2015-Your-Guide-To-Starting-A-Small-Enterprise.Pdf
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FOREWORD One item in the 10-point agenda of the Philippine Government is for the present leadership to generate a million jobs a year. Part of the response initiated by the Department of Trade and Industry through the Bureau of Small and Medium Enterprise Development (BSMED) was to embark on an even more intensive countrywide campaign to create more enterprises that will provide the jobs. This time BSMED focused its interest not only in developing an entrepreneurial way of thinking among the people but more so in ensuring that the enterprises that will be created start on the right path with a foundation solid enough to enable them to grow and succeed. This publication, Your Guide to Starting a Small Enterprise, looks at how a small enterprise evolves from a mere business idea until the enterprise is born. It is a step-by- step guidebook that walks the reader through a systematic way of putting up a small business. It is a light and easy read and the language is simple. This guidebook has a different ending. Unlike the usual guidebook that will either leave the reader hanging, asking for more or be put back to the shelf after being read, Your Guide to Starting a Small Enterprise induces the reader into action. It is not all concepts; it is interactive. Asking the reader to complete a business blueprint as each chapter is read is probably the next best thing that this guidebook can offer. We acknowledge the University of the Philippines Institute for Small-Scale Industries for their assistance in the development of Your Guide to Starting a Small Enterprise and the Bangko Sentral ng Pilipinas for their generous support. FOREWORD One item in the 10-point agenda of the Philippine Government is for the present leadership to generate a million jobs a year. Part of the response initiated by the Department of Trade and Industry through the Bureau of Small and Medium Enterprise Development (BSMED) was to embark on an even more intensive countrywide campaign to create more enterprises that will provide the jobs. This time BSMED focused its interest not only in developing an entrepreneurial way of thinking among the people but more so in ensuring that the enterprises that will be created start on the right path with a foundation solid enough to enable them to grow and succeed. This publication, Your Guide to Starting a Small Enterprise, looks at how a small enterprise evolves from a mere business idea until the enterprise is born. It is a step-by- step guidebook that walks the reader through a systematic way of putting up a small business. It is a light and easy read and the language is simple. This guidebook has a different ending. Unlike the usual guidebook that will either leave the reader hanging, asking for more or be put back to the shelf after being read, Your Guide to Starting a Small Enterprise induces the reader into action. It is not all concepts; it is interactive. Asking the reader to complete a business blueprint as each chapter is read is probably the next best thing that this guidebook can offer. We acknowledge the University of the Philippines Institute for Small-Scale Industries for their assistance in the development of Your Guide to Starting a Small Enterprise and the Bangko Sentral ng Pilipinas for their generous support. TABLE of CONTENTS PART I: INTRODUCTION Chapter Page 1 STARTING A SMALL ENTERPRISE What is a Small Business? 2 Some definitions 2 Strengths and weaknesses of a small business 3 Do You Have What It Takes To Succeed in Business? 6 The role of an entrepreneur 7 Personal characteristics of entrepreneurs 8 Rewards and Risks of Being an Entrepreneur 12 Rewards 13 Risks 14 Doing (Small) Business in the Philippines 15 Incentives to small enterprises 15 Disincentives 18 2 WHERE DO YOU START? Looking within 21 Looking outside 22 Some Options: Buy a business, Take a Franchise, etc. 26 Buying an existing business 26 Taking franchise 27 Over a Hundred Business Ideas 28 3 ASSESSING YOUR BUSINESS IDEAS The Right Type of Business 35 How Do You Start? 36 Selection checklist 36 Screening Your Ideas 38 Knowing the market for your product or service 39 Creating your product or service 41 Putting your business together 42 Looking at your finances 43 SWOT Analysis 43 Making the Final Selection 44 PART II: STARTING YOUR BUSINESS 4 THE BUSINESS PLAN Why Plan a Business? 47 Components of a Business Plan 49 5 DETERMINING YOUR MARKET Some definitions 59 Understanding Your Market 60 Segmenting the market 60 Targeting 62 Understanding your target 63 Analyzing the Competition 67 Estimating Potential Market Demand 67 TABLE of CONTENTS PART I: INTRODUCTION Chapter Page 1 STARTING A SMALL ENTERPRISE What is a Small Business? 2 Some definitions 2 Strengths and weaknesses of a small business 3 Do You Have What It Takes To Succeed in Business? 6 The role of an entrepreneur 7 Personal characteristics of entrepreneurs 8 Rewards and Risks of Being an Entrepreneur 12 Rewards 13 Risks 14 Doing (Small) Business in the Philippines 15 Incentives to small enterprises 15 Disincentives 18 2 WHERE DO YOU START? Looking within 21 Looking outside 22 Some Options: Buy a business, Take a Franchise, etc. 26 Buying an existing business 26 Taking franchise 27 Over a Hundred Business Ideas 28 3 ASSESSING YOUR BUSINESS IDEAS The Right Type of Business 35 How Do You Start? 36 Selection checklist 36 Screening Your Ideas 38 Knowing the market for your product or service 39 Creating your product or service 41 Putting your business together 42 Looking at your finances 43 SWOT Analysis 43 Making the Final Selection 44 PART II: STARTING YOUR BUSINESS 4 THE BUSINESS PLAN Why Plan a Business? 47 Components of a Business Plan 49 5 DETERMINING YOUR MARKET Some definitions 59 Understanding Your Market 60 Segmenting the market 60 Targeting 62 Understanding your target 63 Analyzing the Competition 67 Estimating Potential Market Demand 67 TABLE of CONTENTS TABLE of CONTENTS Chapter Page Chapter Page 6 MARKETING STRATEGIES 8 ORGANIZING YOUR BUSINESS Some definitions 71 Steps in applying for a business permit in the City of Manila 108 Product Strategies 72 The BMBE Law and Your Enterprise 108 Branding 72 How to register a BMBE 109 Packaging 72 Cost of registering a BMBE 110 Labeling 73 Where Else to Register 111 Product support 73 Some reminders when you register 112 Product attributes 73 Other Things to Take Care Of 113 Place Strategies 74 Staffing Your Business 113 Designing places 74 Who will do what? 113 Price Strategies 75 Getting the Right People 115 Factors affecting price 76 Other Matters 118 Promotions Strategies 78 9 COSTING YOUR PRODUCT OR SERVICE The message 78 What are Costs? 121 Promo tools 78 Benefits of knowing your costs 121 7 MAKING YOUR PRODUCT AND COMPLETING YOUR SERVICE The different types of costs 122 Choosing Your Place of Business 81 Costs and Pricing 123 Locating where you can minimize costs 81 Costing steps for a manufacturer or a service provider 124 Other considerations 82 Costing steps for a trader 124 Designing Your Plant Layout for Better Efficiency 83 Costing: trading 124 Calculating how much space you need 83 Costing: service and manufacturing 127 Putting your machines and equipment in the right place 83 Some ways to reduce your costs 127 Getting Your Machines and Equipment 87 10 BASIC RECORDKEEPING FOR THE NON-ACCOUNTANT Choosing the right machines 87 First Things First 129 The steps to follow in purchasing 89 The Chart of Accounts 131 Maintaining Equipment and Machinery 90 The Mechanics of Keeping Score 133 Managing Your Inventory 90 1st step: Journalizing 133 Avoiding poor inventory practices 90 2nd step: Posting to the ledger 133 Controlling your inventory 91 3rd step: Making the trial balance 136 Monitoring your stocks 93 4th step: Making the financial statements 137 Doing a physical count 93 Books of Accounts 139 Valuing your stock 94 What happens if there are to many…. 142 Production Planning and Control 96 Financial Statements 145 Why plan your production activities? 96 Income statement 145 Production planning 97 Balance sheet 147 Controlling production activities 97 11 MANAGING YOUR FUNDS 8 ORGANIZING YOUR BUSINESS Sources of Funds 151 The Legal Forms of Business 101 Some Poor Cash Management Practices 151 Registering Your Business 105 Nine Dos and Don’ts in Managing Your Funds 152 Why register? 105 Some Cash Management Strategies 155 Where to go and how to get there 105 PART III: BUSINESS PLAN WORKBOOK Where to register 106 12 BUSINESS PLAN WORKBOOK Steps in applying for a business name (single proprietorship) Marketing Plan 158 with the DTI 107 Technical Plan 172 Organizational Plan 194 Financial Plan 201 GLOSSARY 207 APPENDIX: Sample Business Plan 223 TABLE of CONTENTS Chapter Page 8 ORGANIZING YOUR BUSINESS Steps in applying for a business permit in the City of Manila 108 The BMBE Law and Your Enterprise 108 How to register a BMBE 109 Cost of registering a BMBE 110 Where Else to Register 111 Some reminders when you register 112 Other Things to Take Care Of 113 Staffing Your Business 113 Who will do what? 113 Getting the Right People 115 Other Matters 118 9 COSTING YOUR PRODUCT OR SERVICE What are Costs? 121 Benefits of knowing your costs 121 The different types of costs 122 Costs and Pricing 123 Costing steps for a manufacturer or a service provider 124 Costing steps for a trader 124 Costing: trading 124 Costing: service and manufacturing 127 Some ways to reduce your costs 127 10 BASIC RECORDKEEPING FOR THE NON-ACCOUNTANT First Things First 129 The Chart of Accounts 131 The Mechanics of Keeping Score 133 1st step: Journalizing 133 2nd step: Posting to the ledger 133 3rd step: Making the trial balance 136 4th step: Making the financial statements 137 Books of Accounts 139 What happens if there are to many….