Introduction To Business Implementation

INTRODUCTION TO BUSINESS IMPLEMENTATION
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.
Purpose of Stating the Mission Statement Clearly
• for the sake of the customers being wooed;
• for the investors who need to know what they are getting into;
• for the financiers evaluating the enterprise; and
• for the government functionaries who must regulate the activities of industries and businesses
A Very Compelling Vision
 The entrepreneur must establish an enterprise on the basis of a very exciting business concept leading to a
grand vision.
 The entrepreneur must offer something new, something appealing, something different.
 The entrepreneur must present a winning business concept that manifests tremendous future possibilities.
Not by Any Other Name
 A good name identifies the company very well, and communicates what the company is all about and what
its products are all about.
 The company name must project its very desired image.
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
entrepreneur.
Purposes of a Business Plan
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.
Important Information That a Business Plan Should Contain
• 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
• its probable risks
The business plan 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 materials 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.
Assets and Liabilities
• The relationships between assets and liabilities, and revenue and expenses, are things you'll need to
understand in order to run a successful business.
• Anyone going into business needs to be familiar with the concepts of assets and liabilities, revenue and
expenses.
• If your business were a living organism, these would be its vital signs.
• Assets and liabilities are the fundamental elements of your company's financial position.
• Revenue and expenses represent the flow of money through your company's operations.
• Accounting standards define an asset as something your company owns that can provide future economic
benefits.
• Cash, inventory, accounts receivable, land, buildings, equipment -- these are all assets.
• Liabilities are your company's obligations -- either money that must be paid or services that must be
performed.
• A successful company has more assets than liabilities, meaning it has the resources to fulfill its obligations.
• On the other hand, a company whose liabilities exceed its assets is probably in trouble.
Assets of an Enterprise
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 equipment.
3. The other assets. They are composed of organizational and pre-operating expenses.
Liabilities of an Enterprise
• 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
3. Owner’s equity
Revenue vs. Expenses
• Revenue is money your company earns from conducting business.
• If you owned an ice-cream stand, for instance, revenue is what you get from customers who buy ice
cream.
• Expenses are the costs you incur to generate that revenue.
• The ingredients you buy to make the ice cream, the wages you pay your employees, the rent and
utilities you pay for your stand -- these are all expenses.
• To remain viable, a company's revenue must exceed its expenses.
Legal Requirements
• All businesses, 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:
 Barangay clearance
 Fire safety clearance
 Certificate of electrical inspection
 Certificate of occupancy
 Department of Trade and Industry (DTI) certificate
 Lease contract if space is leased
 Locational clearance
• There may be additional requirements depending on the type of business and the ordinances issued by the
concerned local government
• It is likewise the responsibility of any enterprise to register its business with the Bureau of internal Revenue
(BIR) for taxation purposes.
Forms of Business Organization
• Sole Proprietorship
• Partnership
• Corporation
Sole Proprietorship
 The simplest and easiest enterprise to organize
 The owner or entrepreneur has sole control over the enterprise, thus, reaps all the profits and, also, all the
losses.
 There is no distinction between the owner and the enterprise, meaning, the entrepreneur is personally
answerable and obligated to fulfill all the terms and conditions of any business contract that he or she enters
into.
Partnership
 Two or more persons binding themselves into a contract to contribute money, property, and expertise in a
common venture with the intention of dividing the profits among themselves
 Can own its own assets, can incur its own liabilities, and can sue and get sued
 A minimum of two persons can constitute a partnership, but there is no limit to the number of persons in a
partnership
 The decision of one partner is binding to all the other partners
Types of Partnership Based on the Liability of the Partners
 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.
Corporation
 Has a separate legal personality quite distinct from the investors who contributed money to the enterprise
Can own its own assets, can incur its own liabilities, and can sue and get sued
 Can be formed or incorporated by, at least five, or at most 15 natural persons
 Once the corporation is established, there is no limit to the number of natural or juridical persons who can
invest in the corporation.
Types of Corporation
1. Stock Corporation
2. Non-Stock Non-Profit Corporation
3. Close Corporation
4. Corporation Sole
Stock Corporation
• The Stock Corporation issues capital stocks divided into shares.
• 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.
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 corporation usually has a social mission.
• Hence, all profit generated by the corporation are not distributed to the funders id the form of dividends.
• Rather, they are plowed back into the corporation or the foundation to contribute further to the attainment
of its mission.
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 made
Corporation Sole
• A Corporation Sole is a special form of corporation allowed by law, usually associated with the clergy.
• The corporation Sole is trusteeship that is set up for the purpose of administering and managing the affairs,
property, and temporalities of a church or group of clergy.

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INTRODUCTION TO BUSINESS IMPLEMENTATION

A Very Clear Purpose

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