CHAPTER 4 - Starting a Business

Lesson 1 Personal competencies

Factors to Consider in Starting a Business -Creativity, opportunity seeking, self-confidence,
• Starting a business is a positive decision on the part of persistence, commitment, and risk-taking, as well as
the entrepreneur to exploit entrepreneurial technical background (eg. Accounting, personal
opportunities which are important and a worthwhile computing) and related experiences needed to run the
in endeavor. particular business, are necessary to start running the
• There are several other reasons like financial business.
stability, self-fulfillment, helps the family and provide
employment to others. Availability of Resources
Start Up Enterprise -Resources pertain to raw materials, human resources,
-A company which is recently formed, where the founder and machineries / equipment.
establishes a completely new business from scratch.
Buying an Existing Business Lesson 2
-Business is acquiring either the shares of an existing Identifying Business Opportunities
company or all of the assets of an existing enterprise.
FRANCHISING Entrepreneurial Opportunity
-Is when the "owner of the company that already has a • Is a favorable set of conditions that will enable the
successful product or service, licenses its trademark, trade entrepreneurs to create new products or services by
name, and methods of doing business to others in combining resources that will result, not only to profit
exchange for an initial franchise fee and royalty but for the common good of the society and the
payments" environment?

Other Factors to Consider in Starting a Business The Opportunity Recognition Process

Focus and Direction • Entrepreneurs should be able to identify, seize, and
-There should be a clear and documented vision-mission pursue business opportunities.
and strategies to begin with. Start right by "beginning with • Successful entrepreneurs are those who can exploit
the end in mind." business opportunities.
• Drucker, has identified seven potential sources
Sources of Capital of opportunity in the external context, namely
-There are different sources of capital that can be used
depending on the needs to start the venture. (1) The unexpected- Opportunities frequently come from
-These can be from personal, family and friends, a unexpected sources. Don’t get stuck into set patterns of
retirement account, banks/financial institutions, a thinking. If your company has a very limited scope, do
government loan, and/or the stock market. prospects ask you to provide other services? Is there a
part of your business that has great potential but isn’t
taken seriously by the leadership team?
Good Network
-Building good relationships and working with other
(2) the incongruous- There is a discrepancy between
people could help start the business.
what is and what should be. This is a key to developing
-Formal networks, like associations and professional
wildly successful businesses but it’s tricky.
groups, as well as informal networks, like childhood
friends, family members, and former classmates, can be
(3) the process need- Process need involves identifying
drivers to build self-confidence and direction, providers of your company’s process weak spots and correcting or
information that are not readily accessible to others, redesigning them. This is a task oriented solution meaning
suppliers of raw materials, and serve as mentors/coaches. that the source of innovation comes from within your
existing capabilities and ways of doing business – not the
Legal Requirements market.
-It is very important to know the laws and regulations that
govern the type of business that will be opened to avoid (4) industry and market structures- Your industry and the
market are in continual flux. Regulations change and
major problems that can arise if legal requirements are
some product lines expand while others shrink. Firms
overlooked. should continually be on the watch for this.

Degree of Risk (5) demographics-We constantly see changes occur in

-A business is said to be risky when the probability or populations, income levels, human capital (education)
chances of failure is high. It means the odds are great in and age ranges. Smart firms are constantly paying
many aspects against starting the business like limited attention to this.
market, stiff competition, high cost of financing the
business and few supply of needed labor. (6) change in perception- Over time populations and
people change. The way they view life changes, where
they take their meaning from, and how they feel about
Research and Development
things also is modified over time and smart companies
-The government should provide adequate support to
must pay attention to this in order to capitalize (and
inventors, scientist and engineers and their new
avoid becoming forgotten, a relic of ages past).
technologies to commercialize their R & D products.
The presence of new technology, science and (7) new knowledge- As the speed of technological
knowledge transfer from universities and public research revolution increases there will be an ever increasing
centers to new and growing businesses, and support for number of opportunities that open up. New knowledge is
the creation of new technology –based ventures, are about more than just technology though, it’s about
good indicators to start a business in this area.
finding better ways of doing things and improving Corporation is an artificial being created by operation of
processes. law, having the right of succession and the powers,
attributes, and properties expressly authorized by or
Lesson 3 incident to its existence. They register with the Securities
TYPES OF BUSINESSES AVAILABLE TO ENTREPRENEURS and Exchange Commission

Micro Enterprise Cooperative is a duly registered association of persons ,

--It has an asset size not exceeding ₱50,000. with a common bond of interest, who have voluntarily
It is usually a home-based enterprise, operating in joined together to achieve a lawful common social or
makeshift or temporary quarters. economic end, making equitable contribution to the
The owner heads the enterprise and employs from one to capital required and accepting a fair share of the risks
not more than 10 people to help him/her. and benefits of the undertaking in accordance with the
Examples are the self-employed vending food like taho, university accepted principles of the cooperatives. They
puto, fishballs; those selling in the public market and those register with the Cooperative Development Authority
having sari sari stores. (CDA)

Cottage Enterprise According to Industry Classification

--It has an asset of ₱250,000 but not exceeding ₱500,000.
1. Agriculture, Forestry and Fishing- includes the
It is a home-based business which is often managed and
exploitation of vegetal and animal natural resources,
operated by the members of the family. comprising the activities of growing crops, raising and
Examples are the subcontractors of footwear like shoes breeding of animals, harvesting of timber and other
and slippers and food manufacturers of peanut butter, plants, animals or animal products from a farm or
jam or pastillas as well as decorative products like vases, their natural habitats.
candles and lanterns. 2. Manufacturing- this section includes the physical or
chemical transformation of materials, substances, or
components into new products
Small Enterprise
3. Electricity, Gas, Steam and Air Conditioning Supply-
--It has an asset of ₱500, 000 but not exceeding ₱2.5 this includes the activity of providing electric power,
million. It is owned by an individual or group and has natural gas, steam hot water and the like through a
enough resources to continue operating. It employs from permanent infrastructure (network) of lines, mines
10 to 20 people. and pipes.
Examples are the grocery stores, bakeshops, salon, clinics 4. Water Supply, Sewerage, Waste Management, and
Remediation Activities- this section includes activities
and toy makers.
related to the management of various forms of
waste, such as solid, or non-solid industrial or
Medium Enterprises
household waste, as well as contaminated sites.
--It has an asset of ₱5 million to less than ₱20 million. It is 5. Accomodation and Food Services activities- this
owned by a single individual, business partners, or a section includes the provision of short-stay
corporation. It employs more than 20 to 100 people. accommodation for visitors and other travelers and
These workers are more skilled and possess technical the provision of complete meals and drinks fit for
expertise to run the business with machines/equipment immediate consumption.
6. Real Estate Activities- this section includes acting as
and utilize various quality controls to make the product.
agents, and/ or brokers in one or more of the
Examples are dining restaurants with branches and
following; selling or buying real estate, renting real
private educational institutions. estate, and providing other estate services, such as
appraising real estate or acting as real estate escrow
Large Enterprise agents.
 It has an asset of ₱ 20 million or more. 7. Arts, Entertainment and Recreation - this section
• It is often owned and managed by a corporation. includes a wide range of activities to meet varied
• It is large in scope of operation and number of cultural, entertainment and recreational interests of
products or services that it offers to the market. the general public including live performances,
• It employs 100 or more workers who are hired on the operation of museums sites, sports, gambling and
basis of their expertise. recreation activities.
• Its Board of Directors is responsible for its governance
and it has a Chief Operating Officer to oversee the
implementation of the directives of the Board.
• It operates in highly formalized but complex systems
of management.
Examples are the big fast food chains, large department
stores, big bookstores, family-owned commercial banks
and insurance companies.

According to Forms of Ownership

Single Proprietorship is owned and usually managed by
one person. They Registered with the Department of
Trade and Industry.

Partnership is an association of two or more persons who

act as co-owners of a business. Each partner contributes
money, property, or service to the business. They register
with Securities and Exchange Commission (SEC).