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Help to Organisation and Management
3.1 How will the business be organised? There are four common forms of business organisation: (1) sole proprietorship, (2) partnership, (3) private limited company (closed corporation), and (4) public limited company (public corporation). Most small businesses, however, are registered as sole proprietorship, meaning that the owner-manager or the entrepreneur is the owner as well as the general manager of his business. Partnership involves co-ownership of the business by one or a few partners who may be a family member or close friends. Partners may bring into the business their capital or their expertise, or both. Private limited company involves ownership of the business by a limited number of people (usually relatives and close friends) who band themselves for purposes of the business. Ownership is based on shareholding which can be transferred to other shareholders with the consent of the existing owners. Public limited company (public corporation) involves many persons owning the business who may not be affiliated with one another. Ownership is determined by shareholding which are floated in the stock exchange and transferable to the public. A corporation has a legal personality and has a limited liability. A corporation may be managed differently from its owners. Countries have various regulations regarding the registration of business under each form. It is important that you know them - the relevant laws (e.g., taxation, liability, etc.), the forms to be filled up and the licenses/permits to be acquired (and paid for) before you can legally operate as a business. 3.2 How will the business be managed and operated? For the business to operate smoothly and efficiently, there must be some structure of authority and responsibility (chain of command), division of labour (job distribution), and definition of what each one must do in the business (job description). Therefore, the business needs an organisational structure. This is mostly depicted through an organisation chart. See Table 3.2 Part II, for illustration. In designing the organisational structure, it is important that the various functions of the enterprise (marketing, production, organisation and management and finance) be performed. In a small business, one person can handle several functions. For instance, the entrepreneur may double up as general manager as well as production manager. In small businesses, it is also common to have family members hold responsibility in the business or even perform production work. For instance, the wife may be the treasurer and marketing manager, while the older children help out as part-time production workers. 3.3. What is the business experience and qualifications of the proponent? To ensure business survival and growth, it is important that the people who run the business must have the proper qualifications and suitable experience. The survival and growth of the business depends on the competence and ability of management. A class B (medium potential) project managed by a class A (highly competent) manager will mostly turn out to be successful, while a class A project (high potential) run by class C (incompetent) management will fail. In particular, if the proponent wants to borrow money from the bank or if he wants to get trade credit from his suppliers (raw materials or machinery), he must be able to convince them about his ability, competence and integrity. It is, therefore, important that the proponent include the highlights of his bio data as well as that of the other key officers of the business that are relevant to the business operation. If possible, the proponent should include bank references, former employers, or well known and respected community leaders who can vouch for his integrity and ability. 3.4 What pre-operating activities must be undertaken before the business can operate? Before the business can start actual operation, there are many preparatory steps that have to be done. The proponent must be aware of these and plan their execution so that he can save on cost, time and energy. Some of these preparatory activities include attendance in a training program (whether skill-related, management or entrepreneurship), preparing your business plan, doing market survey, making trips to machinery and raw materials suppliers, registering the business, hiring a consultant, etc. It is advisable that the proponent list down all these pre-operating activities and decide when and how long each activity will take place. Some of these activities can be done simultaneously (e.g., making market survey and contacting suppliers), while others have to be done sequentially (purchasing the machinery before their delivery and installation in the factory). To aid the proponent, he can prepare a Gantt chart which depicts in one column all these pre-operating activities and another column to illustrate the timetable (in weeks, preferably) it would take to start and complete each activity. See Table 3.4 Part II, for an example of a Gantt chart. 3.5 What pre-operating expenses will be incurred? Pre-operating expenses are those expenses which are needed in order to plan and to prepare for the business operation. These include worker training, market survey, testing, travel to source suppliers of raw materials and machinery, or to negotiate with potential market outlets, etc. In
some cases, you may be able to find workers who do not need any training,
but in many cases some form of training is required. As owner-manager, you
should have a good idea of the manufacturing process. You may have
acquired this knowledge and skill from your previous work, business
experience or training. Or this may require that you spend some time in
another factory of similar size for exposure. 3.6 What fixed assets will be required for the office? Aside from the fixed capital needed to manufacture the products or to facilitate and maintain the production operation, the business needs other fixed assets to maintain the administrative aspects of the business. These assets include a typewriter, furniture and fixtures, cabinets, electric fans, calculator, computer, vehicle, etc. These fixed assets have also to be depreciated according to their useful life. 3.7 What administrative cost will be incurred? To support production and marketing activities of the business, some administrative activities have to be performed, and costs have to be incurred in the performance of these activities. For this reason, administrative costs are also called operating expenses. Administrative costs include the salary of the office secretary, bookkeeper, driver, security guard, depreciation of fixed assets, furniture and fixtures used in the office, communications, etc.
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