Unit 2: The Business Plan

Lesson 4
The Business Plan Contents (III):
Enterprise Strategy, Financial
Forecasting, Compliance, and
Capital Structure
Entrepreneurship
Senior High School Applied - Academic
How can an
entrepreneur foresee if
the business he has in
mind will prosper?

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Learning
Objective
Discuss the different parts of a
At the end of the business plan.
lesson, you should be
able to do the
following:

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Interview one personnel doing business
inside your school that will lead you to
answer the following questions:

1. What are the three things that you noticed

in the industry when it comes to improving
its service to make their customers
satisfied?
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2. Based on your observation or interview,
how do their business calculate its profits
and losses? How do they plan for these
risks?
3. What is their plan on increasing their
business capital and investments?

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 Enterprise Strategy
Enterprise strategy is
a set of choices and
actions geared
toward gaining a
sustainable
competitive
advantage.
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 Process of Enterprise Delivery System

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 Process of Enterprise Delivery System

The enterprise delivery system involves

harnessing human, money, and physical
resources from well-selected suppliers. These
resources become the input that the
operations unit within the enterprise delivery
system will convert or transform into output.
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 Process of Enterprise Delivery System

The output will be delivered to the customers

through the marketing unit of the enterprise
delivery system. The marketing would include
the right packaging, pricing, promotion, selling
and distribution, and the location where the
target customers can best be found.
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 Process of Enterprise Delivery System

The business outcomes should reasonably include:

● high customer satisfaction levels;
● high sales volume, market share, and market reach;
● high financial returns; and
● high people’s performance, productivity, and morale
levels.

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How will the entrepreneur check
if the business will gain profit?

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 Financial Forecast
It refers to the capital investment and sources
of funding in the operation of the business.
This section will show the financial projections
over a period of one year and five-year
program and shall determine the rate of return
of investment.
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 Balance Sheet

The balance sheet shows the financial position

of the enterprise as of the given period of time.
It reflects the total assets, liabilities,
shareholders, and earnings preserved to fund
future operations or to serve as funding for
expansion.
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 Example: Balance Sheet

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 Example: Balance Sheet

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Remember

You can use the balance sheet to

work out a way to meet your
financial obligations and discover
the most effective way to use
credit to finance your operations.

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 Income Statement

The income statement shows the revenues,

cost of goods sold, operating expenses, other
income and expenses, financing costs, income
taxes, and bottom-line figures.

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 Example: Income Statement

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 Cash Flow Statement

It is a projection of money receipts and

expense payments. It shows how and when
money flows through the business. It provides
verification of whether a company has enough
liquidity or money to pay its expenses.

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Remember

A cash flow statement may be a

valuable measure of strength,
profit, and the long-run future
outlook for a company.

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Environmental and Regulatory Compliance

The business plan should articulate the laws

and regulations governing the business, and
also on how the enterprise operates. It should
lay out the plans for acquiring the required
permits, licenses, and authority to use
proprietary intellectual capital.
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Environmental and Regulatory Compliance

1. Bureau of Internal Revenue - Tax Identification Number (TIN)

2. Barangay Clearance
3. Department of Trade and Industry - Business Name Registration
Certificate
4. Mayor’s Permit/ Business Permit
5. Sanitation Permit and Fire Clearance
6. Securities and Exchange Commission (SEC) Certificate

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Tip

The entrepreneur should identify first

what type of business will be established
so that he/she will know the exact
registrations and clearances to secure.

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 Capital Structure

The capital structure refers to the combination

of debt and equity to use as the company's
fund and finance its operations.

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 Capital Structure

Equity Capital
This form of capital refers to any money put up
and owned by the shareholders.

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 Capital Structure

Types:
● Contributed capital - It is the money that was
originally invested in the business for shares of stock
or ownership in return.
● Retained capital - These are profits from previous
years that have been secured by the business and
used for fund growth, acquisitions, or expansion.

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 Capital Structure

Types:
Long-term bonds - It is generally considered one of
the safest types because the business will have
several years to pay the principal while paying the
interest only in a short period of time until the loan
matures.

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 Capital Structure

Types:
Vendor financing - It happens once a company sells
a product before having to pay their vendor. This
could dramatically increase the company's return on
equity while not costing the business any upfront.

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 Capital Structure

Types:
Policyholder float financing - In the case of
insurance firms, this often refers to cash that does
not belong to the business; however, it earns an
investment until an insurance claim has been made.

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Remember

Different types of capital impose

different kinds of risks for a company.
For this reason, capital structure affects
the worth of a company, and so a lot of
analysis goes into deciding what a
company's best capital structure should
be.

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 Activity

An entrepreneur wants to ask for your help in

obtaining pertinent documents to open his
business near your place. Identify the required
permits, licenses, and authority that need to be
secured and how to obtain one.

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 Questions
Part A.
Explain the following terms:
1. Capital structure
2. Enterprise strategy
3. Income statement
4. Debt capital
5. Cash flow statement
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 Questions
Part B.
1. Why should a business comply with the requirements
needed by the municipality or barangay before
starting a business?
2. Is there a need to hire an accountant even if the
business will just start to be established? Explain.
3. Why is it important to map the competitive landscape
of the EXPLOR
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 Questions

4. What should an entrepreneur do to foresee if the

business will secure a return or profit? Explain.
5. Why does capital structure matter to any business?

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 Wrap Up

Enterprise strategy is a set of choices and

actions geared towards gaining a sustainable
competitive advantage.

The financial forecast section of a business

plan refers to the capital investment and
sources of funding in the operation of the
business.

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 Wrap Up

The business plan should articulate the laws and

regulations governing the business and its
operation through environmental and
regulatory compliance.
The capital structure refers to the
combination of debt and equity to use as the
company's fund and finance its operations.

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Wrap Up

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 Bibliography
“Business Permits and Licenses You Need to Launch Your Business in the Philippines.”
Business News Philippines. Accessed April 1, 2020.
https://www.businessnews.com.ph/business-permits-licenses-need-launch-business-
philippines-20170507/
.

“Capital Structure.” Investing Answers. Accessed April 1, 2020.

https://investinganswers.com/dictionary/c/capital-structure.

Kennon, Joshua. “Here Is a New Investor's Guide to Capital Structure and Why It Matters.”
The Balance. Accessed April 1, 2020.
https://www.thebalance.com/an-introduction-to-capital-structure-357496.

Murphy, Chris B. “Understanding the Cash Flow Statement.” Investopedia. Accessed April 1,
2020. https://www.investopedia.com/investing/what-is-a-cash-flow-statement/.

Peters, Michael & Robert Hisrich. Entrepreneurship 4th Edition. McGraw-Hill Book
Co., 1999.

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