CORE OF THE BUSINESS PROJECT AND ITS IMPORTANCE
Content 1. Business success 2. Contract Job and self-employment 3. Business ideas and partners 4. Concept of the business project 5. Core of the business project 6. Requirements for preparing a business plan 7. Contents of a business project 8. Preparation and presentation of a small project 9. Competition of business plans Significance of the business plan
Business plan is specific document of a company. This is programme document of the businessman, which accurately defines strategy of company activity. It encompasses key elements: information about company, its goals, economic market conditions, competition environment etc. Business plan is a confidential document, it is presented to the bank (for a loan), to the buyer of company shares, to reliable partner. Creation of a business plan is one of key stages of your activity. It leads businessman as a book, roadmap, which helps everyone assess and implement adopted idea. Business success /theory/ Business success can be viewed in the scope of enterprise success and personal success: a) Enterprise success: financial effectiveness /profit/, complex effectiveness; satisfaction of the owner; satisfaction of customers- market status; satisfaction of employees; the satisfaction of the legal and administrative environments as well as tax system; share in the local and trade development; prestige; other. b) Personal success connected with professional work: - improvement – reaching a high standard of living, fulfilment of the needs of the worker, his or her family and the community; professional development, becoming an expert in the professional field; ensuring the stability of work; keeping balance between professional work and personal life, family, the community; undertaking new initiatives, ideas; keeping a balance between independence, autonomy and submitting to the employer; performing work in a resourceful manner; satisfaction gained through achieving your goals; people management; prestige, social status; c) Professional success of a person: the work and financial, material remuneration;
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possibility of a salary raise; stable employment; keeping a balance between work and personal/family life, relations with the community (work-life balance); friendly working environment; comprehensible and achievable paths of promotion, occupying a high position in the enterprise; financing further development and education; defining independence at work, independent working time management; working within the scope of products and services of a business interesting for the worker. presentation case study of the successes of people, enterprises characteristic for a given region, place;
Business success /practice/ Persons, enterprises get information through: a) external audit; b) internal audit; The SWOT analysis has been used for diagnosing opportunities and threats in the enterprise surroundings as well as strengths and weaknesses inside the enterprise. OPPORTUNITIES (economic condition, demographic changes, market etc.) THREATS (competition, taxes, distribution, etc.)
STRENGTHS (original product, unique technology, position on the market etc.) WEAKNESSES ( costs, lack of knowledge of marketing, etc.)
Students individually choose components of their own current personal success. They rank the components in order, starting from the most important element, they then define its level in terms of quantity or quality. Group discussion without a trainer. Discussion with a trainer. Students individually define goals which can be accomplished thanks to professional work. They rank the components in order, starting from the most important element, they then define its level in terms of quantity or quality. Group discussion without a trainer (LSD). Discussion with a trainer. Students individually define the elements of enterprise success. They rank the components in order, starting from the most important element, they then define its level in terms of quantity or quality. Group discussion without a trainer (LSD). Discussion with a trainer. Students individually create a model of connecting personal success with the goals of personal success and the goals of the enterprise. Group discussion aimed at cooperation with a trainer. Evaluation of students' initiative during the course: self-evaluation, evaluation by the trainer, joint evaluation by the trainer and the students. Business ideas and partners /theory/ The main business idea consists of defining a vision for the future and a long-term policy (over 10 years), taking into consideration the role that the enterprise will play in the development of the local community. This should be combined with profitability, positive financial indicators (financial stability, capital structure), satisfactory market turnover (turnover volume, market share, market position, new markets), HR, positive social status (image and prestige). The enterprise will focus on one of the following basic concepts of marketing management: customer oriented (consumer needs, preferences, behaviours), profit orientated, marketing activity interpretation orientated.
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It is usually recommended to pursue a combination of all of the three orientations according to the needs of the enterprise. To effectively define a business idea requires answering these questions: a) b) c) d)
if there are rivals, their characteristics, if there are customers (clients), their characteristics, what is the financial, human, material and information capital at our disposal, what are the values/utilities we want to transfer to our recipients in our products?
Searching for business ideas requires: Gathering information concerning the competition, markets, and environment. Transforming information into long-term, mid-term and short-term goals; strategic, tactical and operational plans. Combining goals, information, plans, methods and means of activity into one uniform coherent business concept, taking into account the desire for success. In the search for a business idea the following questions should be asked: what is the subject of sale, consumption, production, etc., who is the rival, customer, consumer, organizational observer, etc., when is there a high demand; when are the rivals most active, the customers purchase, etc., what the consumers, rivals, customers, organizational observers do; how to make a product/how to sell it, etc. what drives the competition to act; the customers to buy; why are specific business ideas pursued, etc., how profitable is the business idea, how effective is the competition, what are the total costs of the product and the final purchase costs for the client, etc. The secondary sources of information of the utmost importance include: the opinions of specialists, experts, people of success, economic and professional press and web portals, materials from offices, branch offices, institutions, economic branch of local government, etc., results of market research, economic and business development indicators, including statistical publications, reports, business register, public address databases, This should be supplemented with observation and experiment with regard to the competition, customers, consumers, the enterprise itself. In the search for a business idea the following tools are used: interview, questionnaire, survey realized personally, through the Internet, telephone or in some other way. It is important to ensure the accuracy of the research (approximation to real states), precision of the research (repetitiveness of the research results), representative nature of the research (the results reflect the views, aspirations of a precisely specified sample group). The report from the market research contains the following main information: the aim of the research - method, who, when and where realized the research, the general/representative sample used in the research, how the research was conducted, accuracy, precision and repetitiveness of the research, significant results of the research, their interpretation. The search for a business idea will be more effective if: it is done in cooperation with specialists, advisers, and people of success, it is oriented at consumers, customers, at understanding and appreciation of their needs, preferences, methods of conduct, will strength and a determination for action is developed, the actions are flexible, it adjusts to opportunities;
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it is focused on effectiveness (efficiency), is measurable and makes use of modern technologies, outsourcing, etc., mental and physical fitness are maintained, as are cordial relations with business partners, personnel, family and local community.
Business ideas and partners /practice/ Students individually create detailed research questions according to the question form. They present and discuss in a group under the supervision of a trainer. Students individually work out a plan for a search for a business idea. They present it and discuss in a group under the supervision of a trainer. Students search for a business idea using a brainstorming method or another, depending on the unique characteristics of the region and project feasibility - group work under the supervision of a trainer. Contract job and self employment /theory/ Contract job concerns mainly permanent cooperation with enterprises. For the employees this means - in comparison with self-employment - more stable professional work situation, narrower scope of professional responsibility, answering to the management, use of the achievements and the contacts of the enterprise for the development of the employee. Employers employing workers look for people with professional experience (also after training period, traineeship, voluntary work) and with references. Self-employment is most frequently a one-person business activity. A natural person undertakes a business activity on one’s own account and risk. Due to this fact they can usually benefit from tax exemptions and save on personal costs - in comparison to a contract - job. Self - employment is usually associated with resourcefulness, creativity, activeness, seizing opportunities, individual use of different kinds of financial and organizational support, undertaking risk. There is usually low formal arduousness at the start, taxation is convenient and liquidation procedures are simple. The drawbacks include financial responsibility for the financial obligations of the company and difficulties in acquiring capital. It requires, apart from the business concept, a little financial capital - and depending on the specificity - material and informational capital. It will be crucial to find and cooperate with different types of venture funds, agencies for enterprise development, state and local government administration supporting the development of entrepreneurship, with banks, etc. It is also very important to know what one is legally obliged to have and to do in case of undertaking self employment (registrations, licenses, permissions, taxes). Contract job and self employment /practice/
Students individually diagnose the main factors, encountered in their surroundings in a community, region, in professional business or an enterprise which are crucial when deciding to do a contract-job: fact-finding method. Group discussion without a trainer directed at competition.
Students individually diagnose the main factors, encountered in their surroundings in a community, region, in professional business or an enterprise which are crucial when deciding to become selfemployment: fact-finding method. Group discussion without a trainer directed at competition.
Students individually conduct a self-evaluation of their own needs, their skills at planning, bookkeeping, work habits, HR, marketing management, cooperation, quality management, product launches: group discussion conducted by the trainer directed at competition.
Students individually conduct a self-evaluation of business management concerning: strategic-tacticaloperational planning, managing the product- distribution-price–promotion, HR, finances, information: soft skills involved in conducting a business. They particularly specify their competence for acquiring investors, anticipation of investment opportunities; and also opportunities of developing an action plan to develop their business activity.
Students individually make a specification and self-evaluation of the main factors resulting from their needs, life situation, personality, competence, experience, capital, for and against contract job/self-
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employment. They define the level (strength) of these elements both in terms of quality and quantity. Group discussion with participation of a trainer directed at competition.
Students individually specify the most significant factors, elements and states that pose opportunities, threats, strengths and weaknesses of undertaking a contract-job and, separately, self-employment: SWOT method. Group discussion with participation of a trainer directed at competition.
Concept of the business project /theory/ The concept of the business project is an internally integrated system of views, values, attitudes and activities aiming at effective business realization. The procedure of a perfect business assumes specifying - for a given market segment - such activities which enable achieving maximum effect while fulfilling the expectations of the product consumers. The concepts of business ideas are subject to selection regarding their technical and physical feasibility. The specifications of the products and their characteristics are defined and costs, quality and reliability are optimized. The above mentioned operations allow to specify the required production capacity based on: estimation of present and future demand, specific needs concerning financial, human, material and informational capital, proposition of the use of private equity for satisfying the demand, verification of business activity effectiveness, pointing out: major threats, long-term results of establishing the business. Basing on the goals and on the preferences of the clients the final version of the product can be defined, which will: a) be technically and technologically feasible, b) be possible to be distributed all the way from the producer to consumer , c) have a price accepted on the market, d) possible to be promoted, e) be financially effective. The art of the business project requires specifying variants of the concepts through the choice of: products with different features, quality and quantity, different prices of products, varied manners of distribution, different ways of promotion. One must always remember to ensure financial effectiveness. In its market activity an enterprise must choose from 4 basic positioning concepts: 1. an action not varied to particular market segments, 2. an action varied to particular market segments, 3. concentrated action, 4. an individualized action (mainly on the supply market for other enterprises and organizations). Placing a product on the market consists of giving the product specific features, and also of price setting, distribution, promotion - in a way, that in the minds of the consumers, the product has a separate, noticeable, attractive place. Market positioning is applied by a diversification of: features, product quality, packaging, functionality - application, producer, consumers, price, image, distribution channels, promotion, etc. It is crucial to subordinate market positioning to the consumers’ concepts, fulfilling their expectations. The most important market positioning options are:
positioning on one market segment, positioning on many market segments, imitative positioning (similar to some other brand) anticipation positioning (change of the target market) adaptation positioning (adjusting to market changes) defensive positioning (introducing a new brand as a supplementation of the attractive already existing own product).
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Next there is a detailed choice of technologies, and means and equipment being in use etc., connecting them with location, layout. A necessary stage of designing is deciding who will do which job. Concept of the business project /practice/ The need of the business plans depends on business origin, extent, structure etc. It’s important to analyze all aspects which shape the business, in the environment of the competition and risk. It will bring benefit, as:
It’s better to discover potential mistakes when writing a business plan rather then carrying it out. Starting activity you’ll feel much safer if you put up a business plan yourself; Will show what, when and how much money certain activity needs; Will help you quickly and clearly present your intentions to the bankers, investors and partners; You will learn planning process.
The experience shows that preparation of business plan could be brought down to five phases:
1. The ultimate goal of the business plan if defined: what is the purpose and scope. The following questions should have clear answers in this phase: who will be interested in the plan, what’s known about the idea, competition, market, what are the strengths). 2. When goals are clear and questions answered, the specific structure of the plan should be chosen, which would match the goals and nature of the business. 3. Structure is being defined, and topics divided to those general, and others which need detailed analysis. Market research, forecast cost analysis and their relation to pricing strategy should be carried out. After the research is complete, you could start the business plan. 4. The business plan is written in this phase. Wording should be clear, neat, using arguments, information received and outlining the data. The brief is written when all sections of the business plan are complete. Then business plan should be carefully read. 5. structure of the business plan. External business environment should be considered, especially legislation, then – industry and segment. Internal environment should be analysed too, benchmarking your company’s activity to that of competitors’. Commonly business plans could either be investment or activity. Contents of the business plan is reliant on the purpose. Essence of the business plan and its significance Structure of the business plan and contents of its chapters is reliant upon the purpose and who will read it. There are different requirements associated with the purpose of the business plan. Emphasis and topics may vary. Structure of the plan, number of sections and their titles could differ. Business plan is recommended to have 9 chapters: 1. Brief (short version of the plan – key part of it); 2. Description of business (introduction to the business idea, its area, product, service, company); 3. Marketing (review part on market and target market, competition, pricing policy, advertisement, promotion, sales strategy); 4. Production (clear processes definition, analysis of the place, facilities, equipment, and raw materials); 5. Management (owners, shareholders, organizational structure); 6. Risks assessment (analysis of the risk factors, which could influence business); 7. Finance (the part should answer question whether the business could be profitable; conclusions should be reasoned by calculations); 8. work chart (terms and sequence of activities); 9. Annexes (supplemental information to other parts of the plan).
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In the opening readers of the business plan should be presented the business idea. It should precede the explanation why you would develop business in this area, what your goals are and business environment. We suggest following sections for the description of business plan:
1. Definition of business area; 2. Company history; 3. Company goals; 4. Product or service description; 5. Product or service improvement research. First part should outline the business area you will work in. Second part depicts information about your company and yourself. If you are starting this business, you should justify the type of company, name and staff that you have chosen. If your business is already running, briefly describe the results achieved. Third part is imperative. Definition of the goals should precede all planning. Fifth part is important as the reader should understand what products will be produced and/or services rendered. If you carry out research to improve characteristics of the product, you should describe them here. Management of the established company is a key factor in shaping and developing the business. There are two extremes of management applied: authoritarian and democratic. Authoritarian is based on assumption that people are inherently lazy. Relying on this concept, people could be managed by money, punishment and threats. Democracy means that if personnel regulate their activity well, there comes success. Consequently managers, supporting this theory, much of attention devote for uncovering the potential of the staff and decidedly regulate their activity. Among those styles of management we could separate following management methods:
1. 2. 3. 4. 5. 6.
manager adopts a decision and informs the subordinates; Manager adopts the decision and takes time to explain his action; Manager adopts the decision together, by exploring opinions of subordinates; Manager adopts the decision and suggest the team to consider and complement it; Manager explains core of the problem and after he inquires for suggestions, adopts them; Manager outlines of the problem, and asks his subordinates to adopt the decision leaving them chance to pick the best alternative; 7. Manager outlines of the problem and adopts the decision offered by subordinates. Core of the business project and its importance /theory/ The business project gives the entrepreneur the ability to adjust to market requirements. It also specifies necessary internal sources and procedures of work. In the creation of the business project be answering the following questions by the entrepreneur may prove very helpful: a) what opportunities does the market give to the entrepreneur? b) what are the strong points of the entrepreneur? c) what does the entrepreneur precisely want? d) what work habits are necessary to achieve the goals of the entrepreneur? e) what does the entrepreneur want in the future? In the stage of preparing the business project the following main issues are usually defined: a) ownership (starting a new enterprise, franchising, purchase of an already existing enterprise), b) ownership form (one man, company), c) financing sources, d) management (qualifications, posts, organization scheme, managing, control). Directing internal activity of an enterprise mainly consists of:
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a) designing and making a product (features, pattern, assortment, quality, brand, guarantees, packaging, service, etc.) b) price setting (base price, discounts, price reductions, price encouragements, payment terms, credits etc.) c) distribution (ways of transferring the product to the recipient, distribution channels, logistics, reserves, transport, intermediaries etc.) d) promotion (trade information, commercial, sponsoring, promotion of the sales place, direct marketing, etc.) e) managing people inside the enterprise (aims, objectives, duties, rights, responsibilities, etc.) f) influencing market trends (change of tastes and fashion of the clients, new needs of the clients, etc.) g) use of new technologies (IT, e-commerce, just-in-time, CRM etc.) Requirements for preparing a business project /theory/ The business project is complied in order to authenticate the undertaking, the enterprise, new initiative. The recipients of the business project (BP) are: organizations, people from outside (creditors, banks, investors, potential business partners), the entrepreneur, the enterprise workers (internal use) Recipients - BP users anticipate demonstrating that the enterprise works effectively, does not take any risk, proves a very high probability of success. At the same time the BP plays INFORMATIONAL role. Implementation of the BP in the enterprise enables directing business activities. The necessary control is conducted through comparison of the achieved results with the BP (CONTROL function). Making the workers aware of the essence of the performed business, their motivation appears due to the use of the BP - INTERNAL INFORMATION function. Business project preparation process should be: a) planned, together with making decisions (specifying the main and partial goals as well as deciding about optimal ways to achieve these goals), b) organized (grouping goals, actions, sources), c) managing (motivation, realization, directing ), d) controlling and estimating (corrections, monitoring of goals). Creating a business project requires organized, systematic action: It is necessary to deal with all the scheduled actions, elements of the project in a proper order, It is crucial to consider feedback, mutual influence of separate elements on each other, It is important to focus on all individual works, analyses, directing particular elements of the project, how they are linked with one another, at the main goal of the business plan creation. An important part of the business project is a plan showing what and when to do: decision about starting an activity analysis of own capabilities and intentions the choice of a product market research forecasting the profit from sales the choice of location, time working out the plan of production and trade working out the marketing plan working out the organization plan working out the plan of legal and administrative actions working out the plan of insurance working out the plan of bookkeeping working out the financial plan writing a letter, report, presenting the enterprise. Also important is the sequence of working out particular elements of the project, resulting from possessing information concerning the remaining elements of the project. Main obstacles encountered during the creation of a business project:
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a) b) c) d) e) f) g) h) i)
improperly specified goals, improper system of motivation, describing a dynamic and complex environment, defining the level of its unpredictability, reluctance to specify the goals, accurate analysis, resistance towards changes, limitations of the freedom of action (lack of ideas, capital, personnel), formalization of the project is not accepted by the entrepreneur, the costs of the project creation, overestimation of numerical data (number fetish)
The above mentioned obstacles may be overcome by, respectively: a) understanding the essence of the aims, b) communicating with the community, participate in the community and understand it, c) the project should be coherent in regard to goals horizontally and vertically, d) specifying the authenticity of the author of the project, effectiveness of his work, effective system of rewarding. Business project should be: feasible effective unique (different from other enterprises) using external opportunities and internal strengths in order to take advantage of the market motivating for action. The form and the content of the BP should be easy to read, to understand, clear and measurable. At the same time it should prove the authenticity of the analyses (numerical data, results and authenticity of the conclusions. The BP details are adjusted to the requirements of the project recipient (for example a bank will require information concerning financial security of the undertaking). In BP it is necessary to use numerical data to the greatest possible extent, which causes that the BP to be specific, the goals and results are measurable and achievable, feasible in strictly defined periods. Contents of a business project /theory/ I. Description of a project constitutes a very big abridgement of the whole BP, after reading the description the recipient of the BP should have an idea of the whole project. This part should contain descriptions of what is going to be done, crucial problems of the whole activity, the most important conclusions. The description capacity should not exceed 2 pages. - introduction; - enterprise name, location, how-where-when it was established; - the most important parts of the undertaking; - the planned costs and financial requirements; - financial forecasts; - the planned results. Description is created as the final stage of the business project preparation. II. Enterprise /undertaking/. name, location, establishing, ownership; financial, material, human, information capital; management; financial condition; production/trade activity; results of the activity; detailed values and advantages. III. Business idea. description of a product/an undertaking: the essence, feature, quality, assortment, uniqueness, attractiveness, use of: technology, analyses and research; consequences for: distribution, price, promotion, personnel, environment; completing binding and recommended requirements, orders and recommendations;
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financial consequences of the product acceptance; Consequences of technical arrangement of the product acceptance (management, production, marketing, etc.).
IV. Market. analysis of the economic climate and the condition of economic situation; branch analysis (trends, rate of growth, stage of development: initial- growth- maturity- decline, specificity); description of the present and future competitors' specific enterprises, positions and share in the market, threats and weaknesses of the rivals, specificity, manners of activity; consumers/clients: segmentation criteria, segmentation, target market, detailed description of the needs and preferences of the segment and the target market, absorbency of the market; pointing and proving that despite the competition the new product will be successful on the market, the source of competitive advantage, the planned share and position in the market. V. Price plan. - the method of specifying the price; price level; - price reductions, discounts, and other price encouragements; - the price attractiveness and uniqueness. VI. Distribution plan. where, when and how the clients will be able to buy the product; distribution channels; the choice of a direct or (and) an indirect distribution with justification of the choice; the choice of intermediaries with justification of the choice; financial effectiveness of the distribution channels and intermediaries. VII. Promotion plan. content and form of the information concerning the product, price, distribution; where, when and how to transfer information about the product, price, distribution; content and form of the information persuading to consumption and purchase of the product; where, when and how to transfer persuading information; content and form of the information forcing consumption/purchase of the product (as far as the forcing information will be transferred) where, when and how to transfer information forcing the consumption and purchase of the product (as far as the forcing information will be transferred) effectiveness of promotion. VIII. Technical feasibility, manpower, resources, natural environment. technology and technique of production/trade; technical documentation of the product, production, trade (if required); permission for construction, the plan of land development, etc. (if required); resources used for production/trade; permissions/certificates/licenses etc. (if required); specification of the production/trade activity, know-how and special skills; suppliers, supply of the resources, hardware, equipment; accessibility and the usage of media (electric energy, gas water, sewage system, disposal of rubbish); communication accessibility and technological convenience of production/trade; section assessing the costs of operational activity specifying the main types of expenditures; cost and quality of the resources, equipment and hardware. IX. Management (you skip this if you are self- employed). organizational structure (organizational scheme): a) functional (finances, production, marketing and other); b) objective (according to products assortment); c) geographical (according to location of the production/trade); d) matrix (the workers are subject to at least 2 managers); e) mixed
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managing and performing work (tasks, duties, rights, responsibility).
X. Financial plan. costs in structural division into: the place of activity, hardware, equipment, resources, other material, HR, information and other important resources depending on the branch, region, situation; structure of private equity and debt and its division into the type of financial capital, the source of acquiring, financial conditions (acquisition costs etc.); the capacity of production (sales), sales prices, income in division into products , place of activity and other; financial indicators of financial condition: a) effectiveness = costs/incomes; b) current ratio = current assets/current liabilities; c) return on assets = net profit/total assets, and other indicators depending on the branch, region, situation; d) critical indicators specifying effectiveness/structure of the indicators’ level in time. XI. Government regulations and support. law, administration, local/branch regulations of production/trade; governmental support of business activity; non-governmental support of business activity. Preparation and presentation of a small project /practice/ -
specifying individually particular initial states for creation of a business project using the fact-finding method, and methods listed above in chapter 5; individual interpretation of the found information; group discussion with participation of the trainer; individual creation of a business project; presentation of business projects: presentation, group discussion conducted by the trainer directed at competition: self-evaluation and evaluation of students by the trainer.
Competition of business plans The business plan can be competitive if it: 1. shows the clarity and potential of the market opportunity defined in the plan, and the strength of the team's argument, 2. includes an overall evaluation of potential reward to risk, 3. proves the appropriateness of the strategy for exploiting the opportunity, 4. proves the reasonableness of the plan for financing the business, 5. and shows the team's ability to actually implement the plan. The Business Plan Contest aims to provide an integrative learning experience for participating in the project: “European perspectives on raising social competencies of offenders�. The contest should spawn hundreds of business plans, and winners and non-winners alike should go on to implement their plans and start successful enterprises. While it is hoped that developed business plans will reflect real opportunities, there is no obligation for the winners to implement their business plans. More important is that the participants learn about the new venture creation process through their efforts, their work with trainers, and their presentations to the judges. Whether you go on to implement your business plan or not, your experience will be an exciting, challenging, and rewarding one. We look forward to reading your business plans and hope that this contest will play a part in the success of any entrepreneurial venture you may be involved with during your career!
PRACTICAL WORK: CONSTRUCTION AND PRESENTATION OF A SMALL BUSINESS PROJECT
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