PART IT PLANNING A BUSINESS ENTERPRISE OBJECTIVE: To understand and get acquainted with the perspective in planning a business enterprise. INITIAL SUMMARY: This part deals with the perspective in planning a business enterprise, The sub-topics are: decision-making; promoting a business - discovery, assembling & financing; the promoter - works of promoter, types of promoters, compensation of promoters and prospectus. A. THE PERSPECTIVE: Hopes and ambitions are the forceful drives in the hearts and minds of individuals which will ignite/lead them to venture into business, hence, the rise of business enterprises. MAKING THE DECISION: Business does not just simply happen. It necessitates proper and careful choice and planning. Furthermore, it must be carefully organized, provided with adequate funds, well-directed and well-managed. In choosing a business, a prospective businessman must consider the following: 1. the wants & needs of people which have not yet been fully satisfied and provided by those already existing ones 2. that risk is indispensable to any business venture; that a businessman must be acquainted with the principles of business organization & management and must have an understanding of human relations; 4, that a businessman must have financial ability to raise funds in adequate amounts for the operation of the business. PROMOTING A BUSINESS: A business can properly come into being only after the painstaking performance of many preliminary activities. Promotion = is consists of all preliminary steps to launch a business to a point where it is ready to operate. (by San Gabriel, N. ) It refers to a method of discovering opportunity and taking advantage of such opportunity for the use of existing resources such as funds, materials and managerial ability. (by Miranda, G. ) Promotion = refers to all things which must be done to bring a business into existence. It embraces the careful investigation of the entire proposition to determine the following: a) probability of its profitability; b) the amount of funds needed for its operation; ¢) __ the possibility of procuring the properly qualified associates; d) the possibility of making all the necessary contracts and procuring franchise; e) the methods by which necessary funds shall be raised; and f) the actual raising or procuring of funds. ‘Scanned with CamScannee2 D. STEPS IN PROMOTING A BUSINESS: D.1 DISCOVERY = refers to the phase where the business proposition is analyzed and evaluated to test its viability. (by San Gabriel, Nati) It is a thorough and minute scrutiny of a given proposition in order to determine whether the business venture should be undertaken at all. (by Miranda, G.S.) It is in this phase of promotion where the outlook of the business is to be appraised wherein the following factors are to be considered: @) nature of the industry = here, one must consider not only the proposed business itself but also the existing demand for the products or services of the industry involved, in order to know whether there is still a room for a few more business in that same kind of business or it is already closed. b) Government regulations = refer to the stipulations and regulations set by the government which might affect the industry such as: protective tariffs, tax exemptions and privileges. ¢) potential market = refers to the future demand for goods & services which that industry produces and its capacity to produce them in an amount desired. This is determined not only in terms of the number of people constituting a given population but also their purchasing power, which is based on their standards of living, d) Cost and availability of materials needed = refers to the price of raw materials and other expenses incurred in the transfer of the same as well as their adequacy or possible supply of these materials. Here, the prospective businessman should try to determine the adequacy, certainty and exhaustibility of raw materials whether their prices are stable or keep on fluctuating for this will seriously affect the industry. e) Proposed location = the businessman should see to it that the location must be favorable for this will contribute heavily toward its success. The place should be accessible to all means of transportation, to raw materials, to labor supply and most especially to the customers. It is in this phase of promotion where the feasibility study is to be undertaken, Feasibility Study = is a systematic survey, analysis and evaluation of a Project on the basis of available statistics and forecasting to determine the Viability of the planned or proposed undertaking. It is sometimes called: Project Study = which is an investigation that ascertains the viability of an undertaking. (by Muro, V.) ‘Scanned with CamScanner‘Steps in the Preparation of a Feasibility Study: 1 the collection of data; 2. the analysis of the gathered data; and 3. the formulation of a recommendation. Objective of a Feasibility Study: Foasibility studies are prepared to guide project Promoters, business managers and financial executives in determining the actions they must take on a project in order to bring about its successful ‘operations Parts of a Feasibility Study: 1 Organization & Management Aspect = a study of this aspect will determine the followin 8) basic consideration in forming; b) form of ownership; ¢) the organizational chart; and d) officers & key personnel. 2 Marketing Aspect = this portion seeks to determine the following a) size, nature and growth of demand for the product; b) description & price of the product to be sold; ) supply situation & the nature of competition; d) —_supply-demand analysis; e) factors affecting the market; = demand side, supply side and prices f) marketing program for the product. = terms of sale, channels of distribution, packaging, transportation & storage facilities. 3. Technical Aspect = the technical study is presented by describing and making the necessary calculations for the following: a) the product b) manufacturing process; c) plant size and production schedule; d) machinery and equipment; e) plant location and layout f) building and facilities; 9) raw materials and supplies; h) utilities; \) waste disposal; ” production cost; and k) labor requirements. Financial Aspect = this study presents the over-all financial picture in terms of operating cash requirements, profitability and cash flow and the following should be treated: a) total project cost; b) sources of financing the project; ¢) _ projected financial statements; and d) financial analysis. ‘Scanned with CamScannerD.2 D3 “ Socio-economic Aspect = a project to be worthy of financing especially from government institutions, should be geared toward not only profit generation but also social & economic benefits. This portion will serve as an aid in determining the socio-economic contributions the project can offer. This will therefore briefly explain how the project will affect the following: a) employment and incom b) taxes; ¢) supply of commodities; and d) demand for materials. ASSEMBLING = consists of all preliminary plans necessary to start the operations of the business. It 1s the phase where the actual organization of the business takes place which involves the following: @) compliance with legal formalities; b) choice of location; ¢) _ choice of the form of business organization; d) acquisition of fixed assets; and e) _hinng of personnel. FINANCING = it involves with the financial planning and the actual Procurement of the initial capital outlay which is sufficient for the following items of expenditures: a) _ to defray the organizational costs; b) to provide for the fixed working capital; c) __ to provide for the acquisition of fixed assets; and d) to provide reserves as a margin of safety. WHO IS A PROMOTER? Promoter = is one who undertakes a thorough examination and a feasibility study of a given proposition. (by Miranda, G. ) It also refers to an individual who undertakes all the necessary steps in organizing a business up to the time it becomes operational. (by San Gabriel, Nati) Works of Promoters: Financial study & project profitability = the estimation and evaluation of the future profitability, cash transactions & financial conditions of the planned business. Here, financial projections should be established such as: sales, costs of sales & other expenses, cash receipts and cash disbursements. Business organization study = here, the promoter is responsible in the determination of the forms of business organization, its organization structure, job descriptions and specifications, salary range and fringe benefits. ‘Scanned with CamScanner1s 3 Engineering study = it includes the determination of the plant site, plant layout, building specifications including construction costs, etc. 4. Financial requirements & sources of funds = this aims to guide the management in working out for the most adaptable financing scheme for the project which includes interest rates, repayment periods and specific sources. Types of Promoters: 1. Professional Promoters = those whose main occupation is promoting a business whereby he uses his own funds and managerial skills and ability in order to eam profits. Side-line Promoter = this kind of promoter is engaged in a particular business or occupation but in order to augment his earnings, he accepts and perform promotion activities occasionally. 3. Banking Promoters = these are banking institutions particularly commercial banks, which provide business promotion services to their clients. 4. Financial Promoters = these are composed of investment bankers engaged in the promotion of certain business ventures through the sale of marketable securities. Investment banker = the intermediary between the user of funds (issuing company) and the providers of funds (the ultimate investors) 5. Subdivision Promoters = they are those engaged in the development of new places or subdivisions. Promoters’ Compensation: The compensation of the promoter may take the form of: a) cash (in the form of commission = which is based on a certain percentage of the authorized capital stock or a fixed rate); b) securities (common or preferred stocks); and ©) _ a job or a combination of the three (3). THE PROSPECTUS: Prospectus = is a well-prepared, printed statement which gives out desired information on a proposed commercial or industrial undertaking and/ or describes a particular security offered for sale. (by Miranda, G.S.) Features of Prospectus: 1. it is devised to project the proposed business in a favorable light to stimulate the interest of the future investors; 2 it must not contain any information that would mislead the public; and 3 it must give complete and accurate information. ‘Scanned with CamScanner