CHAPTER 2: STARTING A BUSINESS
LESSON 2.2 FACTORS YOU SHOULD CONSIDER
LESSON 2.1 TURNING IDEAS INTO REALITY
TIPS FOR TURNING YOUR IDEAS IN REALITY
1. When deciding whether to start a new business, you
should evaluate your capabilities, interest, knowledge,
skills, resources, and potentials
2. Be sure that there is a market for your new ideas
before getting on with your venture.
3. Remember that your experiences and know-how are
keys to starting and operating a successful business
enterprise.
4. Be aware that starting a new enterprise from scratch
takes time, a thorough market research, initial capital, a
god business plan, and most of all, a lot of patience.
5. Before starting a new venture, make a feasibility
study to determine whether you should pursue your
business enterprise.
6. Consider asking for other people’s views, especially
those who know more about the venture you wish to
start, rather than simply being limited to your own
ideas.
7. Attend trade shows and trade fairs to give yourself a
broader picture of the business environment and learn
from the experiences of others.
8. Consider the strong and weak points of your
competitors. Improve upon their weaknesses and avoid
trying to compete against your competitor’s strength.
9. Searching for a market gap or solving a problem for
potential customers will produce sound venture ideas.
10. Be a trend spotter. Look for emerging trends and
take advantage of your window of opportunity by
getting into the marketplace ahead of your competitors.
11. Put into writing your business plan. This will help
you add more substance into your business idea and
develop your business strategy while studying the
industry and your competition
12. Operate your home-based business enterprise as if
it were in a separate business location. Be professional
at all times.
13. Carefully study and evaluate potential retail
locations by studying the trading area, reviewing
customer demographics and traffic patterns, talking to
other tenants, and contracting a competent commercial
real estate company.
14. Always negotiate the terms and conditions of a
commercial lease for your business enterprise.
15. Home employment schemes are one of the oldest
types of classified advertising frauds. This could only
mean that being transparent is very crucial in the
business. Deal with all the requirements of the
government, from registering your enterprise to passing
all the dues to paying taxes.
BEFORE STARTING YOUR OWN BUSINESS
 Name of your business
Choosing your business name that is
appropriate to your product or
prospective customer that is easy to
read and remember. Use catchy name,
if possible.
 Register it to Department of Trade and Industry
(DTI) and Security Exchange Commission (SEC)
You first need to register and secure the
business name and secure the
necessary locality where would it
operate. To have a legal ownership.
 Time and Money
Time and Money Creating social
network accounts, brochure, or print ads.
LESSON 2.3 WHAT KIND OF LEGAL STRUCTURE
SHOULD YOU USE?
3 MAJOR TYPES OF LEGAL
I. SOLE PROPRIETORSHIP
 Easiest structure because of relatively fewer
formalities and restrictions.
 You have the complete control of your business
and also your profit and debt.
II. PARTNERSHIP
 It has two people contributing money, share in
the management of the business, and same goal.
Why they tend to find a partner?
• To raise money
• Acquiring needle expertise.
Positive side
 Companionship.
 Enhanced ability to raise money and recruit and
motivate key people.
Negative side
 Losing control over the venture.
 Losing wealth.
 Being stock with the other owners.
 Being accountable to others.
 Who will give more money?
 Who will sign the checks?
 Who will the one will fire a staff?
Ways to find a Partner
1. Person who compliments with your strengths and
weaknesses rather than with similar background.
2. Look for someone who specialize your weakest area.
3. Seek to someone you can trust, compatible, and can
communicate with easily.
4. Evaluate if he exhibits the ability compromise.
5. Considering the trial period before settling in a
partner on sharing business or venture.
III. CORPORATION
 Exists separate from its founders since the
company is owned by stakeholders and run by a
board of directors elected by stakeholders.
3 Primary Characteristic
1. A corporation limits a stakeholder's liability to their
amount of investment.
2. If shareholders are active in operating the business,
they are considered as employees and must be paid a
reasonable wage subject to the prohibition of Labor
Code.
3. A corporation must pay a tax on income as a separate
legal entity.
Additional...
 Corporation shields the shareholders from the
claims of creditors and contractual relationship,
unless the shareholder sign personally instead
of as officers of the corporation.
2.4. PLANNING, ORGANIZING AND MANAGING
YOUR BUSINESS ENTERPRISE
2.4.1. Planning Your Business Enterprise
Planning simply means thinking ahead. In a business, it
means thinking ahead about objectives, strategies,
finances, production, marketing, profit prospects, and
growth possibilities. What is important however, is that
your business plan remains realistic, as opposed just
being a daydream.
Business Planning involves how to attain your goals and
the ways to accomplish such goals. Setting a time frame
is essential in achieving your goals. You also have to
remember that opening the business is not the end of
business planning. Ultimately, you have to plan on
maintaining consumer satisfaction because this will
translate into stability and growth from your business.
Here are some basic principles in planning which can be
applied particularly to microenterprises or small
businesses:
1. Planning must be realistic. It must be based
on available resources--- human, financial, and physical.
If these are deficient, then it would be impossible for
you to successfully implement your project. Any plan
not supported by adequate resources would likely to
fail.
2. Planning must be based on felt needs. Your
objective as an entrepreneur should fit the needs of the
people in your community. You can identify such needs
through careful observation, personal interviews, or
through the conduct of a survey.
3. Planning must be flexible. Resources, needs,
and economic condition change. Therefore, your plans,
in order to remain effective and relevant, should be
adjusted to take into consideration to these changes.
4. Planning must start with simple projects.
Simple businesses enterprises have a higher possibility
of success. More importantly, these provide new
entrepreneurs with a good training ground on
businesses operations. As you gain more resources and
management experiences, you could easily engage in
bigger business projects.
2.4.2. Organizing Your Business Enterprise
In organizing your enterprise, there are several types of
business organizations that you could choose from;
these legal structures are the sole proprietorship,
partnership, and cooperation.
What is organization?
An organization is composed of two are more persons
who work together to achieve a common set of goals
and objectives.
What is organizing?
Organizing, on the other hand, is the process of
combining and coordinating resources and activities to
accomplish efficiently and effectively an organization’s
goals and objectives.
Every organization has a structure which indicates
positions and relationships.This are generally shown
through an organizational chart. This implies that the
form and expansion of your organizational structure will
depend on the size of your business.
2.4.3. Managing Your Business Enterprise
All business organization has resources and goals to
achieve. Resources require proper allocation and
efficient use to effectively achieve business goals. These
and many more are made possible by good
management. Bear in mind that without effective and
efficient management, your organization cannot
survive.
BASIC FUNCTIONS OF MANAGEMENT:
1. Establish the goals of the enterprise and
develop plans to attain these goals. Common
to all business organizations is the pursuit of
profit. However, they may vary in terms of
strategies in achieving and maximizing profits.
2. Organize people and other resources to
achieve goals. The enterprise’s resources and
activities must be a grouped in such a way as to
ensure efficiency and economy.
3. Lead and motivate people toward the goals of
the enterprise. As an entrepreneur, you must
be a good leader and an effective motivator.
 You must be able to inspire your employees to
perform their best.
4. Maintain sufficient control systems to ensure
that the enterprise is moving well towards its
goals. As an entrepreneur, you must evaluate
and regulate business activities to ensure that
your enterprise achieve its goals. In case
activities deviate from your standard, then you
must immediately take corrective action.
2.5 FINANCIAL MANAGEMENT, PRODUCTION,
AND MARKETING FOR YOUR BUSINESS
ENTERPRISE
2.5.1. Financial Management for Your Business
Enterprise
Financial capital or funds is essential resources to an
entrepreneur. As an entrepreneur, you need money to
start your business. You also need money for the
development and expansion of your business. Far more
important, however, is your ability to manage your
funds. When you have scarce financial resources, there
is a need to plan well and control your finances in order
for your business to last long.
Financial management therefore refers to the activities
that are concerned with securing funding and securing
it wisely. The entrepreneur as financial manager must
determine the best ways to raise money and also the
entrepreneur should be able to efficiently use money to
realize the goals of the enterprise. Good financial
management requires planning. It generally starts with
the identification of the financial needs of the business.
Finance, in essence, is the art and science of managing
financial resources. In other words, it involves both
individual skills and methods of acquiring and using
financial resources. To be an effective financial
manager, it is essential that you have a good knowledge
of economics. Theories of economics like the law of
diminishing marginal physical returns, theory of
production and cost, price theory, profit maximization,
and the law of supply and demand provide knowledge
to financial analyses and decision-making.
2.5.2. PRODUCTION OF GOODS AND SERVICES
PRODUCTION - is simply the creation of good and
services.
-process of converting economic
resources into goods and services.
-Goods and services are produced to
satisfy human needs and wants.
ENTREPRENEUR - the principal actor. They decide in the
proper combination of resources, such as the
application of key or use of machinery.
Producing a product or service which is new in the
market begins from an idea. This idea is then developed
into a product or service by the entrepreneur. This is
part of the entrepreneur's role as an innovator and
creator.
COST OF PRODUCTION - payment test for the use of the
factors of production.
For every product produced, there is a corresponding
cost incurred by the business enterprise.
TAKE NOTE:
When production cost is high, the price of the goods
sold will also be high.
The higher the price of the goods produced, the
lower the demand for such product will be, since a
higher price means lower purchasing power. Ultimately,
a higher price will result to lower sales.
TO LOWER THE COST OF PRODUCTION
Entrepreneurs must choose resources that are
abundant because these are generally cheaper than
resources that are scarce.
CHEAPER INPUTS=LOWER PRODUCTION COST.
QUALITY CONTROL- Refers to the process of insuring
that goods and services are produced in accordance
with their designs and specifications.
Quality has become the central point of their business.
In this age of stiff competition, quality is often the name
of the game.
2.5.3. MARKETING FOR YOUR BUSINESS
ENTERPRISE
MARKETING- refers to the set of activities directed at
facilitating and accomplishing exchange between sellers
and consumers of goods and services.
Marketing is a broader concept that includes the
integration of various functions such as market
research, product development, advertising, customer
service, distribution, and selling.
Marketing is consumer oriented.
It is always important for business enterprises to have a
marketing plan. This is an outline of action designed to
achieve a specific set of goals.
A marketing plan must be compatible with marketing
resources and the external environment of the business
enterprise.
APPENDIX : BATTLE I SHOULD WIN AS AN
ENTREPRENEUR
 Strategy
 Environment
 Corporate Social Responsibility (CSR)
 Business Ethics
I. STRATEGY
What is strategy?
1. DIRECTION- where your business is trying to get to in
the long run
2. MARKET- place(s) where your business would
compete in
3. SCOPE - activities involved in the market(s)
4 ADVANTAGES- area(s) where your business can
perform better against competitors in the market(s)
5. RESOURCES - necessary skills, assets, finances,
facilities, technical competence and connection, among
other, needed for your business to become competitive
6. ENVIRONMENT - external factors that affect your
business' ability to compete
7. STAKEHOLDERS -people who have power and
expectations in and around your business.
B. strategy at different levels of a business
 Operational strategy- is concerned with how
each part of your business is organising to
deliver the corporate and business-unit level
strategic direction.
 Business unit strategy - is concerned more with
how your business competes successfully in a
particular market
 Corporate strategy - is concerned with the
overall purpose and scope of your business in
order to meet stakeholders' expectations.
C. Strategic management
Three components:
 Strategic analysis- is about looking at, analyzing
and understanding the events happening
outside your business organization.
 Strategic choice - is about selecting the
Appropriate business strategy for your business
organization.
 Strategy implementation- is about translating
your selected or chosen business strategy /
strategies into organizational action.
D. STRATEGIC THINKING VERSUS STRATEGIC
PLANNING
Strategic thinking is:
o Your VISION of what your company business
will look like in the future
o very much like painting a picture.
o the picture that will guide the direction, nature
and focus on your business
Strategic thinking attempts to establish WHAT your
business organization should look like while strategic
planning focuses on HOW your business organization
will get there.
E. Winning strategy
o purpose your VISION with PASSION and
PERSISTENCE
o the best strategy is to aim for a business
environment without competition. CHANGE
THE RULES OF THE GAME ON YOUR FAVOR
o if competition is inevitable , do not outwork it,
Instead TILT the playing filed to your advantage
o the essential DIFFERENCE between winners and
loser is their capability to think strategically, to
implement those strategies, and to change the
rules of the game in their favor.
o DARE to think outside the box!
o DARE to dream the unthinkable!
F. RED OCEAN VERSUS BLUE OCEAN STRATEGY
Blue Ocean strategy - is a business strategy written by
W. Chan Kim and Renee Mauborgne in 2005. The book
illustrates the high growth and profit and organizations
can generate by creating new demands in an
uncontested market space , or a "BLUE ocean" than by
competing head to head with other suppliers for known
customers in an existing industry.
The metaphor or "red" or "blue" oceans describes the
"market universe". Red oceans - Refers to all the
industries in existence today (the known market space).
Blue oceans, in contrast, are all the industries not in
existence today ( the unknown market space)
G. ELEMENTS OF BUSINESS STRATEGY FROM SUN
TZU'S THE ART OF WAR
1. Mutual Philosophy and purpose of the group -
Shared ideas bind people together into a cohesive
team. YOU WORK AS A TEAM.
Example. Team spirit, employees' identification
with the brand, believing in the company's vision-
mission statement, mutual trust among staff, and
management.
2.Environment -The prevailing conditions determine
the plans that you can. These conditions are too big and
general to be controlled by people. Thus, you need to
understand these factors and take them into account.
Example. Economic Cycle, financial crisis,
recession, depression, bankruptcy.
3. Situation - This is similar to environment but on a
smaller scale. These are factors that you and your
competition can control, if you just know how to do so.
Example. How much products do you produce?
How do you produce these? For whom do you produce
these products?
4.Leadership - leadership allows you to craft good plans
because of your perception, foresight, emotional
intelligence, and objectivity. It allows you to implement
your plan because you can manage your
troops/subordinates.
Example. Clear job descriptions, duties and
responsibilities, division of work
5. Art - This is the skill and ability to implement your
strategy. Preparation and coordination are essential
here. Ex. Versatility, determination, results-oriented
mind set
II.ENVIRONMENT
The environment of your business consists of the
conditions, circumstances, and influences that affect
your business' ability to achieve its goals or objectives.
Your business exist in an environment that has both
internal and external components.
Internal Environment versus External
Environment
• The internal environment exist within your business
organization.
• The external environment lies outside your business
organization
Elements of Internal and External Environments
Five Elements
1. Physical
ex. plant facilities, natural environment,
infrastructure
2. Technological
ex. computers, robots, systems innovation
3. Social
ex. family system, attitude of people, religion
4. Political
ex. form of government, military and defense
policies
5. Economic
ex. money market, goods market, capital
market
C. SWOT ANALYSIS
SWOT is an acronym for Strengths, Weaknesses,
Opportunities, and Threats
A SWOT analysis is a simple framework that you can
use to identify, describe, and analyze the strengths,
weaknesses, opportunities, and threats facing your
company or business.
It can be applied either at the corporate level or the
business unit level.
Internal Analysis
√ An internal analysis of strengths and weaknesses
focuses on internal factors that give your business or
company certain advantages in meeting the needs of
your target market(s).
√ Strengths refer to the core competencies that give
your business/company an advantage in terms of
meeting the needs of your target market (s).
√ Weaknesses refer to limitations of your
business/company face. It is important to identify these
so you can develop and implement an appropriate
strategy.
External Analysis
√ An external analysis examines opportunities and
threats that exist in the business environment.
√ Both opportunities and threats exist independent of
the firm.
√ Opportunities refer to favorable conditions in the
environment that could produce rewards for your
business/company if acted upon. √ Threats refer to
barriers that may prevent your business/company from
realizing its objectives.
III. CORPORATE SOCIAL RESPONSIBILITY (CSR)
What is CSR?
Corporate Social Responsibility (CSR) talks about your
business' responsibilities to the society where it is
located or where it operates. CSR is also referred to as;
✓ corporate or business responsibility
✓ corporate or business citizenship
✓ community relations
✓ social responsibility
Why is CSR Important?
"CSR is an important business strategy because,
wherever possible, consumers want to buy products
from companies they trust; supplies want to form
business partnerships with companies they can rely on;
employees want to work for companies they respect;
and NGOs, increasingly, want to work together with
companies seeking feasible solutions and innovations in
areas of common concern. Satisfying each of these
stakeholder groups allows companies to maximize their
commitment to another important stakeholder group-
their investors, who benefit most when the needs of
these other stakeholder groups are being met. I
honestly believe that the winning companies of this
century will be those who prove with their actions that
they can be profitable and increase social value-
companies that both do well and do good...
Increasingly, shareowners, customers, partners, and
employees are going to vote with their feet - rewarding
those companies that fuel social change through
business. This is simply the new reality of business - one
that we should and must embrace,"
Carly Fiorina
Chairman and Chief Executive
Hewlett Packard Company
IV. BUSINESS ETHICS
Business ethics (also known as corporate ethics)is a
form of applied or professional ethics that examines
ethical principles and moral or ethical problems that
arise in a business environment. It applies to all aspects
of a business and is relevant to the conduct of
individuals and business organizations as a whole.
Sample Business Ethics
DO'S
✓ Have staff meetings on a regular basis.
✓ Talk about desirable behaviors and give examples of
unethical behaviors.
✓ Allow the staff to discuss among themselves
hypothetical situations in which they must make an
ethical choice.
✓ Have an open-door policy and seriously consider all
comments and complaints from the staff.
✓ Mentor your staff on accepting responsibility and not
deflecting blame.
✓ Make sure there are adequate checks and balances
within your finance department.
✓ Have clearly defined roles and responsibilities for all
staff members.
✓ Treat your staff in the same way you expect them to
treat their coworkers.
DON'TS
× Put undue pressure on the staff. They may bend
under pressure and turn toward unethical behavior to
get the results you are demanding.
× Have a culture of fear or silence.
× Allow anyone to "pass the buck" or deflect blame for
things that are within their responsibility.
× Neglect employees' suggestions, complaints, and
recommendations for the business.
× Criticize your employee in front of other workers
every time they commit mistakes.