THE NATURE OF SMALL

BUSINESS
WHAT IS A SMALL BUSINESS

 Business – An organized effort of individuals to produce and

sell goods and services in order to satisfy the needs of the
society.
- The primary objective of business is
to acquire profit.
 Small Business – Owned by the principal worker and
employs one or more assistants. (micro business)
- Owner mainly directs the
work of the employees.
DEMOGRAPHIC CHARACTERISTICS
OF ENTREPRENEURS
 Parents owned business
 Foreign parents
 High school degree or less
 College or more
 Age 31 and under
 Age 40 or more
PERSONALITY CHARACTERISTICS
REQUIRED BY SUCCESSFUL
ENTREPRENEURS
 Achievement Orientation
 Risk Taking
 Independence, Self Confidence, Self Assurance
 Innovativeness
 Strong Verbal and Numerical Skills
PERSONALITY CHARACTERISTICS
REQUIRED BY SUCCESSFUL
ENTREPRENEURS
 Selling Skills
 Problem Solving Abilities
 Strategic Planning
 Perseverance
 STARTING A SMALL
BUSINESS
 Goals
1. Recognize important factors to be considered when
starting a business
2.Describe elements of a business plan
3. Identify types and sources of financing a small business
SAMPLE TEMPLATE OF A
BUSINESS PLAN
S.W.O.T ANALYSIS
 THE BUSINESS DECISION

 Team Approach
 Even small businesses need a few full – or part –time employees to
grow or cover extended hours.
 Choosing the team members become one of the most important
initial business decisions.

 Preparation and Research

 Includes having enough information to make good decisions about
the business.
 Information is needed on customers, competitors, important
operations, government regulations, and many more
 THE BUSINESS DECISION

 An Idea Plus Experience

 Business ideas come from many sources
 Hobbies, interests, business experiences, books, Magazines
 Several years of training in a range of business operations will
prepare you for the role of owner.

 Right place right time

 If the business is not easy to find or requires a great deal of travel
time, many potential customers will stay away.
SMALL AND MEDIUM ENTERPRISE

 Small and Medium Enterprise (SME) – are defined as any

business activity or enterprise engaged in industry, commerce,
agribusiness and/or services, whether single proprietorship,
partnership, cooperative or corporation, whose total assets,
inclusive of those arising from loans but exclusive of the land on
which the particular business entity’s office, plant and
equipment are situated must have value falling under the
following categories:
IN TERMS OF CAPITALIZATION
SMALL AND MEDIUM ENTERPRISE AMOUNT OF CAPITALIZATION
CATEGORY
Micro Enterprise Less than Php 3 Million
Small Enterprise From Php 3M to Php 15M
Medium Enterprise From Php 15M to 100M
Large Enterprise Php 100 Million and above

(redefined the categories) Republic Act No. 9170

otherwise known as the Barangay Micro Business Enterprise (BMBE)
Act of 2002
IN TERMS OF EMPLOYMENT SIZE

SMALL AND MEDIUM ENTERPRISE EMPLOYMENT SIZE

CATEGORY
Micro Enterprise Less than 10 employees
Small Enterprise From 10 to 99 employees
Medium Enterprise From 100 to 499 employees
Large Enterprise 500 employees and above
TYPES OF SMALL BUSINESS

 Small Manufacturing Business

 Small Service Business
 Wholesaling
 Retailing
 General Construction Firms
TYPES OF SMALL BUSINESS

 Small Manufacturing Business

 A manufacturing business is involved in the conversion of raw

materials into products needed by society.
TYPES OF SMALL BUSINESS

 Small Service Business

Business services – provide service to other business.
Examples: janitorial/security services, collection agencies
Personal services – provide service to a person.
Examples: tutoring, massage parlors, voice lessons
TYPES OF SMALL BUSINESS

 Small Service Business

Repair Services – provide repairs to owners of various machinery
and appliances.
Examples: auto repair shop, watch repair, plumbing
Entertainment and recreation – includes movie houses, resorts,
billiard pool centers, bowling centers.
TYPES OF SMALL BUSINESS

 Small Service Business

Hotels, motels, and inns

Education services – include Montessori school for children,

high school, correspondence schools.
TYPES OF SMALL BUSINESS

 Wholesaling
Wholesaling refers to the activities of persons or establishments
which sell to retailers and other merchants, and/or to industrial,
institutional, and commercial users, but who do not sell in large
amounts to final customers.
Examples: soft drinks wholesalers, dealers of supplies and
office equipment
TYPES OF SMALL BUSINESS

 Retailing
Retailing cover all activities involved in the sale of goods and/or
services to the final consumers.
Examples: retail drug stores, fast-food shops, appliances
stores etc.
TYPES OF SMALL BUSINESS

 General Construction Firms

Engaged in construction of buildings whether for private
individual firms, or for the government. Many of them perform
subcontracting jobs for bigger contractors such as installing
electrical facilities and sewerage.
CHARACTERISTICS OF SMALL
BUSINESS
 A small business is low in capital but high in labor intensity.
 A small business is efficient in specialized skill or service.
 A small business succeeds in small, isolated or overlooked
markets.
 A small business often operates in unstable markets.
 A small business is closer to the market place.
CHARACTERISTICS OF SMALL
BUSINESS
 Generally, the owner of the small business are also the
managers.
 Capital comes from the owner or small group
 The area of operation is small.
 The size of the enterprise is small in relation to the industry.
ECONOMIC IMPORTANCE OF
SMALL BUSINESS
 Small businesses play an important role in the
development of our economy. They assume the following
function:
1. Provides economic opportunities for entrepreneurs – People
who do not feel comfortable as employee have the option of
engaging in small business operation.
ECONOMIC IMPORTANCE OF
SMALL BUSINESS
 Small businesses play an important role in the
development of our economy. They assume the following
function:
2. Provides of product and services to consumers – the
production of many products and services is oftentimes feasible
with big and medium business operation. These limited
opportunities are naturally fitted for a small business.
ECONOMIC IMPORTANCE OF
SMALL BUSINESS
 Small businesses play an important role in the
development of our economy. They assume the following
function:
3. Suppliers of products and services to other businesses – some
businesses require raw materials, semi-finished parts, finished
components, or even labor, which they cannot economically
produce. The small business perform this for them.
ECONOMIC IMPORTANCE OF
SMALL BUSINESS
 Small businesses play an important role in the
development of our economy. They assume the following
function:
4. Distributors of products and services of other businesses –
some manufacturers do not have the ability to distribute their
products and services.
ECONOMIC IMPORTANCE OF
SMALL BUSINESS
 Small businesses play an important role in the
development of our economy. They assume the following
function:
5. Supporters of Government – small businesses support the
government with the taxes they pay, as well as performing other
functions.
ECONOMIC IMPORTANCE OF
SMALL BUSINESS
 Small businesses play an important role in the
development of our economy. They assume the following
function:
6. Providers of employment – a large proportion of the labor
force are employed by the businesses.
ADVANTAGES OF OPERATING A
SMALL BUSINESS
 Personalized relationships with customers and employees
 Flexibility in management
 Government incentives
 Simple record keeping
 Independence
DISADVANTAGES OF OPERATING
A SMALL BUSINESS
 Difficulty in raising capital
 Risk of failure
 Limited management skills
 Lack of opportunities for employees
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES

 Barangay Micro Enterprises Act

 The Anti-Dumping Act of 1999
 Consumer Act of the Philippines
 Electronic Commerce Act of 2000
 Price Act
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Others
 Export Development Act (RA 7844)
 Foreign Investment Act (RA 7042)
 Retail Trade Liberalization Act (RA 8762)
 Safeguards Measures Act
 Transaction Value Act
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 “Barangay Micro Business Enterprise”
 It is hereby declared to be the policy of the State to hasten country’s
economic development by encouraging the formation and growth of
BMBEs which effectively serve as seedbeds of Filipino
entrepreneurial talents, and integrating those in the informal sector
with the mainstream economy, through the rationalization of
bureaucratic restrictions, the active intervention of the government
specially in the local level, and the granting of incentives and
benefits to generate much-needed employment and alleviate
poverty.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 “Barangay Micro Business Enterprise”
 Engaged in the production, processing or manufacturing of products
or commodities
 Whose total assets shall not be more than Three Million Pesos (Php
3,000,000)
 Services – excludes exercise of profession duly licensed by the
government
 Certificate of Authority
 Assets – all kinds of properties, real or personal owned and/or used
by the BMBE for the conduct of its business
 Where to register: Office of the Treasurer of each city or municipality
 Fee: not to exceed One Thousand Pesos (P 1,000)
 Effectively: 2 years renewable for a period of 2 years for every
renewal
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 “Incentives and Benefits”
 Exemption from Taxes and Fees
 Exemption from the coverage of the Minimum wage law Credit
Delivery
 Technology transfer, production and management training and
marketing assistance
 Trade and investment promotion
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 The Anti-Dumping Act of 1999
 Whenever any product, commodity or article of commerce imported
into the Philippines at an export price less than its normal value in the
ordinary course of trade for the like product, commodity or article
destined for consumption in the exporting country is causing or
threatening to cause material injury to a domestic injury, or materially
retarding the establishment of a domestic industry producing the like
product, the Secretary of Trade and Industry, in the case of non-
agricultural product, commodity or article, after formal investigation
and affirmative finding of the Tariff Commission, shall cause the
impositions of an anti-dumping duty equal to the margin of dumping
on such product, commodity or article and on like product,
commodity or article thereafter imported in the Philippines under
similar circumstances, in addition to ordinary duties, taxes and
charges imposed by law on the imported product, commodity or
article.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Consumer Act of the Philippines (Republic Act No. 7394)
 Products the interest of the consumer, promotes his general
welfare and establishes standards of conduct for business and
industry.
a. Protection against hazards to health and safety;
b. Protection against deceptive, unfair and conscionable sales acts and
practices;
c. Provision of information and education to facilitate sound choice
and the proper exercise of rights by the consumer;
d. Provision of adequate rights and means of redress; and
e. Involvement of consumer representatives in the formulation of
social and economic policies.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Electronic Commerce Act of 2000 (Republic Act No. 8792)
 Provides for the legal recognition and admissibility of electronic
data messages, documents and signatures.
 Mandates all government department and offices to accept
electronic data messages and documents in their transactions
within two years from its effectively.
 Provides for penalties on computer hacking, introduction of
viruses and piracy of copyrighted works of at least P 100,000
and maximum commensurate to the damage incurred, and
imprisonment of six months to three years, among others;
 Promotes e-commerce in the country, particularly in business-
to-business and business-to-consumer transactions.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Price Act (Republic Act No. 7581)
 Protects consumers by stabilizing the price and supply of basic
necessities and prime commodities without denying legitimate
business a fair return an investment and by prescribing
measures against undue price increases especially during the
emergency situations and similar occasions.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Export Development Act (RA 7844)
 Aims to develop the country’s export sector and meet the country’s
export goals.
 Puts into focus a national strategy for a sustainable agri-industrial
development to push the Philippines’ image as a newly
industrialized country.
 Enjoins the government and the private sector to consolidate efforts
to promote exports and expand the country’s share in the
international markets by promoting industries that are considered
export winners.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Foreign Investments Act (RA 7042)
 Recognizes the role extent played by foreign investments in the
economy, and sets into place the procedures for the registration
and grant of incentives to foreign investors.
 Specifies the limits on the extent of allowable foreign ownership
 There are no restrictions on foreign ownership in export and
domestic market enterprises, but a Foreign investment
Negative List or Negative List defines the areas of economic
activities where foreign ownership is limited.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Foreign Investments Act (RA 7042)
 Former natural-born Filipinos are granted the same investment
rights of a Philippine citizen based on existing investment and
related laws. However, former natural-born Filipinos are restricted in
cone areas such as defense-related activities, exercise of profession,
activities covered by the Retail Trade Act, Small Scale Mining Act,
Rice and Corn industry Act and other laws.
 Foreign Investment List
 No foreign equity is allowed in mass media; services involving the
practice of professions, such as engineering, medical and allied
profession, accountancy, criminology, architecture, law, etc.; retail
trade; cooperatives; small-scale mining, utilization of marine
resources; ownership and operation of cockpits; manufacture, repair
of nuclear weapons and other biological, chemical weapons, etc.;
and other areas.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Foreign Investment List
 Up to 25 % foreign ownership is allowed for private requirement,
whether for local or overseas employment; locally-funded public
works, except for infrastructures/development projects and
foreign-funded or assisted projects.
 Up to 30 % foreign equity is allowed in advertising
 Up to 40 % foreign equity for exploration, development and
utilization of natural resources; ownership of private lands;
operation and management of public utilities, educational
institutions; rice and corn administration; contracts to supply
materials, good and commodities to GOCCs; project proponent of
a BOT project in public utilities; deep-sea commercial fishing
vessels operation and condominiums.
 Up to 60 % ownership in financing companies regulated by the
SEC and investment houses.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Safeguards Measure Act (RA 8800)
 Contains measures to protect local manufactures from trade
practices that are unfair. It provides relief to domestic industries
when a sudden increase in imports adversely affects local
industries.
 The government can levy a higher tariff an imports of
agricultural products once these breach a certain volume or
price, protecting local farmers growing the same products.
 Also provides an adjustment period for the agricultural sector to
become competitive, as well as adjustment plans for other
affected sectors to help enhance competitiveness.
LAWS THAT GOVERN
ENTREPRENEURSHIP IN THE
PHILIPPINES
 Transaction Value Act (RA 8181)
 Changes the basis of dutiable value of imported articles subject
to an ad valorem rate of duty from Home Consumption Value
(HCV) to Transaction Value (TV).
 The price actually paid or payable for goods that are exported to
the Philippines.
 The price that appears on the accompanying commercial or
sales invoice issued in the country of origin or exporting country.
 The TV system enables local manufacturers or producers to
price their export products more competitively and allows
Philippines to align its valuation system not only with its ASEAN
neighbors but also with the rest of the world.