MODULE 4: BUSINESS OWNERSHIP AND PLANNING

LESSON 2: Basic Routes to Business

a. Starting A Business
b. Buying An Existing
Business
c. Franchising
d. Home-Based Business

THE ENTREPRENEURIAL MIND

GESSP – EM

University of Makati | JP RIZAL, WEST REMBO , MAKATI CITY

There are several ways to start your own business. And there are so many industry sectors to
choose and get in to. You may opt to start from scratch or put up something new or you can
buy an existing business and grow from there, it could be franchising or a home-based business
route. Can you share your thoughts on these routes and their pros and cons.

TO GIVE YOU BETTER UNDERSTANDING ON HOW TO START YOUR

BUSINESS READ AND TRY TO ACCOMPLISH ACTIVITIES TAKEN FROM -
HAVE YOU GOT WHAT IT TAKES? PAGES 85-87 by Douglas A. Gray
B.A., L.L.B.
Should You Start a Business From
Scratch or Buy an Existing Business?
The Staff of Entrepreneur Media, Inc.
January 15, 2015

In their book, Start Your Own Business, the staff of Entrepreneur Media, Inc. guides you
through the critical steps to starting a business, then supports you in surviving the first
three years as a business owner. In this edited excerpt, the authors discuss the process
you should go through when purchasing an existing business.

When most people think of starting a business, they think of beginning from scratch—
developing your own idea and building the company from the ground up. But starting
from scratch presents some distinct disadvantages, including the difficulty of building a
customer base, marketing the new business, hiring employees and establishing cash
flow ... all without a track record or reputation to go on.

If you're worried about the difficulties involved in starting a business from the ground up,
you might decide that buying an existing business is a better fit for you. When you buy a
business, you take over an operation that’s already generating cash flow and profits.
You have an established customer base and reputation as well as employees who are
familiar with all aspects of the business. And you don't have to reinvent the wheel—
setting up new procedures, systems, and policies—since a successful formula for
running the business has already been put in place.

On the downside, buying a business is often more costly than starting from scratch.
However, it’s often easier to get financing to buy an existing business than to start a
new one. Bankers and investors generally feel more comfortable dealing with a
business that already has a proven track record. In addition, buying a business may
give you valuable legal rights, such as patents or copyrights, which can prove very
profitable.

Of course, there’s no such thing as a sure thing—and buying an existing business is no

exception. If you’re not careful, you could get stuck with obsolete inventory,
uncooperative employees or outdated distribution methods.

Buying the perfect business starts with choosing the right type of business for you. The
best place to start is by looking in an industry you're familiar with and understand. Think
long and hard about the types of businesses you are interested in and which are the
best matches with your skills and experience. Also consider the size of business you're
looking for, in terms of employees, number of locations and sales.
Next, pinpoint the geographical area where you want to own a business. Assess the
labor pool and costs of doing business in that area, including wages and taxes, to make
sure they’re acceptable to you. Once you’ve chosen a region and an industry to focus
on, investigate every business in the area that meets your requirements. Start by
looking in the local newspaper’s classified ad section under “Business Opportunities” or
“Businesses for Sale.”

And just because a business isn’t listed doesn’t mean it isn’t for sale. Talk to business
owners in the industry; many of them might not have their businesses up for sale but
would consider selling if you made them an offer. Put your networking abilities and
business contacts to use, and you’re likely to hear of other businesses that might be
good prospects.

When purchasing an existing business, you'll definitely want to put together an

“acquisition team”—your banker, accountant and attorney—to help you. These advisors
are essential to what is called “due diligence,” which means reviewing and verifying all
the relevant information about the business you're considering. When due diligence is
done, you'll know just what you're buying and from whom.

The preliminary analysis starts with some basic questions. Why is this business for
sale? What's the general perception of the industry and the particular business, and
what's the outlook for the future? Does—or can—the business control enough market
share to stay profitable? Are the raw materials needed in abundant supply? How have
the company’s product or service lines changed over time?

You also need to assess the company’s reputation and the strength of its business
relationships. Talk to existing customers, suppliers and vendors about their relationships
with the business. Contact the Better Business Bureau, industry associations, and
licensing and credit-reporting agencies to make sure there are no complaints against
the business.

While you and your accountant review key financial ratios and performance figures, you
and your attorney should investigate the business’s legal status. Look for liens against
the property, pending lawsuits, guarantees, labor disputes, potential zoning changes,
new or proposed industry regulations or restrictions, and new or pending patents; all
these factors can seriously affect your business. Be sure to:

 Conduct a uniform commercial code search to uncover any recorded liens (start
with city hall and check with the department of public records).
 Ask the business’s attorneys for a legal history of the company, and read all old
and new contracts.
 Review related pending state and federal legislation, local zoning regulations and
patent histories.

Legal business liabilities take many forms and may be hidden so deeply that even the
seller honestly doesn’t know they exist. Be sure to have your lawyer add a “hold
harmless and indemnify” clause to the contract. This assures you’re protected from the
consequences of the seller’s previous actions as owner.

Also make sure your deal allows you to take over the seller’s existing insurance policies
on an interim basis. This gives you time to review your insurance needs at greater
leisure while still making sure you have basic coverage from the minute you take over.

^******^

origin source: unknown, got this from

 So we don’t just jump into opportunities but study every perspective to get wise
decisions. But…
 Sometimes buying a business specially a competitor is a very strategic decision, take for
example
 the Jollibee Food Corporation acquired Mang Inasal
for P3 billion pesos with 30% being retained by the original owner. Why?
Jolibee used to dominate the Chicken business

Chicken Business Share

McDo,Wendy's
KFC,etc
JFC
33%
67%

JFC McDo,Wendy'sKFC,etc

3 years Later
Rest of the
Player
16%
JFC
Mang Inasal
32% 52%

JFC Mang Inasal Rest of the Player

 Mang Inasal has eaten up Jolibee’s market share?

 Projected to grow by at an average of 40 stores a year,
Mang Inasal will eat the market share of JFC by as much
as 40%++ - projected losses? P5.5 billion

 Jollibee Foods Corp. has acquired the remaining 30% stake of

Edgar Sia II in Mang Inasal for about P2 billion last 2016
 They did not end the business relationship since they both knew
they are very good and will incur losses if they battle it out so…
 • At present, JFC is the largest food service network in the
Philippines according Phil. Star Global
• As of July 24,2019 it owned restaurant outlets here and abroad
• Jollibee (1000),
• Chowking (637)
• Greenwich (236)
• Red Ribbon(510)
• Mang Inasa(577)
• Burger King (101)
• Pho 24
• CBLT
• Yonghe King (323)
• Hong Zhuang Yuan
• Dunkin Donut
• Highland Coffee
• Hard Rock Café
• Smasher Burger

Just to be sure and at the safe and winning side try to consider these:
from Have You Got What it Takes? By Douglas A. Gray B.A., L.L.B.
TO GIVE YOU BETTER UNDERSTANDING READ THE RULES/PROS/CONS
OF BUYING A BUSINESS AND TRY TO ACCOMPLISH ACTIVITIES TAKEN
FROM -HAVE YOU GOT WHAT IT TAKES? PAGES 173- 179 by
Douglas A. Gray B.A., L.L.B.

If YOU WANT TO OPEN YOUR OWN BUSINESS YOU NEED TO WALK

THE TALK. LEARN TO PREPARE A BUSINESS PLAN, HERE IS THE FORMAT FROM
HAVE YOU GOT WHAT IT TAKES? PAGES 152- 166 By Douglas A. Gray B.A., L.L.B.
I’m asking this question because some of you are not really interested
to have their own business some would want but not now! Those who
would want employment, this lesson is still for you because you will
learn to understand how owners think and decide. You don’t work to
find friends. The concept of work is this, the owner would want to do
everything so that he/she can save labor expenses but when their
hands are full of responsibilities and things to do, they hire someone to
do it for them-they employ one after the other as they need. So you are
not there to earn alone but to help the owner succeed by doing what
you are paid to do. To make your boss give you a raise or promotion
you must WOW them always. So what you deliver should not be just to
break even for him but to earn more, much, much more. You are
helping to realize the owner’s dream! How about your dreams then? So
should you choose to be employed be the best employee always! And
treat your self well. You are spending your lifetime- 8 hours a day of
your life is dedicated to work for others, when you get paid reward
your self with a secured future or after employment lifeline. Saving,
insurance, stocks, bonds or anything that you can buy with higher resell
value in the future not one that depreciates. We will discuss this
lengthily in the nest lesson.

If the reason for you not to be in business is you don’t have money, it is
not money that is the problem. Its you who is the problem. A student
once asked me sir how do I open a computer shop with no money?
How much do you need? He said P100k. If your family, relatives and
friends can chip in say 5 persons with P20k or 10 friends/relatives with
P10K each or 15 friends/relatives with P6.7k so on and so forth. That’s
why being trustworthy is imperative, there are endless creative ways to
raise capital requirements. This PANDEMIC opened up online business
opportunities, boredom during lockdown turned many to become
entrepreneurs, some product selling, others reselling other people’s
product, where ever you are in the hierarchy you are bound to earn
from free Facebook, Viber, YouTube, Instagram or delivery with no sunk
in capital at all.
Try to answer the entrepreneurial potential self-assessment link below.
Besure to submit the score you get or screenshot it and send it to me.

https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/business-
assessments/pages/entrepreneurial-potential-self-assessment.aspx

Remember if you are thinking of business ideas, think how many

customers can you attract always.
Activity: in the previous lesson you have 3 business ideas in mind.
Share your thoughts on how you will start your own business? As a
start up, or you will buy an existing one, franchise, home business?
Why?

Share in writing how you intend to raise the capital needed.

After taking the self assessment for entrepreneur, what is your

core/strength and your weaknesses? Explain fully your answers.

There are those who choose to start their own business but have their
eyes open to franchising their business concept to gain more market
presence and to raise more capital for their opportunities they see fit

Thanks