Organizing a Business
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Prepared by: Glarce, Franc Lawrence G.
Valmores, Devin-J E.
Organizing a Business
Why Persons Engage in Business
Entrepreneurship
Business Prospecting
The Search for Business Opportunities
Business Promotion
Discovery
Determination of Feasibility
Assembling the Needed Resources
The Promoter
Liability of Promoters
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Organizing a Business
Organizing a Business
The first stage in the life cycle of a business is
organization. Much of what will happen to the firm in the
later stages depends on the first few steps in the
organization process.
Organizing a Business
Organizing a Business
The most common reasons for business failures
include the following:
Organizing a Business
Why Persons Engage in Business
1. provision of employment to people;
2. profits;
3. service to the community;
4. personal satisfaction;
5. means to earn a living;
6. achievement of power; and
7. protection of ones self and family.
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Organizing a Business
Entrepreneurship
two options:
1. to buy an existing business; or
2. to create a business that he will operate.
The entrepreneurs functions are:
Organizing a Business
Business Prospecting
The Research for Business Opportunities
Business opportunities come in several forms. They could be a result of any of
the following
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Organizing a Business
Business Prospecting
The Research for Business Opportunities
5. the development of a new product concept like the engine that runs on
water;
6. the increasing demand for specialized services like manpower export
services, health and fitness services, management consultancy, and skills
training;
7. the increasing requirement of the wholesale and retail industry; and
8. many others
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Organizing a Business
Business Promotion
refers to discovery and exploration of a business
opportunity with the purpose of converting it into a
going concern.
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Organizing a Business
Business Promotion
Discovery
Determination of Feasibility
The feasibility study is a defined investigation and analysis of a proposed
business venture to determine its viability. According to the need, the
study must contain some or all of the following aspects:
1. Management study including proponents, personnel, and organization;
2. Marketing study;
3. Production facilities and products;
4. Taxation and legal aspects;
5. Financing;
6. Profitability; and
7. Social desirability.
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Organizing a Business
Business Promotion
Determination of Feasibility
Management Study. It is in this particular portion of the feasibility study where the
following aspects are determined:
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Organizing a Business
Business Promotion
Determination of Feasibility
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Organizing a Business
Business Promotion
Determination of Feasibility
Technical Study. In this particular aspect o the feasibility study, the following
requirements should be determined:
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Organizing a Business
Business Promotion
Determination of Feasibility
Taxation Study. The tax burden applicable to the project should be shown in this
portion of the feasibility study. An important factor that must be
considered is that the design of the project must be such that the tax
burden is legally minimized.
Financing Study. The source of financing for the project is discussed in this portion.
Particular attention is given to selecting the most attractive financing
scheme using factors of cost and availability.
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Organizing a Business
Business Promotion
Determination of Feasibility
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Organizing a Business
Business Promotion
Assembling the Needed Resources
Once the feasibility of a proposed business project is determined by
experts, the proponent may proceed to assemble the needed resources.
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Organizing a Business
Business Promotion
Assembling the Needed Resources
Initial Capital Requirements. A new business project requires initial capital
to take care of the following:
a. cost of organization;
b. working capital;
c. acquisition of fixed assets; and
d. reserves.
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Organizing a Business
Business Promotion
Assembling the Needed Resources
Sources of Initial Capital. A new business project may initially be financed by
using any or a combination of various sources. The management of the
firm about to start operations will have to use time and expertise to
avail of credit facilities offered by suppliers and financing institutions.
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Organizing a Business
Business Promotion
Assembling the Needed Resources
Retention of Control. There is a possibility that at the promotion stage,
outsiders may deprive the promoter and the founders of control
over the new business idea. It is, therefore, important that certain
control measures be instituted to protect the interests of the promoter
and the founders.
a. leases;
b. options an contracts;
c. franchises and concessions; and
d. patents and copyrights. 19 of 25
Organizing a Business
Business Promotion
Assembling the Needed Resources
Valuation. The correct valuation of the property and services to be acquired
by the new business project is a very important step in the assembly
of needed resources. In some cases, stocks are issued as payment for
the required property and services. Unless a conservative valuation is
used, stocks may be issued whose nominal value may be higher than
the amount representing the real assets of the business project.
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Organizing a Business
Business Promotion
Assembling the Needed Resources
Promoting a business may not succeed due to any of the following:
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Organizing a Business
The Promoter
is the person responsible for the formation of a company.
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Organizing a Business
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Organizing a Business
The Promoter
Liability of Promoters. The promoter undertakes to pursue his job with
the capacity of a temporary trustee.
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Organizing a Business