Introduction to Business

Implementation
S U B T ITLE
After much seeking and screening of entrepreneurial
opportunities, the critical decision to seize one
particular opportunity culminates in the
establishment of an enterprise.
Presumably, all the market research has been done
and the desired customer segment has been
targeted. Likewise, the final location has been
chosen and the new product has been designed and
developed. These have all been part of the rigorous
steps taken in preparing for entrepreneurship. Now
is the time to set up the enterprise, plan its future,
and mobilize the needed resources.
A Very Clear Purpose
The entrepreneur must be very clear about the purpose in
establishing the enterprise. Whether it is for generating
profits or feeding the family, making a difference in the
industry or actualizing the self, the purpose must be
compelling enough to motivate the entrepreneur.
The personal purpose of the entrepreneur is his or her
personal mission. However, it may also well be the
enterprise mission statement. As time passes, the
enterprise begins to have its own life and may have a
purpose separate from the personal mission of the
entrepreneur.
The enterprise must state its mission statement
clearly for:
The sake of the customers being wooed;
The investors who need to know that they are getting
into;
The financiers evaluating the enterprise; and
The government functionaries who must regulate the
activities of industries and business.
A Very Compelling Vision
The entrepreneur must establish an enterprise on the
basis of a very exciting business concept leading to a
grand vision. If the business is just like any other
business in the marketplace, customers will not take
notice. The entrepreneur must offer something new,
something appealing, something different that says,
“Take notice, I’m arriving with a bang!” In other
words, the entrepreneur must present a winning
business concept that manifest tremendous future
possibilities.
Not by Any Other Name
Next, the entrepreneur must choose a very
fitting name for the enterprise. A good name
identifies the company very well. It
communicates what the company is all about
and what its products are all about. The
entrepreneur must think long and hard about
the name because he or she has to live with it for
a very long time. Thus, the company name must
project its very desired image.
A Company of Angels
In livelihood undertakings or microenterprises, it is
common for entrepreneurs to embark on a business
venture as a “lone wolf,” not needing the capital or
expertise of others. At best, it may be a “mom and pop”
affair.
For small, medium, and large enterprises, the entrepreneur
needs the capital and the expertise, or both others. The
choice of business partners here is a very critical one. A
mistake would mean years of internal squabbling. Thus, the
entrepreneur must choose the “company of angels,”
partners who are well-meaning and like-minded.
Angel investors provide capital to entrepreneurs knowing
that there are risks involved. However, they are prepared to
support the entrepreneur because of the good business
prospects they are seeing and their favorable character
assessment of the entrepreneur. Angels. Also exert a lot of
effort in choosing the correct partners. Angel investors may
come in the form of senior relatives, close friends, and
professional equity investors.
Angel industrial partners are people who can contribute
their expertise, experience, technology, contacts, and good
character that will enable the enterprise to succeed. In slice
of the profit. For business that would rely heavily o
industrial partners, the entrepreneur is well advised to
make the best choice of such angel partners.
A Very Good Business Plan
The next step for the entrepreneur is to have a very good
business plan. It is a wise thing to do in order to chart the
course of the business properly and to focus the efforts of
the entrepreneur5. in part 1 of this book, the entrepreneur
was asked to prepare an outline of the business plan and
keep it handy for any revision and adjustment that needs
to be done along the way. Now, the entrepreneur must
flesh out, into more specific details, the information that a
food business plan contains. Likewise, it is important to
know what the business plan’s purpose is: for whom it is
being written (target audience), and what would be the
coverage of the business plan (in terms of depth and
breadth)
The purpose of the business plan are:
1. Entice partners, investors, and bankers to fund a business venture.
2. Communicate what the enterprise is all about, what market it wants to serve.
3. Show what financial returns it could muster.
The business plan should contain important information about the following:
The business itself;
The organizers;
The management and technical people;
The financial structure;
Its market potential;
Its target market;
Its projected sales, expenses, and profits; and
Its probable risks.
The business plan should begin with the business
concept and the vision for the enterprise in the next
three to five years.
It should then declare the business purpose or the
mission statement of the enterprise. This could be
accompanied by a statement of values or business
philosophy. The business plan should proceed to an
enumeration of business objectives, key result area,
and performance indicators. An overall enterprise
strategy should then be articulated to show how the
performance indicators could be attained.
Next, the business plane should contain an executive summary of the following:
1. The organizers and the key people behind the business and why these people have the
resources, talents, skills, and technology to achieve success;
2. The market being targeted and why there is enough market potential to justify the
business;
3. The products or services to be offered and why they are right for the market;
4. How the business will be operated and organized, including all outsourcing,
subcontracting, franchising, and licensing agreements;
5. The investment capital required for the business and what exactly it would be used for;
6. The technology, the technical expertise, the equipment, and material suppliers to be
utilized;
7. The capital structure (short and long term debt, stockholders’ equity) of the business;
8. The operating budget, financial projections( income statement, balance sheet, cash
flow), and return on investment prospects;
9. The risks in the business and the contingency measures to counteract them.
Organizing and Structuring the Enterprise
The Business Plan must be able to estimate the capital required by the
enterprise. The capital required would be dictated by the investment in the
assets of the enterprise. These assets are composed of the following:
1. The current assets, which are short-lived assets. They are composed of
cash, inventory, accounts receivables, and other current assets.
2. The long-lived or fixed assets. They are composed of property, plant, and
3. The other assets. They are composed of organizational and pre-operating
expenses.
The assets of the enterprise are financed by its liabilities. These liabilities are
composed of:
(1) Current liabilities such as suppliers’ credit and other short-term credit; (2)
long term debt; and (3) owner’s equity.
The simplest and easiest enterprise to organize is the
sole proprietorship. In this structure, the owner or
entrepreneur has sole control over the enterprise. He
or she reaps all the profits an also, all the losses. But
he or she will also incur all the risks.
The sole proprietorship is mandated by law to
register the business with the proper authorities. All
business, in whatever legal form, are required to
secure a mayor’s permit or municipal license before
they can operate in a locality.
Before getting this permit, there are clearances that
must be obtained. These are the following:
Barangay clearance
Fire safety clearance
Certificate of electrical inspection
Department of Trade and Industry (DTI) certificate
Lease contract if space is leased
Locational clearance
If two or more persons bind themselves into a contract to
contribute money, property, and expertise in a common
venture with intention of dividing the profits among
themselves, they would have entered into partnership.
A partnership is vested with its own legal personality quite
distinct and separate from its individual members. Thus, a
partnership venture can own its own assets. It can incur its
own liabilities. It can sue and it can get sued.
A minimum of two persons can constitute a partnership.
However, there is no limit to the number of persons in a
partnership. There two types of partnerships based on the
liability of the partners: general partnership and limited
partnership.
A general partnership is composed of partners who are
liable individually and collectively to all those who have
claims against them. Claimants can run after all the
personal assets of all the partners.
A Limited partnership consists of partners who have limited
liabilities while others in the partnership have unlimited
liabilities. A limited partner is not personally liable for all
the obligation of the partnership beyond his or her prorated
capital contribution to the partnership. The law requires
that there must be a ta least one general partner in a
limited partnership to assume the unlimited liabilities. The
limited partnership must add the word ‘Limited’ to its
partnership name.
The partnership should obtain all the required government
clearances, permits and licenses. It should get:
a bank certificate of deposit on the money
contributions of the partners; and
the approval for its partnership name from the
Department of Trade and Industry.
Having obtained these documents, it should register and
file its Articles of Partnership with the Securities and
Exchange Commission (SEC). Needless to say, the
partnership must also register with the SSS and the BIR, as
well as other government instrumentalities that may have
jurisdiction over its type of business.
The third form of business organization is the
Corporation. Like the partnership, the corporation
also has a separate legal personality quite distinct
from the investors who contributed money to the
enterprise.
The corporation can be formed or incorporated by, at
least five, or at most 15 natural persons. According to
Philippine law, the majority of the incorporators must
be residents of the Philippines. However, once the
corporation is established, there is no limit to the
number or natural or juridical persons who can invest
in the corporation.
The corporate form of business allows various combinations of
funds to be raised from financiers and investors. Thus, bigger
business favor the corporate form of business. This is due to its
limited liability and flexibility in financing terms obtained.
Four types of corporations
1. Stock Corporation. The Stock Corporation issues capital stocks
divided into shares (or proportions of the total capital). Based on
the submission of Articles of Incorporation to the Securities and
Exchange Commission, the corporation is authorized to raise
capital that has a corresponding number of shares. At least 25% of
the authorized capital, as stated in the Articles of Incorporation,
must be subscribed to by stockholders at the time of incorporation.
Moreover; at least 25% of the subscribed capital must be paid up by
the subscribers at the time of incorporation. The rest of the 75%
will comprise the unpaid capital subscriptions, which then
represent the receivables of the corporation from the subscribers.
2. Non-Stock Non-Profit Corporation. The Non-Stock
Corporation is organized to carry out a purpose or purposes
other than generating profits for investors. The Non-Stock
Corporation usually has a social mission. Hence, all the
surpluses (or profit equivalents) generated by the
corporation are not distributed to the funders in the form of
dividends. Rather, they are plowed back into the
corporation or the foundation to contribute further to the
attainment of its mission. The Non-Stock Corporation is
governed by its Board of Trustees who are chosen and
replaced according to the provisions of the Articles of
Incorporation and the accompanying By-Laws.
3. Close Corporation. The close Corporation has
Articles of Incorporation that limit the ownership of
issued stocks to at most 20 persons. There are strict
restrictions on the transfer of stocks. The stocks
cannot be listed in any stock exchange nor can any
public offering of shares be made.
4. Corporation Sole. A corporation Sole is a special
form of corporation allowed by law, usually
associated with the clergy. The Corporation Sole is a
trusteeship that is set up for the purpose of
administering and managing the affairs, property,
and temporalities of a church or group of clergy.
A Merry Band of Men and Women
After establishing the enterprise, the entrepreneur must meticulously
screen and hire men and women who foster the cause and share the
commitment of the enterprise. Good character and competence must be the
two major criteria for hiring people.
If the team is not fully equipped technically and managerially, the small size
of the organization should allow the people to learn fast:
• about customers
• about operations
• about competition
• about financing needs
• about teamwork