An enterprise starts with a real customer problem, not merely an attractive business name. GST302 offers a chance to connect opportunity identification with planning, financing, marketing, ethics and the realities of growing a venture.
The examples below are illustrative figures for learning and should not be presented as field-survey data, projected guarantees or university-prescribed templates. Follow the current official GST302 business-plan and assessment instructions for your actual submission.
What you will be able to do
- Express a venture idea as a measurable customer problem and solution.
- Estimate unit contribution and break-even quantity from assumptions.
- Distinguish cash movement from profitability.
- Choose an evidence-based growth option and assess its risks.
Lessons with worked examples
1. Validate a problem before building the solution
Opportunity identification begins by asking who experiences a problem, how often, what it costs them and how they solve it now. Describe a specific user and situation rather than a broad ambition such as “everyone needs technology.” Early interviews and observation help test whether the need is widespread enough to support a service.
A business idea is not validated because friends say it sounds good. Stronger evidence includes repeated descriptions of the same problem, proof of existing spending, or a small paid pilot. Record observations honestly and keep private customer information confidential. A clear value proposition explains who benefits and why the proposed option is better than their present alternative.
- Name a particular customer segment and repeated pain point.
- Record assumptions separately from observed evidence.
- Test the simplest ethical version of your solution.
Worked example — appointment reminders
Suppose a clinic reports frequent missed visits. “Build an app for every hospital” is too broad. A narrower hypothesis is: “Private clinics with recurring appointments need reliable, low-cost reminders.” Speak with clinic managers, count missed appointments before and after a pilot, and estimate what clinics would pay. None of those results should be invented.
Takeaway: Test the existence and value of the problem before investing heavily.
2. Calculate contribution and break-even
Unit economics show what remains from each sale after its variable costs. Contribution per unit equals selling price minus variable cost per unit. To calculate operating break-even in units, divide total fixed costs for the period by unit contribution, assuming each unit has roughly the same price and variable cost. Fixed costs stay constant over the relevant volume; variable costs change with sales.
This formula is a planning tool, not a guarantee. Discounts, spoilage, unsold inventory, taxes, financing costs and changes in demand can alter the result. Always state the period and assumptions. Where contribution is zero or negative, selling more units at the same terms cannot cover fixed costs.
- Contribution = selling price − variable cost.
- Break-even units = fixed costs ÷ contribution per unit.
- Round required whole units upward and state assumptions.
Worked example — printing service
Illustrative month: printing fee ₦1,500 per pack; paper, ink and transaction costs ₦900 per pack; fixed monthly costs ₦60,000. Contribution = ₦1,500 − ₦900 = ₦600. Break-even = ₦60,000 ÷ ₦600 = 100 packs. At 120 packs, estimated operating surplus before unlisted expenses is 120×₦600−₦60,000 = ₦12,000.
Takeaway: A realistic plan tests both cost assumptions and achievable sales volume.
3. Plan cash flow and operations
Profit and cash flow are related but not identical. A sale made on credit may create revenue without immediate cash. Buying equipment may reduce cash today while its cost is recognized in accounting over a longer period. A small venture therefore needs a cash schedule as well as a sales forecast.
An operations plan specifies suppliers, quality checks, delivery steps, staff duties, record-keeping and what happens when something fails. Build a month-by-month estimate of expected cash receipts and payments. Include a reserve for predictable delays and make sure the assumptions behind the forecast can be explained.
- Distinguish cash received from invoices issued.
- Record delivery costs and payment delays explicitly.
- Identify a response to supplier or technology failure.
Worked example — profitable but short of cash
A training business invoices ₦200,000 in one month and expects ₦150,000 in expenses. It appears to earn ₦50,000 before further adjustments, but if the client pays next month and current expenses must be paid now, the business still needs cash to operate. A forecast should show both the expected profit and the timing mismatch.
Takeaway: Good management tracks when money arrives, not only whether a sale is profitable.
4. Marketing, ethical practice and growth
Marketing starts with understanding which group values the service, where that group can be reached and what message addresses its problem. Pricing, distribution and promotion should reinforce a truthful offer. Track results such as qualified inquiries, repeat customers and the cost of attracting a paying customer, rather than just counting social-media impressions.
Growth can mean more customers, better retention, new locations or new products. Each option has trade-offs: hiring too early increases fixed costs, while launching in several regions can reduce service quality. Ethical growth requires accurate claims, fair treatment, transparent terms and protection of customer data.
- Measure conversion from inquiry to paying customer.
- Identify the bottleneck before expanding capacity.
- Include customer consent, privacy and service recovery in plans.
Worked example — choose a growth metric
A tutoring service receives 100 inquiries and 12 paid enrolments: inquiry-to-enrolment conversion is 12%. If a revised onboarding process yields 18 paid enrolments from 100 comparable inquiries, the conversion rises to 18%. Before declaring success, consider whether seasonality, price or lead quality also changed.
Takeaway: Measure a business change with comparable evidence and clear assumptions.
Apply what you learned — GST302 Practice Clinic
Original independent learning exercise. Try it before opening the worked explanation; this is not an official NOUN examination question.
Price a student service using break-even thinking
Situation: A student printing service charges ₦1,600 per order. Paper, ink and transaction charges cost ₦1,000 per order. Monthly fixed costs are ₦30,000.
Your task: Calculate contribution per order, monthly break-even orders and profit at 80 orders, ignoring taxes and exceptional costs.
Reveal the step-by-step solution
- Contribution per order = ₦1,600 − ₦1,000 = ₦600.
- Break-even order count = ₦30,000 ÷ ₦600 = 50 orders.
- At 80 orders, total contribution = 80 × ₦600 = ₦48,000.
- Operating profit before other costs = ₦48,000 − ₦30,000 = ₦18,000.
Answer: Contribution: ₦600 per order. Break-even: 50 orders. At 80 orders: ₦18,000 operating profit under these assumptions.
Common mistake to avoid: Profit does not equal cash in the bank if customers pay later or suppliers require early payment.
Test yourself — original practice questions
These are independently created learning questions, not official NOUN TMA or examination questions. Try each one before revealing the explanation.
Question 1. A service charges ₦2,000 per sale and spends ₦1,250 in variable costs. Its contribution is what?
- ₦750
- ₦1,250
- ₦2,000
- ₦3,250
Show answer and explanation
Answer A: ₦750
Contribution = ₦2,000 − ₦1,250 = ₦750 per unit.
Question 2. If fixed costs are ₦45,000 and contribution is ₦750 per unit, break-even volume is:
- 45 units
- 60 units
- 75 units
- 120 units
Show answer and explanation
Answer B: 60 units
Break-even units = ₦45,000 / ₦750 = 60 units, under the stated assumptions.
Question 3. Which is the strongest early evidence that a business problem matters?
- The founder likes the logo.
- The founder predicts millions of users.
- Target customers repeatedly describe and spend to solve it.
- Several friends say the idea sounds interesting.
Show answer and explanation
Answer C: Target customers repeatedly describe and spend to solve it.
Observed repeated needs and spending are stronger validation signals than casual approval.
Question 4. Why can a business report sales while lacking cash?
- All sales are cash sales.
- Costs disappear once invoiced.
- Credit customers may pay after expenses are due.
- Break-even means cash is always available.
Show answer and explanation
Answer C: Credit customers may pay after expenses are due.
The timing of receipts and payments can produce cash shortages even when revenue is recorded.
Three things to practise this week
- Interview three potential users without suggesting the “right” answers, and note recurring problems.
- Make a one-page table of price, variable costs, fixed costs and break-even assumptions for a small venture.
- Draw a three-month cash-flow forecast with separate cash receipts and payments.
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