide the details of all the founders.

SUB MODULE 4.4.4 - ESTABLISHING THE RIGHT FUNDING MODEL FOR YOUR BUSINESS

Finding the right source of funding for your business is as important as knowing how to run your
business. Choosing the right option is all about understanding how much you need, how
much you want to give up, etc. There are several funding options available to small businesses
which includes: Small business Loans, Funding from Families & Friends, Crowd Funding, Angel
Investors, Venture Capitalists, etc.

How you decide to capitalize a business is called your capital formation strategy, and this
depends on some factors such as;
• How much capital you require?
• The intended use of funds
• Your personal credit standing
• The availability of collateral

To decide on the best funding model, first consider all the source of funding available, then
eliminate those sources of capital that are not feasible at the moment. Think about the
business plan you have written which will show future changes in the business such as
increased sales, additional staffing, etc. This will help you in deciding which funding will best
suite your business.
There are generally seven (7) steps for establishing the right business model. These steps are:

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 • Size the Value of your Solution in the Target Segment - Customers often complain that
existing approaches are not intuitive or integrated, but old solutions may be familiar
and locked in. It is advisable for you to estimate your costs by including a 50 percent
gross margin or more, as a lower bound on a price. Products that are too expensive
for the market won’t succeed. However, there are ways of modelling the products to
succeed. You can make your expensive products affordable but still, more expensive.

For example, if you sell a Car worth N2million, you can arrange a system that allows
your customers pay you in instalments. You could get them to pay you N200,000 every
month, this way at the end of the month, you get a total sum of N2.4 million naira. In
a nutshell, selling expensive products are most times better deals. But you must find a
way to make them affordable.
• Confirm that your Product or Service Solves a Problem - Once you have a prototype
or alpha version, expose it to real customers to see if you get the same excitement
and delight that you feel. Look for feedback on how to make it a better fit. If it doesn’t
relieve the pain, or doesn’t work, then go back to the drawing board.

• Test your Channel and Support Strategy - Now is the time to pitch the entire business
model to a group of customers or a specially selected focus group. This is not just a
product pitch, but must include all elements of your pricing, marketing,
distribution and maintenance. Here again is your chance to make pivots for almost
no cost.
• Talk to Industry Experts and Investors - A small advisory board of outside people
with experience in your domain can give you the unbiased feedback you need, as
well as connections for setting up distribution and sales channels. It’s also valuable to
talk to potential investors for their views, even if you are bootstrapping the effort.

• Plan and Execute a Pilot or Local Rollout - Good traction on a limited rollout is great
validation of a business model. It allows you to test costs, quality and pricing in few
stores or a single city, with minimum jeopardy and maximum speed for recovery and
corrections. Save your viral campaign and major inventory buildup for later.

• Focus on Collecting Customer References - Give extra attention to those first few
customers and ask for publishable testimonials and word-of-mouth support in return.
If you can’t get their support, even with your personal efforts, take it as a red flag that
the business will probably not scale at the rate you projected.

• Target National Trade Shows and Industry Association Groups - You need positive
visibility, credibility and feedback from these organizations as a final validation of your
business model, as well as your product model, in the context of major competitors.
This may also be a great source for leads as a key part of that final rollout and scale-
up effort.

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Your business model can be a better sustainable competitive advantage than your product
features, or it can be your biggest risk exposure. Too many of the business plans I see are
heavy on competitive product features, but light on business model details and innovations.

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