INTRODUCTION TO BUSINESS IMPLEMENTATION

Report
Presented to the Faculty of the Senior High School
MINDANAO STATE UNIVERSITY-BUUG
Datu Panas, Buug, Zamboanga Sibugay

In Partial Fulfillment of the

Requirements for the Subject
Entrepreneurship

ANIORA, JAIRA MAE B.

PRADIA, JONVIE M.

March 2020
 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, the needed resources.

A Very Close 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 what they are getting into;

 the financiers evaluating the enterprise; and

 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. If the business is just like any other business in the marketplace,
costumers 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/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 microenterprise, it is common for entrepreneurs to embark

on a business venture as a ‘lone wolf”, not needing the capital or expertise of others

For small, medium, and large enterprise, the entrepreneur needs the capital and the
expertise, or both of 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 risk 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 exchange
for what they bring to the deal, they may demand shares of stock or a percentage slice of the
profit. For business that would rely heavily on 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
entrepreneur. 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
good 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 purposes of a business plan are:

1. Entice partners, investors, and bankers to fund s 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 ff.

 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 areas, and performance indicators.
An overall enterprise strategy should then be articulated to show performance indicators could be
attained.

Next, 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 investments 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 prospect; and

9. The risks in the business and the contingency measures to counteract them.

The business plan should then elaborate the contents of the executive summary. Each content
must be justified convincingly by analyzing relevant information and making logical
conclusions.

Also, for each of the major functional disciplines, such as marketing, operations, finance,
human resources, and general administrations, there should be a functional strategy that would
show how the desired results could be obtained.

For the investors, they should be given “fearless forecast” on expected profits, dividends, and
market values. The rights and obligations of investors must be spelled out.

For the financial institution and other financiers, the financial statements must be synthesized
in order to capture both the upside and downside prospects. Due diligence must be evident in the
analyses and conclusions made.

For the government readers, the business plan should provide compliance statements with all
laws and regulatory provisions.

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 equipment.

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 way the financial package is designed is called the capital structure of the enterprise.

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 and, also, all the losses. But he/she will also incur all the risks.

In sole proprietorship, there is no distinction between the owner and the enterprise. In
sole proprietorship, the entrepreneur is personally answerable and obligated to fulfill all the
terms and conditions of any business contract that he/she enters info.

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

 Certificate of occupancy

 Lease contract if space is leased

 Department of Trade and Industry (DTI) certificate

 Locational clearance

There may be additional requirements depending on the type of business and ordinance
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. The official receipts of the enterprise must also
be registered with the BIR. For a sole proprietorship, the tax identification number (TIN) of the
entrepreneur serves as the enterprise TIN.

If two or more persons bind themselves into a contract to contribute money, property, and
expertise in a common venture with the intention of dividing the profits among themselves, then
they would have entered into a 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 are 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 the. 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
obligations of the partnership beyond his/her prorated capital contribution to the partnership. The
law requires that there must be at 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.

In a partnership, the decision of one partner is binding to all the other partners. There
should be internal mechanisms and procedures followed to ensure this. When the partners enter
into a contract, they need the consent and knowledge of the other partners.

In order to form a partnership, a binding contract must be signed by all of the partners.
They should decide on a partnership name and craft their Articles of Partnership. These Articles
of Partnership must contain all the operational requirements of the partnership.

The partnership should obtain all the required government clearances, permits, and
licenses. It should get:

 A bank certificate on the money contribution of the partners; and

 The approval for its partnership name from the Department of Trade and Industry.

Having obtained thee 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.

A corporation form of business allows various combinations of funds to be raised form

financiers and investors. Thus, bigger business, there is no limit to the number of natural or
juridical persons who can invest in the corporation.
 There are three types of corporations, which are as follows:

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 the stakeholder at the time of Incorporation. The rest of the
75% will comprise the unpaid capital subscription, 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(s) other than generating profits for investors. The Non-Stock
Corporation usually has a social mission. Hence, all the surpluses generated by
the corporation are not distributed to the funders in the form of dividends.
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 purposes of administering and managing the affairs, property,
and temporalities of a church or group of clergy.

The corporation must enter its name with the DTI and register with the SEC, SSS,
BIR, and all other relevant government entities. In contrast to the sole
proprietorship, where taxes are based on the total income of the owner in a
gradually increasing proportion of the income, the corporation pays a stipulated
percentage of its income tax (35% of income before taxes in the Philippines). Of
course, other types of taxes are paid by business enterprise such as the value
added tax the real estate tax, etc.

The start-up corporation established by the entrepreneur (and his or her family or friends)
is quite a long way from the politics of large corporations. However, the more ambitious
entrepreneur must plan way ahead for this type of politics.

The entrepreneur must make a decision. “ Do I want absolute control or do I want to

become a very wealthy person because of the high value of my shares in the stock
market? Meanwhile, at the start-up stage, who will the entrepreneur invite as co-investors
in the enterprise? It begins as an issue of investor compatibility and investment
flexibility, but eventually, it will become an issue of control as the enterprise grows and
prospers.
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 of hiring people.

If the team is not 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