1. Organizing a Business
By: Mrs. Belen Apostol

2. Organizing a Business Most common reasons for business failures:
Bad or improper management practices, including poor cost controls and poor hiring practices;
Poorly focused and executed marketing or inadequate marketing;
Poor location;
Failure to invest in new products and efficient technology; and
Lack of adequate financing.

3. Why persons engage in Business Provision of employment to people;
Profits;
Service to the community
Personal satisfaction
Means to earn a living
Achievement of power; and
Protection of one’s self and family

4. ENTREPRENEURSHIP
To engage in business, a person or group of persons has two options:
To buy an existing business, or
To create a business that he will operate (entrepreneur)

5. ENTREPRENEURSHIP Functions of an Entrepreneur:
To supply the capital of the firm;
To organize production by buying and combining inputs;
To decide on the rate of output in the light of his expectations about demand; and
To bear risk involved in these activities

6. ENTREPRENEURSHIP Qualities of an Entrepreneur: Over – achievers
Risk takers
Self confident
Hard workers
Goal setters
Accountable
innovative

7. BUSINESS PROSPECTING A prospective businessman should
Carefully scan the environment for other possible openings.
Prepare a list of alternative business opportunities and
he should make his choice from the list.

8. BUSINESS PROSPECTING Business Opportunities:
Increasing demand for basic commodities due to an increase in population;
Rising prices (or costs) of existing products like construction materials;
Relaxation of government policies like the lifting of import restrictions;
The development of new service concept like the issuance and delivery of passports through courier service;

9. BUSINESS PROSPECTING Business Opportunities:
5. The development of a new product concept like the engine that runs on water;
6. The increase demand for specialized services like manpower export services, health fitness services, management consultancy, and skills training;
7. The increasing requirements of the wholesale and retail industry.

10. BUSINESS PROMOTION Business Promotion – discovery and
exploration of a business opportunity with
purpose of converting it into a going concern.
Three steps in business promotion:
Discovering the idea for a new business;
Determining the feasibility of the idea; and
Assembling the needed resources to start a business.

11. BUSINESS PROMOTION Discovery
The identification of an idea for a new business.

12. BUSINESS PROMOTION Determination of Feasibility
Feasibility Study – detailed investigation of a
Proposed business venture to determine its viability.

13. BUSINESS PROMOTION A Feasibility study includes:
Management study including proponents, personnel, and organization;
Marketing study
Production facilities and the product;
Taxation and legal aspects;
Financing aspects;
Profitability; and
Social desirability

14. Feasibility Study Management study includes the following:
The appropriate form of organization;
The internal structure of the organization;
The owners; and
The staffing pattern of the organization.

15. Feasibility Study Marketing Study provides the following:
The future total demand for the product;
The competitive situation of the product in the industry;
An estimated annual sales volume;
Future selling prices; and
The marketing program

16. Feasibility Study Technical Study provides the following:
The manufacturing process selected; if applicable;
The rated capacity of the plant;
The design of the machinery;
The location and lay-out of the plant;
The specifications of the structures; and
The requirements for operation

17. Feasibility Study Taxation study
includes the tax burden applicable to the project.

18. Feasibility Study Financing study
includes the source of financing for the project giving particular attention to selecting the most attractive financing scheme using factors of cost and availability.

19. Feasibility Study Profitability.
shows the rate of return using various approaches.

20. Feasibility Study Social Desirability (optional)
provide a description of the social returns applicable to the project. It presents the benefits that will be afforded by the project to the community.
e.g. reduction of prices & provision for employment

21. Assembling the Needed Resources The resources needed:
Initial capital required
Essential properties
Processes
personnel

22. Assembling the Needed Resources Initial Capital Requirements:
Cost of organization;
Working capital;
Acquisition of fixed assets; and
Reserves.

23. Initial Capital Requirements
Cost of Organization
includes the payments made for permits and licenses, incorporation taxes, business name etc.
includes lawyers fees for legal requirements, architect’s fees, etc.

24. Initial Capital Requirements
Working Capital
required to finance inventories and supplies; salaries and wages, power water, rent, insurance, transportation, advertising and sales promotion.

25. Initial Capital Requirements
Fixed Assets may be acquired through purchase or lease.
- business assets acquired for continued use in the production of goods or services.
- e.g. land, machinery, buildings, furniture, fixtures and equipments

26. Initial Capital Requirements
Reserve Fund – required to take care of difficulties encountered due to insufficient income generated by the firm.

27. Sources of Initial Capital
Owners
Creditors

28. Retention of Control Control measures to protect the interests
of the promoter and founders.
Leases
Options and contracts
Franchises and concessions
Patents and copyrights

29. Retention of Control
LEASE – an agreement over the use of real property for a period of time.
- used to obtain initial control of the land and buildings

30. Retention of Control OPTION – an agreement where one
person grants another to buy a certain
property at an agreed price, at or within
a stated future. Certain sums of money are
required for options which may or may
not be credited as part of the purchase
price.

31. Retention of Control CONTRACT – an agreement with
specific terms between two or more
persons or entities in which there is a
promise to do something in return for a
valuable benefit known as consideration.

32. Retention of Control FRANCHISE – exclusive right granted
by the franchisee to the franchisor for the
operation of a public utility service, or the
selling or distribution of a product in a
specified area.

33. Retention of Control CONCESSION – right granted by the
government to a concessionaire for the
exploitation of natural resources placed at
his disposal for a sum consisting of a
minimal periodic payment plus a percentage
of the income from sales.

34. Retention of Control PATENT – the right to make, use , or
sell an invention during the patent period.
- can be obtained for new products,
new substitute for existing products as well
as new production or marketing techniques.
- patent holder may license others
to make use of his invention in return for
payment of royalties.

35. Retention of Control COPYRIGHT – legal device that gives
the creator of a literary, artistic, musical,
or other creative work the sole right to
publish and sell that work. Copyright
owners have the right to control the
reproduction of their work, including the right
to receive payment for that reproduction. An
author may grant or sell those rights to
others, including publishers or recording
companies..

36. Valuation Property and services to be acquired
by the new business project should have
the correct valuation.
Stocks are issued as payment for the
required property and services, in some
cases.

37. BUSINESS PROMOTION Promoting a business may not succeed
Due to any of the following:
Overvaluation of property and services;
Inadequate sampling or overestimation of the potential market;
Underestimation of expense of establishing a business;
Inability to raise sufficient capital

38. BUSINESS PROMOTION 5. Managerial and personnel difficulties; and
6. Unforeseen changes in the state of the entire economy

39. BUSINESS PROMOTION PROMOTER
- person responsible for the formation of a company.
- sees opportunity for a new business
- interests other people in it;
- makes the business’ blueprint;
- arranges for the initial funds, labor, and skills required
- sets the business going.

40. BUSINESS PROMOTION
The promoter is motivated by any or a combination of the following:
The promoter’s fee
Shares of stock or bond in the new business project;
A management position in the new business project;
A new customer for his products or services; and
The desire to contribute to the economic growth of the local community

41. BUSINESS PROMOTION Promoters may be classified as follows:
Professional promoters – they are those whose main occupation is business promotion.
Side-line promoters – they are persons who perform promotion activities occasionally;
Banking promoters – they are banking institutions which provide business promotion services to their clients;

42. BUSINESS PROMOTION Promoters may be classified as follows:
4. Financial promoters – they consist of investment houses engaged in the promotion of certain business ventures through the sale of securities;
5. Subdivision promoters – they are those engaged in the development of new subdivisions.

43. LIABILITY OF PROMOTERS
Temporary Trustee – a promoter cannot legally bind the firm into contracts and deeds unless approved by the owners or the board of directors.
- cannot act as the agent of a corporation still to be formed, he does not have a principal to represent.

44. for listening!