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An list for an organization.
Organizational Plan is basically a ´to doµ
It lists out the plan of work, programs, and organizational growth over a period of time - six months, a year or five. The tasks involved, who is responsible for them, and when they·ll be done.
An Organizational Plan Helps To:
Set priorities for work Make sure tasks get done on time Focus on one thing at a time Share work among staff, board members & volunteers Make goals clear to investors Get a handle on big projects by breaking them down See the big picture of what organization is doing
building the management team Execute the business plan The team must be able to accomplish three Identify fundamental changes in the business as they occur Make adjustments to the plan based on changes in the environment and market that will maintain profitability functions: .
developing the management team Management·s ability and commitment to the new venture are significant to investors. management team to operate the business full time at a modest salary Drawing out large salaries for the management team is unacceptable to an Entrepreneur and considered to be a lack of psychological commitment to the business . Investors demand that the management team not operate the business as part time venture.
Legal forms of Business Proprietorship form of basic legal business with single owner. control over all decisions. run by stockholders having limited liability & regulated by statute . Corporation form of business with separate legal entity. pooling resources to own a business. unlimited liability. receives all profits forms are Partnership form of business with 2 or more individual with unlimited liability.
Factors of the three forms of Business Formation Factors Proprietorship Partnership Corporation No Limitation on number of stockholders No Limitation on Number of partners In general partnership. In Limited Partnership partners are liable for capital contribution Ownership Individual Liability of Owners Individual Liable for business Liability Amount of capital contribution is limit of shareholder·s liability . individuals are liable for business liabilities.
Factors Proprietorship Partnership Corporation Costs of Starting Business Partnership agreement. and minor filing fees for trade Only Filing Fees name. Limited for trade name partnership requires more comprehensive agreement. and fees for states in which corporation is registers to do business . filing fees. legal cost. hence higher cost Created only by statute. taxes. Articles of incorporation.
Factors Proprietorship Partnership Death or withdrawal of one partner terminates partnership unless partnership agreement stipulates otherwise. In limited partnership death or withdrawal of one partner has no effect on continuity. Death or withdrawal of owner(s) will not affect legal existence of business . Limited partners can withdraw capital six months after notice is provided Corporation Continuity of Business Death dissolves the business Greatest form of continuity.
stock part of business interest without may be transferred consent of general only to an partners. Loans or new contributions by partners require a change in partnership agreement . In S partner can sell corporation. individual New Capital raised by sale of stock or bonds or by borrowing in name of Corp.Factors Proprietorship Partnership Corporation Transferability of interest General Partner Stockholders can can transfer sell or buy stock at his/her interest will. Limited agreement. In S Corp. only one class of stock & limited to 75 shareholders Capital Requiremen ts Capital raised only by loan or increased contribution by proprietor. Stocks· Complete only with consent transfer may be restricted by freedom to sell of all other general or transfer any partners.
Day-to-day control in hands of management who may not be major stockholders. In limited partnership. only the general partners control the business. more attractive as an investment opportunity Management Control Proprietor makes all decision and can act immediately Proprietor Distribution responsible and receives all of profits and losses profits and losses Attractiveness for raising capital Depends on capability of proprietor and success of business . Depends on partnership agreement and investment by partners. Shareholders can share in profits by receipt of dividends With limited liability for owners.Factors Proprietorship Partnership All partners have equal control and majority rules. Depends on capability of partners and success of business Corporation Majority stockholder(s) have most control from legal point of view.
training. description and job analysis. performance appraisal. and job description and specification. the entrepreneur will need to prepare a job The job analysis will be serving as a guide in determining hiring procedures. compensation program. .building a successful organizational culture Once legal form of organization is determined.
physical traits. Job specification outlines the skills and abilities needed to perform the job including prior experience. a summary of the responsibilities and duties the authority of the individual and standards of performance. Outlining the job specification for a trained employee is easier than for the untrained people who will be trained on the job. such as personality.building a successful organizational culture Job description Specify the details of the work that is to be performed and any special conditions or skill involved in performing the job. skills or experience required. . So the entrepreneur should focus on specific qualities that will be required. interest. or sensory skill. Job description should contain a job summary.
role of the Board of Directors Reviewing operating and capital budgets Developing long-term strategic plans for growth and expansion Supporting day to day activities Resolving conflicts among owners or shareholders Ensuring the proper use of assets or Developing a network of information sources for the entrepreneurs .
selecting Board members Select individuals who can work with a diverse group and will commit to the venture mission The member of board members should be carefully selected considering the following criteria Select candidates who understand the market environment or can contribute important skills to the new venture·s achievement of planning goals Select candidates who will show good judgment in business decision making .
such as lawyers. Has no legal status Meet less frequently. ad agencies. depending on the important venture decision Useful in a family business Selection process similar to the BOD Compensated per meeting basis or with stock Provide reality check . accountants. etc.Board of Advisors Loosely tied to the organizations Serve the venture in an advisory capacity Uses of Board of Advisors Formal part of a venture Outside advisors.
Debt or Equity Financing Commercial Banks Sources of Capital Internal or External Funds Family and Friends Personal Funds .
accounts receivable.the money is usually used to provide working capital to finance inventory. usually a loan.or a building with part of the value of the asset (usually 50-80%of the total value) being used as collateral for the long term loan. Long-term debt (lasting more than 1 year) is frequently used to purchase some assets such as a piece of machinery.Debt FINANCING Debt financing (asset based financing). plant.land. or the operation of the business. machine or land) be used a collateral If the financing is short-term (less than one year) . house. the payment of which is only indirectly related to the sales and profits of the venture Typically requires that some asset (such as car.is a financing method involving an interest-bearing instrument. When interest rates are low debt financing allows the entrepreneur to retain larger ownership portion in the venture .
as well as any disposition of its assets on a pro-rata basis. In small ventures. The investor shares in the profits of the venture. push-cart in the mall etc) . the equity may be provided by the owner (ice-cream stand.Equity FINANCING Does not require collateral and offers the investor some form of ownership position in the venture.
Internal & External FUNDS Internally & Externally generated funds can come from several sources within the company: Profits from sale of assets. the needed funds can be obtained by selling littleused assets (assets should be on a rental basis (preferably on a lease with an option to buy). In every new venture. the start-up years involve putting all the profits back into venture (even outside equity investors do not expect payback in the early years). extended payment terms and accounts receivable. Another method is collecting bills more quickly. . extended working capital. Sometimes. reduction in working capital. Sometimes cash can be generated through extended payment terms from suppliers.
Alternative sources of FINANCING Suppliers and trade credit Commercial banks Asset-based lenders Institutions and insurance companies Pension funds Venture capital Private equity placements Public equity offerings Government programs .
. They are absolutely essential in attracting outside funding particularly from banks private investors and VCs.Personal FUNDS These are the least expensive funds in terms of cost and control . It is not the amount but the fact that all money available are committed that makes outside investors feel comfortable with the entrepreneur·s commitment level .
the rights and responsibilities of the investor and remedies in case of failure be highlighted.Family & FRIENDS Provide a small amount of equity funding for new ventures. the terms of money. Keep the business arrangements strictly professional. . A formal agreement containing the amount of money involved. Settle everything upfront and in writing.
Commercial BANKS Types of bank loans : 1) Accounts receivable loans 2) Inventory loans 3) Equipment loans 4) Real estate loans .
Factor (bank) actually ¶buys ·the accounts receivable at a value below the face value of the sale and collects the money directly from the account. In case of government customers ´factoring" arrangement may be developed. .Accounts Receivable LOANS Suitable when the customer base is well known and credit worthy. and protection against possible uncollectible accounts . Bank may finance up to 80%of the value of their accounts receivable.the commission covering the actual collection. Factoring costs involve both the interest charge on the amount of money advanced until the time the accounts receivable are collected . Cost of factoring is higher than the cost of securing a loan.
.Inventory LOANS Usually the finished goods inventory can be financed up to 50% of its value. the bank advances a large % of invoice price of the goods and is paid on a pro rate basis as the inventory is sold. Trust receipts are a unique type of inventory loan used to finance floor plans of retailers such as automobile and appliance dealers In Trust Receipts.
the company acquires the use of the equipment through a small down payment and a guarantee payment and that is made over a period of time. . The total amount paid is the selling price plus the finance charges.Equipment LOANS Can be used to secure longer-term financing usually 3-10 years Types1) Financing the purchase of new equipment. 3) Sales leaseback financing-the entrepreneur ¶sells' the equipment to a lender and then leases it back for the life of the equipment to ensure its continued use. 2) Financing used equipment already owned by the company. 4) Lease financing.
Real Estate LOANS Is also frequently used in asset-based financing Is usually easily obtained to finance a company·s land.plant.or another building usually up to 75%of its value .
Cash Flow FINANCING 1) Installment loans 2) Straight commercial loans 3) Long-term loans 4) Character loans .
Installment LOANS Can also be obtained by a venture with a track record of sales and profits Are used to cover working capital needs for a period of time such as when seasonal financing is needed Usually for 30-40 days .
Straight Commercial LOANS Funds are advanced to the company for 3-90 days These self liquidating loans are frequently used for seasonal financing and building up inventories .
. more mature companies The debt incurred is usually repaid according to a fixed interest and principal schedule with interest only being paid in the 1st year and principal amount sometimes start being repaid in the 2nd and 3rd year.Long Term LOANS Can make funds available up to 10 years Usually available to strong.
land and securities. . Must have the assets of the entrepreneur or other individual pledged as collateral or the loan co-signed by another individual Frequently pledged assets are-cars.Character LOANS When the business itself does not have the assets to support a loan. the entrepreneur may need a character (personal) loan. homes.
source of loan repayment Conditions of the economy and the industry that will not threaten the business. Capital which the owner must have put in the business for the business to run.but in no case. Capacity or ability to generate the cash flows to repay the loan from normal operations. .Bank Lending Decisions 5C·s The basis of the evaluation of a client rests on the well known 5 C's of banking: Character or determination of the borrower to meet its future obligation. Collateral which is pledged by the borrower as a secondary . as primary .
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