Primary Goals of a Business
Going into business means investing
in activities that can make available goods and services needed in a community,
realize profit from the investment, increase the value of the business itself
as an economic entity, and improve the quality of life in the community. In other
words, we fill an economic need, gain therefrom and at the same time,
contribute to the economic and social well-being of the people in the locality.
Inasmuch as a business concern is, in itself, an economic entity, its growth
and stability enhances also the economic condition of the community where it is
situated. The primary goals of a business concern must therefore be as follows:
- To earn profit
- To increase its own value as an economic entity
- To improve the quality of the life in the community
To Earn Profit
Funds are invested in a business to
earn sufficient return on investment. Goods and services are made available to the
public and are billed to customers/clients with sufficient markup to cover
operating expenses, financing charges, income taxes and desired net profit. Net
profit realized results in an increase in assets and owner’s equity. Part of it
may be distributed to the owners of the business (or declared as dividends in the case of a corporation)
with the remainder left in business (or plowed back into it).
Increasing the Value of a Business
Growth and stability are the primary
bases in measuring the value of a business entity. Growth may be measured in
terms of increase in assets that appreciate in value, improved production
capacity accompanied by increase in sales volume and increase in owners’
equity. Profitability contributes to growth and stability specially when part
of realized profit is retained or plowed back into the business.
Stability of a
company refers to its ability to weather the ups and downs in the economy or
its ability to continue operations despite anticipated risks in a business. It is
measured primarily based on the relative amount of owners' equity.
Social Responsibility of Businessmen
The social responsibility of a
businessman refers to his contribution to the improvement of the quality of
life in the community. This is not only in the form of pecuniary contributions
but more of how his business is able to improve the economy and its environment.
He adheres to legal and moral standards by adopting company objectives,
policies and practices consistent therewith.
Raising Capital
Raising capital
is the #1 skill of an entrepreneur. Money capital is the lifeblood of every
single investment. Without capital, there is no product, no sales, no property,
and no cash flow. Whether your current or future investments involve real
estate or business, raising capital is very important to keeping your
investments alive and producing cash flow.
Knowing how to
borrow money to make more money and feeling comfortable with the process is
critical to developing an entrepreneur. Through practice, mistakes, and lessons
learned, you will gain the skills to raise money.
It is easy to go into debt, but not usually so easy
to get back out. Borrowing money has consequences, and it is wise to fully
consider those consequences before signing for the debt. Paying it back as
agreed will determine the true nature of your character and business skills. If
you become good at taking care of Other People’s Money (OPM), you will likely
have plenty of capital with which to pursue your investment opportunities.
The term OPM has become a popular acronym for the concept of raising capital.
It is sometimes spoken of with reckless abandon, as though getting others to
back your idea is as easy as asking. As simple as some might make it appear,
there are proven guidelines and important legalities for qualifying yourself
and your project to attract the capital of others. As often heard by lenders:
“Bad deals chase the money, while the money chases the good ones.” In the end,
how successful you are at borrowing will be largely determined by the answers
to these two questions:
- How
viable is the opportunity?
- How clear, concise,
complete, compelling, and convincing is the communication contained
in your
loan package?
Make a business
Plan
The business
plan, together with solid market research, is the foundation of any business.
It also makes your business attractive to investors and lenders, who look at
this document to see how viable your business would be in the long run, before
sinking their investment into your venture.
Here are the 7
steps to make your very own business plan:
Step 1: Name
your business.
The business
name reflects the character of your business, so be very deliberate when
choosing one. You can also come up with a separate name for your product or
service, which could serve as your trademark. Be very careful when choosing
product names for they determine the brand image and brand experience of your
product.
Step 2: State
your mission.
Spell out the
purpose of your business and its goals, including the product or service
concept you plan to adopt. Keep the business goals and targets realistic, so as
not to put off the reader with fantastic fanciful claims.
Step 3:
Introduce the business and its management team.
Make a clear
and complete description of the business and how you plan to start and operate
it. State the rationale behind the business’s establishment. Introduce the
people – the team – who will run or invest in it. Include a brief look at their
background including prior professional and business experience, educational
attainment, leadership skills, and personal resources.
Step 4:
Elaborate on your product and marketing plan.
Discuss your
product or service in detail, and how it would generate revenues for your
business. Include here the following information: unique characteristics of
your products, size of the potential market, suppliers, etc. Next, describe
your market, and provide a detailed description of your potential customers
[demographic profile and recent consumption trends].
Step 5:
Illustrate your financial strategy.
This part
should attract the most interest from your readers – show the flow of money
into and out of the business, coming up with either a profit or loss for a
particular period of time. Keep in mind that finance people will look at the
numbers and analyze your projected performance ratios. Seek assistance from an
accountant or a financial planner in preparing this section of the plan.
Step 6: Write
the executive summary.
This section
encapsulates your entire business plan for those who don’t have time to go over
the entire document – these are often the decision-makers who should be
informed about the business. The executive summary is usually written last,
after the entire document is completed, and it may appear at the start or at
the end of the business plan.
Step 7: Go over
the entire document.
Whenever it is
possible, use charts and graphs to illustrate cash flows and projected return
on investment.
Basic Parts of
a Business Plan
1. Cover
2. Executive
Summary
3. Table of
Contents
4. Information
on the Company
5. Information
on the Industry and Business Environment
6. Information
on the Management Team
7. Marketing
Plan
8. Financial
Statements
When a business
does well, everyone wants to be a part of it. Wall Street clamors to buy shares
in any enterprise that is producing a healthy return on investment. On the
other hand, you have likely seen the statistics that suggest as many as 90
percent of small businesses fail within the first five years. People and
companies squander billions of dollars in investment capital on poor business
investments. If you want to attract capital to your business, make your
business work. Make it profitable. Infuse it with passion and the prospect of
continued success. If you develop a proven talent for generating solid returns
and offer such an opportunity to others with proper disclosures, they will
naturally want to be a part of your enterprise.
As you attract the capital of others, no matter how small-scale at first, and
take exquisite care of that capital, your investors will spread the word.
Others will be knocking on your door to become part of a good thing. It is
almost as if the only thing you need to do is to prove your ability to run your
company honorably and profitably. If you do that in the face of the corporate
corruption that seems to be more and more prevalent, capital will seek a home
in your enterprise. However, remember that even when potential investors come
to you through referrals, you still have the same responsibility to provide all
of the disclosures required by law.
Two Tips on
Raising Money
Tip#1: Seek
advice from accountants and attorneys when preparing your pitch.
Not only is it good practice, it is fabulous education. If they are sharp
accountants and attorneys, you will be forming great relationships. They can
also introduce you to other great people.
If they are incompetent professionals, and there are many of them, you and your
business will suffer. So take your time and be picky when selecting attorneys
and accountants.
Tip#2:
Begin asking for money before you need the money.
All you need to say is, “I’m starting a business in a few months.” Briefly
describe the business, and why you’re excited about it. This pitch should take
less than a minute. If you keep talking, you lose. After a minute, ask
questions such as, “Are you interested? Would you like to hear more? If the
answer is yes, then ask, “May I call you when we are ready to start talking to
potential investors?”
If they say yes, take their name and keep your promise to call them – in the
future, not the next day.
Remember the rule: “It is
easier to ask for money when you don’t need the money. “You don’t ever want to
sound desperate and needy, even if you are. Don’t give them sob stories or
tales of woe. Avoid exaggeration and promises of excessive returns. Investors
are more likely to believe someone who is conservative and cautious, rather
than excessive and cocky. So start early, practice, don’t over-promise, and
obey these rules for raising capital.
