CHAPTER VI.

Organizing Business Enterprise

1.The basics of starting a business enterprise
2. Identifying and assessing business opportunities
3. Appraising a business project
4. Organizing your business enterprise
5. Registering a Business Enterprise
❖ Business Enterprise
Definition:
▪ Business enterprise refers to a person spotting a
business opportunity and setting up a business.
▪ Business ideas come about for a number of reasons.
Often this is because a person may feel that they or
others have a need that is not being met, they want to
make a social difference or they want to make money.
▪ A person who sets up a business is known as
an entrepreneur.
1. The basics of starting a business enterprise
❑ 10 steps to start your business
1. Conduct market research
Market research will tell you if there’s an opportunity
to turn your idea into a successful business. It’s a
way to gather information about potential customers
and businesses already operating in your area. Use
that information to find a competitive advantage for
your business.

2. Write your business plan

Your business plan is the foundation of your
business. It’s a roadmap for how to structure, run,
and grow your new business. You’ll use it to
convince people that working with you — or investing
in your company — is a smart choice.
3. Fund your business
Your business plan will help you figure out how
much money you’ll need to start your business. If
you don’t have that amount on hand, you’ll need
to either raise or borrow the capital. Fortunately,
there are more ways than ever to find the capital
you need.

4. Pick your business location

Your business location is one of the most
important decisions you’ll make. Whether you’re
setting up a brick-and-mortar business or
launching an online store, the choices you make
could affect your taxes, legal requirements, and
revenue.
5. Choose a business structure
The legal structure you choose for your
business will impact your business registration
requirements, how much you pay in taxes,
and your personal liability.

6. Choose your business name

It’s not easy to pick the perfect name. You’ll
want one that reflects your brand and captures
your spirit. You’ll also want to make sure your
business name isn’t already being used by
someone else.
7. Register your business
Once you’ve picked the perfect business name, it’s
time to make it legal and protect your brand. If
you’re doing business under a name different than
your own, you’ll need to register with the federal
government, and maybe your state government,
too.

8. Get federal and state tax IDs (BIR-Philippines)

You’ll use your employer identification number (EIN)
for important steps to start and grow your business,
like opening a bank account and paying taxes. It’s
like a social security number for your business.
Some — but not all — states require you to get a
tax ID as well.
9. Apply for licenses and permits
Keep your business running smoothly by
staying legally compliant. The licenses and
permits you need for your business will vary
by industry, state, location, and other factors.

10. Open a business bank account

A small business checking account can help
you handle legal, tax, and day-to-day issues.
The good news is it’s easy to set one up if you
have the right registrations and paperwork
ready.
 Let’s Practice and Answer some
question from our Lesson!

❑ Question #1. Enumerate the 10 steps to start your business.

2. Identifying and assessing business opportunities

❑ How to Identify Business Opportunities

▪ Find a business opportunity in every market need.
▪ One of the first things you should remember in trying to
identify business opportunities is that all enterprising
ventures answer, in one way or another, a particular human
need.
▪ Whether it is a product or a service, it must respond to what
the buyers need or want.
 Observing Market Solving the Problem Finding Gaps in the
Trends Market Place

Identifying and assessing business opportunities

❑ Study demand and supply gaps.
Find out how the present demand for certain products or services in the
community is being met. Is demand for some items being filled by local
suppliers or producers? Find out whether or not local supply can cope
with or totally satisfy local demand. If not, this may suggest that there is
room for still one more in the business.
❑ Study import-export movements.
Again, perhaps a number of products are being supplied by producers
or suppliers outside the community or imported from other countries.
Study these imports. Possibly, given the resources, you can produce
these. You may not be able to produce the same high quality as the
imported ones. However, if you can produce at a much lower cost and
sell the products cheaper, you have a competitive advantage there.
You may find that your products though cheaper and of lower quality
will also be attractive in the market. For example, locally cured ham,
corned beef, tocino and longganisa have become acceptable
substitutes for imported processed meats.
How to Identify Opportunity?
 ❑ Capitalize on available resources.
The availability of certain resources in an area can suggest business
opportunities. These resources may be in the form of raw materials, skills,
information or technology.

Consider the following:

▪ Raw materials. Identify the materials that are native to and abundant in an
area. Study how to make money out of these either through gathering the
materials, trading them, partially processing them, or manufacturing finished
products out of them.

How to Identify Opportunity?

▪ Local skills. Are specialized, traditional skills available in the
community? Can these be used for commercial purposes? Study
these skills for possible upgrading and innovation. The availability of
skilled weavers in a community, for example, can be tapped by
organizing a weaving, handloom, or handicraft industry.
Examples of traditional skills on which progressive enterprises have been
built are: shoemaking in Marikina City, slipper-making in Liliw, Laguna,
woodcraft in Paete, Laguna, jewelry making in Meycauayan, Bulacan, and
“antique” furniture making in Betis, Pampanga.

▪ Industry information – Reading technical and business journals will

keep you updated on business ideas. Newsweek Magazine,
Example, has a regular feature on new products and techniques. Local
publications like MagNegosyo of TLRC and Entrepreneur Philippines
Magazine give information that inspire new entrepreneurs. Check out, too, the
business features section of Philippine Daily Inquirer, Business World, and
most other dailies. Online, there are sites that will be useful, notably the
DTI website, E-Yellow Pages, the UP ISSI website, etc.
How to Identify Opportunity?
 For example;
The following were identified by the DTI(Department of Trade and Industry)as
export winners in 2002:
o Processed fruits
o Marine products (fresh/frozen fish, shrimps)
o Carrageenan and seaweeds
o Electronics (components and parts)

A more updated priority list is given in the National SME Agenda(Small, Medium
Enterprises) prepared in 2004:
o Food
o Organic and natural products
o Marine products
o Wearables, including costume and fine jewelry, and footwear

How to Identify Opportunity?

❑ Adapt, complement, reshape.
Be observant. What are the people around you doing? Can you pick up
something from it – with some modification?
Get familiar with the current economic situation in communities
comparable to where you live. You can be inspired by a number of
projects which have worked in these areas and which you can adapt to
your own local situation. Don’t just copy and imitate. Innovate!
Innovating is improving on someone else’s idea to make it work for you.
This might mean reshaping or repackaging goods or services to fit or
match present trends or styles. Creative ideas may add or change a
product’s features and thus add more to its benefits.
For example, if you live in the province, you might wish to look at a
project that has succeeded in the city. Internet cafes, for instance, which
first proliferated in Metro Manila, are now being set up in the regions.
Fads like string-it-yourself bracelets and necklaces, color-it-yourself
ceramics, print-while-you wait shops, and badminton courts can also
catch the imagination of provincial markets.
How to Identify Opportunity?
❑Explore forward-backward industry linkages.
No doubt, there are a number of industries in your community. Find out what
possible business ideas you can pick up from what already exists.
For example, a backward linkage of a meat processing plant in your area may
spur agribusiness projects like poultry or hog raising, transport services, supplies
required for meat processing. Consider also going into distribution of poultry
feeds, egg trays and other inputs to the poultry raisers in the community. A
forward linkage, on the other hand, would explore opportunities in meat
packaging, subcontracting, or trading and distribution of finished products.

❑Screen and select the best investment alternative.

You may be able to identify a number of alternative business
ideas. You may then narrow down the choice to two or three
possible projects, maybe food, garments or handicraft. But since
you have limited resources, you can’t go into all three projects at
once. You will have to screen and select the best one.
How to Identify Opportunity?
❑ Six Criteria for Assessing New Business Opportunities

1) Financials
Assess the company's financial performance or potential financial
performance. Evaluate historical sales revenues, profit margins of products
and services, recent sales trends and cash flow. Examining cash flow lets
you determine when you will get your money in and how much credit you
might need to obtain. For example, your business might have excellent
sales, but if the customers don’t pay for 60 days, you might have to delay
your salary, operate using your savings while you wait for your bills to be
paid, or take out a loan to buy materials. If you are launching a new
business, look for trade association data that shows financial trends for
similar companies and expected trends for the coming year.
2.) Sales.
A thorough sales assessment will give you insight into how sales have
taken place and where you might improve them. Spot trends by analyzing
where products are selling and to what types of customers. For example,
if a business is selling exclusively through independent retailers, you
might have a chance to grow market share by entering mass retailers.
Items with high profit margins might be producing most of the company’s
profits, but causing it to lose sales. Adding low-margin items might help it
expand. Certain geographic territories with low sales may not be
underperforming, but are simply underserved, offering opportunities to
grow the business.
3) Market Data
Researching the marketplace will help determine if it is being underserved or possibly
saturated. Detailed demographic data can show that even if the marketplace contains
significant competition, you have an opportunity to successfully introduce a new business
or improve the performance of an existing one. Demographics such as gender, age, race
and marital status will help you better understand who your potential customers are.
Analyzing the price points of your competitors will also give you insight into why people
might be buying a particular product or service. Look at market trends, such as sales
during the last three years, and look for advances in technology that might affect the
marketplace. For example, a shift from PCs to mobile devices causes a decrease in
demand for traditional hardware and software and more demand for smartphone apps.
4) Assets and Liabilities
Look at the assets of an existing business to determine how it depends on them. The
business might depend on a recipe, trademark, copyright or patent for its unique selling
proposition. A company’s location, specific manufacturing process, grandfathered
agreements or no-compete agreements with a supplier might be giving the business an
edge, without which it would struggle to compete. A franchise might be thriving because of
a restricted territory it owns or specific benefit it has been receiving from the owner’s
status as a minority. Check the assets of any business you plan to purchase to determine
what would happen if you lose them. Look for liabilities, such as debts, lawsuits and
expiring contracts and assets.
5) Relationships
Key factors in a small business’s success often include personnel, endorsements
and relationships. Key personnel, such as a well-known chef, IT whiz or top sales
performer can make or break a business. Having a professional sports league or a
celebrity endorse a business might be key to driving its sales. Having official
sponsor, supplier or partner status of a trade association or other organization can
also boost sales. Assess the impact of losing a key relationship on sales and
revenue, and look at contracts before you buy a business that relies on any.

6) Opportunity Costs
Look at what entering a new business will cost you, in terms of lost revenue,
personal time or sales connected to other business or opportunities you have. For
example, using your cash to buy a business reduces your ability to pay down
debt, lower interest payments, improve or upgrade current facilities, increase
advertising and make other investments with that cash. You will need to devote
your personal time to the new business. Accurately assess the number of hours
you will need to spend on a new business venture and calculate the revenue your
time would generate spent on another opportunity.
 Let’s Practice and Answer some
question from our Lesson!

Question #1. How to Identify Business Opportunities

❑ Question #2. ENUMERATE Six Criteria for Assessing New

Business Opportunities.
3. Appraising a business project
Definition
▪ Project appraisal is the structured process of assessing the
viability of a project or proposal.
▪ It involves calculating the feasibility of the project before
committing resources to it.
▪ It is a tool that company’s use for choosing the best project that
would help them to attain their goal.
▪ Project appraisal often involves making comparison between
various options and this done by making use of any decision
technique or economic appraisal technique.
❑Process of project appraisal
The process of project appraisal consists of five steps and they are –
1) Initial assessment
2) Defining problem and long-list
3) Consulting and short-list
4) Developing options
5) Comparing and selecting project

The process of appraisal generally starts from the initial phase of the
project. If the appraisal process starts from an early stage, then the
company will be in a better position to decide how capital should be
spend in the project and also it will help them to make the decision of
not spending too much or stopping a project that is not economically
viable.
❑ Types of project appraisal
Appraisal of projects can be done by many ways, but the most common
of them are :
1. Financial
2. Economic appraisal

In case of financial project appraisal, the company reviews the cost of

the project and the expected revenues that will be generated by the
project. This type of appraisal helps the company to prevent
overspending on a project. It also helps in finding certain areas where
alterations can be done for generating higher revenues.
Under economic appraisal, the company mainly focuses on the total
benefit of the project and less on the costs spent on the project. Other
than these two types of appraisal, there are also other types of project
appraisal which include technical appraisal, management or
organizational appraisal and marketing and commercial appraisal.
 Let’s Practice and Answer some
question from our Lesson!

Question #1. Defined Project appraisal.

❑ Question #2. What are 2 types of project appraisal?

4. Organizing your business enterprise
❑ What Is Organizational Structure?

ORGANIZATIONAL STRUCTURE
The specification of the jobs to be done within a business and how
those jobs relate to one another.

ORGANIZATION CHART
A physical depiction of the company’s structure showing employee
titles and their relationship to one another.
❑ CHAIN OF COMMAND
Reporting relationship within a business: the flow of decision-making
power in a firm.

❑ JOB SPECIALIZATION
The process of identifying the specific job & that need to be done end
designating the people who will perform them.
1.1

Organizing the Business Enterprise

Figure 2.
 Figure 3.
Company Organizational Chart
 Let’s Practice and Answer some
question from our Lesson!

Question #1. Differentiate the ORGANIZATIONAL STRUCTURE

and ORGANIZATIONAL CHART?

Question #2. Identify the 4 Types of Soil Colloids according to

their Classified group?
5. Registering a Business Enterprise
How to Register a Business in the Philippines:
Requirements and Permits

Steps to Legally Register and Operate a Business in

the Philippines
▪ There are a number of government agencies you must register
with in addition to opening a bank account when starting a
business in the Philippines and hiring employees.
▪ It is essential to register your business to avoid any legal
problems once business operations begin.
▪ The following are the required steps ICPH will perform on your
behalf to legally register your new business in the Philippines.
Most of the steps can NOT be performed simultaneously. These
required steps must be performed one at a time.
1. Secure Business Name with the SECURITIES AND EXCHANGE
COMMISSION(SEC)
The first step is to register your preferred corporate name with the
SEC while our lawyers work on the company’s articles of incorporation
and by-laws. Once the AOI and By-laws are drafted, you may open
the TITF account with your preferred bank.
2. Open Corporate Bank Account
Companies applying for incorporation must open a TITF account with
its preferred bank. The TITF account will serve as the temporary
depository account of the required paid-up capital of the corporation.
The basic requirements for the opening of a TITF account include the
proposed articles of incorporation and by-laws, account opening forms
with the specimen signature card to be accomplished by the treasurer-
in-trust, valid identification cards of the treasurer-in-trust, and the
minimum deposit required by the bank which ranges from P10,000.00
to P50,000.00 depending on bank. The bank will issue a certificate of
deposit which is among the documentary requirements to be
submitted to the SEC.
Registering a Business Enterprise
3. Register with the Securities and Exchange Commission (SEC)
Once a bank certificate of deposit is issued, and provided the following documentary
requirements are complete, the application for registration may be submitted to the SEC:
•Name Reservation and Payment Form
•Notarized Articles of Incorporation and By-laws
•Treasurer’s Affidavit
•Bank Certificate of Deposit or Proof of Inward Remittance
•Duly accomplished SEC Form F-100 (for corporations with more than 40% foreign equity)
SEC registration takes 10 to 15 working days upon submission of complete documentary
requirements, provided there are no holidays during this time period.

4. Register with the Bureau of Internal Revenue (BIR)

After SEC registration, a company must obtain a taxpayer identification number (TIN),
register its books of accounts, and apply for authority to print official receipts from the
Bureau of Internal Revenue (BIR), the national taxing authority in
the Philippines.
5. Register with the Social Security System (SSS)
All companies must be registered with the SSS and must secure an employer
number which will be used as reference for the remittance of monthly contributions.
To register with the SSS, the following documents have to be submitted:
•Employer Registration Form (R-1)
•Employment Report Form (R-1A)
•SEC Registration, Articles of Incorporation, and By-laws

6. Register with PhilHealth

PhilHealth is a medical insurance program administered by the Philippine Health
Insurance Corporation (PHIC). All employers are required to register their
employees with this agency as stated in the New National Health Insurance Act (RA
7875 / RA 9241). To register with PhilHealth, the following documents are required:
•Employer Data Record (ER1)
•Report of Employee-Members (ER2)
•SEC Registration, Articles of Incorporation, and By-laws
 7. Register with Pag-IBIG
Pag-IBIG Fund is also known as the Home Development Mutual Fund
(HDMF), a housing loan which is mandatory for all employees covered by the
Social Security System (SSS). The Pag-IBIG Fund also provides other types
of loans for qualified individuals.

8. Obtain a Mayor’s or Business Permit

The following documents are required to secure a business permit:
•SEC Registration, Articles of Incorporation, and By-laws
•Locational Clearance
•Lease Contract
•Barangay Clearance

End of the Topic….

 Let’s Practice and Answer some
question from our Lesson!

Question #1. Enumerate some Steps to Legally Register and

Operate a Business in the Philippines.
References:
1. https://www.sba.gov/business-guide/10-steps-start-your-business
2. https://businessdiary.com.ph/2887/how-to-identify-business-
opportunities/
3. https://smallbusiness.chron.com/six-criteria-assessing-new-business-
opportunities-40604.html
4. https://www.readyratios.com/reference/appraisal/project_appraisal.
html
5. Chapter 7 - Organizing the Business Enterprise.pdf
6. https://philippinesbusinessregistration.com/company-
registration/requirements/
7. https://stats.oecd.org/glossary/detail.asp?ID=3207