Читать книгу A Trilogy On Entrepreneurship: Creating the Enterprise - Eduardo A. Morato Jr. - Страница 4

After much seeking and screening of entrepreneurial opportunities, the crucial decision to seize one particular opportunity culminates in the establishment of an enterprise. Presumably, all the market research has been done and the desired customer segment has been targeted. Presumably, the final location has been chosen and the new product has been designed and developed. These have all been part of the rigorous steps taken in preparing for entrepreneurship. Now is the time to set up the enterprise, plan its future and mobilize the needed resources.

A Very Clear Purpose

The entrepreneur must be very clear about his or her purpose in establishing the enterprise. The weakest purpose is “I just want to while away my time and make money on the side.” The motivation here is too weak to carry the entrepreneur through the roller coaster ride of business. A stronger statement like “I want to become filthy rich” feeds on the greed of the entrepreneur. The greater the greed, the greater the motivation. But even this is not sufficient because greed can blind the entrepreneur to favor get-rich-quick schemes that have little sustainability and poor customer sensitivity. A more acceptable expression of greed is “to provide income for my family.”

A lofty purpose like “I want to express and fully actualize myself through the excellence and uniqueness of my products” derives its energy from the creative soul of the entrepreneur. This is the entrepreneur speaking from a higher motivational ground.

“I simply want to delight my customers” is a trite and suspicious statement. Unless the entrepreneur is a business version of Mother Teresa, it sounds too altruistic. However, more mature enterprises do make this statement because they know that “what’s good for the customer is good for the business.”

Perhaps a combination of greed, self-expression and altruism can be a more enduring and passionate purpose. The purpose of the entrepreneur is actually a personal mission statement. However, at the beginning, this personal purpose may also well be the enterprise mission statement. As time passes, the enterprise will assume a life of its own, separate from the entrepreneur. By then, a separate enterprise mission statement should be crafted.

The enterprise must state its mission statement clearly for the sake of the customers being wooed, the investors who need to know what they are getting into, the financiers evaluating the enterprise, and the government functionaries who must regulate the activities of industries and businesses. The market wants to know what value proposition the enterprise will bring to them, and what specific customer needs or wants will be satisfied. The investors want to know what yields and returns could reasonably be realized from the enterprise and what risks would be encountered. The financiers want to ascertain the viability and sustainability of the enterprise. The government wants to protect the public while it is promoting investments and encouraging industry development. All these stakeholder concerns must be addressed while determining the purpose for establishing the enterprise.

A Very Compelling Vision

No doubt, the entrepreneur will establish the enterprise on the basis of a very exciting business concept. If the business is just like any other business in the marketplace, it will not take customers by storm. A me-too business lacks oomph, lacks pizzazz, lacks libido. The entrepreneur must offer something new, something appealing, something different that says “take notice, I’m arriving with a bang.” Well, it may not be as dramatic as all that but the point is well made. The enterprise must present a winning business concept.

Case Example – The Jollibee Business Concept

When Jollibee decided to challenge the giant McDonalds in the market, it brought the Filipino taste to hamburgers. For that matter, it introduced a lot of Filipino dishes not traditionally sold in hamburger joints. Jollibee observed in their market research that Filipino consumers smelled their burgers before eating them. The logic is obvious: the nose can smell a thousand aromas while the tongue can only distinguish four tastes (sweet, sour, salty and bitter). Jollibee knew that good taste is a function of good smell. Their tag line “langhap sarap,” which roughly translates to “you can savor its good taste from its great aroma,” says it all. Jollibee also came up with a child-friendly name and an endearing mascot to accompany the name. Strategically, Jollibee decided to locate two or three outlets to “surround” McDonalds. The rest is history.

Jollibee came up with a differentiated business concept that won the hearts, minds and wallets of Filipino consumers. Although a late-comer in the industry compared to McDonalds and Tropical Hut, it definitely bested them all. However, even a good business concept is not good enough in the long run. The entrepreneur must be able to see five to ten years down the road where the business might go. The entrepreneur must have a compelling vision of the enterprise to “put fire in the belly” while pursuing “that impossible dream.” Well, it should not really be impossible. That is just an exaggeration to approximate that “big, bold and audacious” goal that would obsess the entrepreneur “like a maddened zealot.” For Jollibee, its initial vision might have been to outnumber and outgun McDonalds. Then, it might have been to totally blanket the country. Next, it envisioned a global presence. The dream just kept getting bigger and bolder. But that is what a compelling vision is all about.

Not By Any Other Name

My favorite bard, William Shakespeare, was wrong. A rose by any other name will NOT smell as sweet. The name Jollibee is a happy, jolly and lovable name that appeals to children and adults alike. The name may not capture what the enterprise is all about, like that equally famous “National Book Store.” However, it does project “a fun place to be with the family” and “to eat heartily and merrily.” Could you imagine if Jollibee chose the name “Sourworm,” fuelling some unfounded rumor that the hamburgers contain protein-filled worms. An equally bad name is “Mang Donald’s,” a terrible me-too version of a Filipino firm trying to beat an American icon. It is a shameful name that declares the enterprise is a copycat trying hard to be what it cannot be.

A name identifies the enterprise. It should try to communicate to the market what the company or its products are all about. Sometimes, it is a straightforward communication of what the enterprise is, like the National Book Store. The name says it all. Sometimes, the name carries a twist to project a desired image. Zagu wants to convey that it is a sophisticated, contemporary, and youthful version of good old plain sago (tapioca or pearl balls). It is different, it is new. Sometimes, the name captures what consumers perceive to be true. Italianni’s promises to deliver what consumers perceive to be good food, Italian food. And Italianni’s does deliver on that promise.

Sometimes, the name carries an emotional connotation while convincing the mind. The name Jaguar is a great one for a Philippine security agency. Jaguar is a mysterious large cat that prowls and protects its forest habitat in the jungles of South America. Security agencies often pick the name of strong and powerful animals to convey an emotional sense of security under some fearsome protector. Jaguar is also a play on words. Filipinos refer to security personnel as guards, or “guardya.” The street term used is “dyaguar,” a name that sounds the same as Jaguar.

Sometimes, the name does not say much. It does not have any meaning or connotation. The enterprise wants it to be bias-free, especially when trying to appeal to an international market. Names of Japanese cars are like that. Camry, Vios, Sentra, Mazda 626, Jazz. Cefiro, et al. were probably chosen because they have been surveyed to sound good, easy to pronounce, easy to remember and quite neutral in their meaning relative to cars. The Japanese hope to create the car’s desired image over the long haul, until the time when the name would have become significant to consumers, not because of the name but because of the car. Successful American cars, however, inject power and speed in their cars. The appeal is focused on the large American public, which is a huge market by itself. The Ford Mustang and the Corvette Stingray are examples. Europe uses the brand names of their makers, which are oftentimes associated with their craftsmanship. Examples are Mercedes Benz and Ferrari.

In establishing an enterprise, the entrepreneur must think long and hard about the name. Once baptized with a name, the enterprise has to live with it for some time. Meanwhile, the enterprise would have to spend a lot of money on brand-building just to make the name known.

A Company of Angels

The entrepreneur may decide to embark on a business venture as a “lone wolf,” not needing the capital or expertise of others. In livelihood undertakings or microenterprises, this is the common approach. At best, it may be a “mom and pop” affair. However, since mom and pop have entered into a more serious partnership, marriage, the business partnership will prosper or fail on the basis of their marital relationship.

For small, medium and large enterprises, entrepreneurs would need the capital, the expertise, or both of others. The choice of business partners, whether they are investors or industrial partners, is a critical one. A mistake here would mean years of internal squabbling and relational hurdles. The entrepreneur needs the “company of angels,” partners who are well-meaning and like-minded. Angel investors provide capital to entrepreneurs knowing there are risks involved. However, they are prepared to support the entrepreneur because of the good business prospects they are seeing and their favorable character assessment of the entrepreneur. Angels also exert a lot of effort in choosing the correct partners. Angel investors may come in the form of senior relatives, close friends and professional venture capitalists.

Angel industrial partners are people who can contribute their expertise, experience, technology, contacts and good character that would enable the enterprise to succeed. In exchange for what they bring to the table, they might want shares of stock or a percentage slice of the profit. For businesses that would rely heavily on industrial partners, the entrepreneur is well-advised to make the best choice of such angel partners.

Case Example — A Pact With The Devil, A Deal Made in Heaven

Arthur and Martha were an entrepreneurial husband and wife team. They had entered into various businesses and were able to raise four sons and send them to good schools. Martha, the more daring of the two, wanted to be a San Miguel Beer distributor in their area but the couple was low on funds then. San Miguel demanded that the distributor order five million pesos worth of beer over three months. That meant a lot of working capital which the couple did not have. At that time, San Miguel gave a thirty- day suppliers’ credit but expected real estate collateral. Martha hatched a plan. The couple would borrow three hundred thousand pesos from a money lender to buy a second- hand delivery van and to pay for operating expenses. Payment of interest alone was one thousand pesos a day. That was “a pact with the devil.” The collateral would be provided by Arthur’s family. The couple thought that the San Miguel terms allowed them to have “a deal made in heaven.” They would withdraw part of the required inventory from San Miguel and try to sell the beer within a week. That gave them a float of three weeks to “roll the cash” generated from San Miguel. As long as they pushed the sales aggressively, the margins from the beer sales could more than cover the interest payments with some extra money to boot. When San Miguel delivers the next batch of beer, the previous batch would have been sold. Arthur and Martha were not so lucky as to find “a company of angels” but their example is more an exception rather than the rule. As the warning on some extreme TV shows would say “do not try this at home.”

Picture lifted from www.shutterstock.com. 2762092.

A Very Good Business Plan

In trying to entice partners, investors and bankers to fund a business venture, the entrepreneur needs to communicate what the enterprise is all about, what market it wants to serve and what financial returns it could muster. The entrepreneur must have a very good business plan. If the entrepreneur already has the capital and the expertise, a business plan would still be a wise thing to have in order to chart the business course properly and to focus the efforts of the entrepreneur.

The business plan should contain important information about the business itself, its organizers, its management and technical people, its financial structure, its market potential, its target market, its projected sales, expenses and profits and its probable risks.

The business plan should begin with the business concept and the vision for the enterprise in the next three to five years. It should then declare the business purpose or the mission statement of the enterprise. This could be accompanied by a statement of values or business philosophy. The business plan should proceed to an enumeration of business objectives, key result areas and performance indicators for the planning period. An overall enterprise strategy should then be articulated to show how the performance indicators could be attained.

Next, the business plan should contain an executive summary of (1) the organizers and the key people behind the business and why these people have the resources, talents, skills and technology to achieve success; (2) the market being targeted and why there is enough market potential to justify the business; (3) the products or services to be offered and why they are right for the market; (4) how the business will be operated and organized, including all outsourcing, subcontracting, franchising and licensing agreements; (5) the capital required for the business and what exactly it would be used for; (6) the technology, the technical expertise, the equipment and materials suppliers to be utilized; (7) the capital structure of the business; (8) the operating budget, financial projections and profit prospects; and (9) the risks in the business and the contingency measures to counteract them.

The business plan should then elaborate on the contents of the executive summary in more detail. Each of the content areas must be justified convincingly by analyzing relevant information and making logical conclusions. Also, for each of the major functional disciplines (marketing, operations, finance, human resources and general administration), there should be a functional strategy to show how the desired results could be obtained.

The concluding portion of the business plan should highlight the key messages for the intended readers of the plan. For the investors, they should be given “fearless forecasts” on expected profits, earnings per share, dividends and market values. Divestment or exit schemes should be discussed. Major features of the shareholder or investor agreement should be emphasized. Voting rights, seats in the board, veto powers, protection clauses for minority investors, and all significant sections of the Articles of Incorporation and the By- Laws should be divulged. For the financial institutions, the financial statements must be synthesized to capture both the upside and downside prospects. Due diligence must be evident in the analyses and conclusions made. The paying capacity of the enterprise, its investors’ capabilities and the venture’s back-up financial plans (just in case things do not turn out as expected) should round up the presentation. For the government readers, the business should provide compliance statements with all laws and regulatory provisions.

Organizing and Structuring the Enterprise

The Business Plan should be able to estimate the capital required by the enterprise. The capital required would be dictated by the investment in the assets of the enterprise. The assets will contain the working capital (current assets), the property, plant and equipment (fixed assets) and the organizational and pre-operating expenses (other assets) needed. These assets would be financed by suppliers credit, short term debt, long term debt and owners’ equity. How the financing package is designed to fund the assets is the capital structure of the enterprise. The right financing mix will not be discussed here. Suffice it to say that there should be enough capital provided by the owners in order to entice financiers to participate in the funding of the enterprise.

The simplest and easiest enterprise to organize is the sole proprietorship. In this structure, the entrepreneur or owner has sole control over the enterprise. He or she reaps all the profits and, also, all the losses. The law does not vest a juridical or a legal personality on the sole proprietorship separate from the owner. The enterprise and the owner are one. Thus, any entity that has a claim on the enterprise can run after all the personal assets of the owner. The risks carried by the enterprise are all borne by the owner. However, the owner is the supreme authority in running the business. He or she calls all the shots and is not answerable to anyone, except the government for its usual pound of taxes and its regulatory provisions. The owner should include the enterprise income in filing his or her personal income tax return. There is no distinction made by the law between the owner and the enterprise. If the entrepreneur enters into any business contract, including loan agreements, then the entrepreneur is also answerable and personally obligated to abide by the terms and conditions of the contract like any other dutiful citizen.

The sole proprietorship is mandated by law to register the business with the proper authorities. All businesses, whatever the legal form, are required to secure a mayor’s permit or municipal license before they can operate in a locality. Before getting this permit, there are clearances that must be obtained. These are (1) barangay clearance, (2) fire safety clearance, (3) certificate of electrical inspection, (4) certificate of occupancy, (5) Department of Trade and Industry certificate, (6) lease contract if space is leased, and (7) locational clearance.

There may be additional requirements depending on the type of business and the ordinances issued by the concerned local government. For food products, there should be a certificate from the Bureau of Food and Drugs. For hospitality enterprises, a clearance from the Department of Tourism is necessary. Schools, financial institutions, transportation companies, amusement centers and the like have their respective agencies to obtain clearances, permits or licenses from. Moreover, any enterprise employing the services of other people must register with the Social Security System. It is, likewise, the responsibility of any enterprise to register its business with the Bureau of Internal Revenue for taxation purposes. The official receipts of the enterprise must also be registered with the BIR. For a sole proprietorship, the tax identification number (TIN) of the entrepreneur serves as the enterprise TIN.

If two or more persons bind themselves in a contract to contribute money, property and expertise to a common fund with the intention of dividing the profits among themselves, then they would have entered into a partnership. Registration with the Securities and Exchange Commission is not essential to give the partnership a juridical personality. A partnership is vested with a juridical personality quite separate and distinct from its members. Thus, it is empowered to sue and can get sued.

A minimum of two persons can constitute a partnership. There is no limit to the number of persons comprising a partnership. There are two types of partnership based on the liability of the partners. A General Partnership is composed of partners who are liable pro rata and solidarily (together) to all those who have claims against them. Claimants can run after all the personal assets of all the partners. A Limited Partnership would have partners who have limited liabilities while others in the partnership would have unlimited liabilities. A limited partner is not personally liable for all the obligations of the partnership beyond his or her pro rata capital contribution to the partnership. The law requires that there must be at least one general partner in a Limited Partnership to assume the unlimited liabilities. The Limited Partnership must add the word Limited to its partnership name.

Partnerships have more participative decision-making processes, which capture the essence of what it means to be “partners.” Partners are supposed to respect one another’s contribution to the enterprise. In a general partnership, the decision of one partner is binding to all. Hence, there are internal mechanisms and procedures followed to ensure that the partners do not enter into contracts without the knowledge and consent of the other partners.

In order to form a partnership, a binding contract must be executed by the partners. The partners must decide on a partnership name and come up with their Articles of Partnership. These Articles should contain all the provisions governing the operation of the partnership. It should stipulate how decisions are to be made. One or more managing partners can be designated to make certain decisions. Levels of authority can be specified for the managing partners. The Articles can state what decisions would require the presence of all or the majority of the partners. They can include provisions on how the contributions of each partner would be compensated, how their interests would be safeguarded, and how the profits of the partnership would be computed and distributed. The Articles should also carry exit or divestment provisions in case one or more partners would want to get out of the partnership. There should also be provisions on the dissolution of the partnership.

The partnership should obtain all the required government clearances, permits and licenses. It should get a bank certificate of deposit on the money contributions of the partners. It should get the approval for its partnership name from the Department of Trade and Industry. With these documents, it should register with and file its Articles of Partnership with the Securities and Exchange Commission. Needless to say, the partnership must also register with the SSS and the BIR, as well as other government instrumentalities that may have jurisdiction over its type of business.

By and large, partnerships have worked well with individuals coming together as professionals in a field of expertise such as accounting, auditing, law, medicine, business consulting, architecture, and engineering. The partners pool their talents together to project a formidable image of a strong institution with a large network of clients and connections. It is an aggrupation of partners whose total impact is far greater than the sum of its parts. Each partner contributes his or her own weight to the enterprise. This is profoundly called “gravitas,” a term which connotes a certain heaviness and awesomeness of bearing that is respected in the elite and august circles of professionals.

The corporation is a separate and distinct legal or juridical personality, allowed by the government, and carries a limited liability for the investors who put their money into the corporation. A corporation can only be formed or incorporated by, at least, five to, at most, fifteen natural persons. (The majority of the incorporators must be residents of the Philippines following Philippine law.) However, once the corporation is established, there is no limit to the number of natural or juridical persons who can invest in the corporation. The corporate form of business allows various combinations of funds to be raised from a large number of investors and financiers. Bigger businesses favor the corporate form because of this financing flexibility and because of its limited liability.

There are four types of corporation. The Stock Corporation issues capital stocks divided into shares (or proportions of the total capital). Based on the submission of Articles of Incorporation to the Securities and Exchange Commission, the corporation is authorized to raise capital that has a corresponding number of shares. At least 25% of the authorized capital, as stated in the Articles of Incorporation, must be subscribed to by stockholders at the time of incorporation. Moreover, at least 25% of the subscribed capital must be paid up by the subscribers at the time of incorporation. The rest of the 75% will comprise the unpaid capital subscriptions, which then represent the receivables of the corporation from the subscribers. Thus, a corporation that has an authorized capital of Twelve Million Pesos must have at least Three Million Pesos in subscribed capital and Seven Hundred Fifty Thousand Pesos in paid-up capital. The profits of a stock corporation are distributed in the form of dividends to its stockholders according to the number of shares that they hold.

The Non-Stock Corporation is organized to carry out a purpose or purposes other than generating profits for investors. The Non-Stock Corporation usually has a social mission. Hence, all the surpluses (or profit equivalents) generated by the corporation are not distributed to the funders in the form of dividends. Rather, they are plowed back into the corporation or the foundation to contribute further to the attainment of its mission. The Non-Stock Corporation is governed by a Board of Trustees who are chosen and replaced according to the provisions of the Articles of Incorporation and the accompanying By-Laws.

The Close Corporation has Articles of Incorporation that limit the ownership of issued stocks to at most twenty persons. There are strict restrictions on the transfer of stocks. The stocks cannot be listed in any stock exchange nor can any public offering of shares be made.

A Corporation Sole is a special form of corporation allowed by law, usually associated with the clergy. The Corporation Sole is a trusteeship that is set up for the purpose of administering and managing the affairs, property and temporalities of a church or group of clergy.

The corporation must enter its name with the DTI and register with the SEC, SSS, BIR and all the other relevant government entities. In contrast to the sole proprietorship, where taxes are based on the total income of the owner in a gradually increasing proportion of the income, the corporation pays a stipulated percentage of its income tax (35% of income before taxes in the Philippines). Of course, other types of taxes are paid by business enterprises such as the value added tax, the real estate tax, etc. Family-owned enterprises usually load a lot of their expenses in the corporation to reduce their corporate income taxes. Many would prefer to receive large expense accounts rather than receive dividends because the dividends are also taxable. Naturally, the government is trying to curve this practice. Large corporations listed in the stock market, however, like to show large profits because these would heavily influence the market price of their shares. Stockholders enjoy the dividends that they get from large corporations but they enjoy the more quantum leaps in their share prices.

The governance and management of corporations can become quite complicated. As the corporation issues more and more shares of stock, its ownership would get dispersed. There might come a point where no stockholder or group of stockholders controls the majority of the shares. Since board seats are based on number of shares held, the stockholders would be vying for the proxy nomination of minor stockholders. Alternatively, they can expect to be voted into the board because they have been running the corporation well. There can even come a point, in the case of very large corporations, when the management group is composed purely of professionals hired to run the business affairs by the Board of Directors, who set the corporate policies and the directions while the management implements them. This extreme situation is not as problematical as the in-between situations where groups of stockholders are vying for management control. Consequently, many family corporations try to avoid offering shares to the public at large to “keep everything within the family.” However, families also get discombobulated when too many heirs and heiresses are fighting for corporate control.

The start-up corporation established by the entrepreneur (and his or her family or friends) is quite a long way from the politics of large corporations. However, the more ambitious entrepreneur must plan way ahead for this type of politics. The entrepreneur must make a decision. “Do I want absolute control or do I want to become a very wealthy person because of the high value of my shares of stock?” Meanwhile, at the start-up stage, who will the entrepreneur invite as co-investors in the enterprise? It begins as an issue of investor compatibility and investment flexibility but, eventually, it will become an issue of control as the enterprise grows and prospers.

A Merry Band Of Men and Women

The entrepreneur should gather “a merry band of men and women,” to paraphrase a line from Robin Hood. The analogy is intended. The entrepreneur should meticulously hand-pick men women who will share the cause and the commitment of the enterprise. Good character and competence should be the criteria for hiring. At the beginning, the merry band must play many roles because the enterprise cannot afford too many people. The entrepreneur himself or herself must wear many hats. As the enterprise grows, there can be room for specialization but the entrepreneur must watch out for the bureaucratization that accompanies it.

If the merry band is not fully equipped technically and managerially, the small size of the organization should allow the people to learn fast about a lot of things. While there are just a few customers, the merry band should try to learn from these customers as much as they can. While the operations are simple, the technology and the technical aspects can be tried, tested and adjusted frequently. While the competition is not watching, the enterprise can develop its own niche in the market. While the financing needs are not yet that heavy, the organization can accumulate the earnings and save for the bigger investments ahead. While the merry band is small, it is the best time for the members to help and teach one another. The important thing is to develop a culture of hard work and a cadre of happy workers.

In the final analysis it is people who will mold the enterprise. Mix a cup of courage with a pocketful of dreams, add a pound of diligence and stir with a measure of perseverance. Pour into a bowl of dedication and sprinkle with a chestful of compassion. Shake three times and serve a merry band of men and women.