BMSH2301

BUSINESS QUANTIFICATION AND

IMPLEMENTATION
Business implementations are the driving force behind all activities striving to accomplish one or more
objectives in a business plan. Entrepreneurs can ensure that their team works towards company objectives
by understanding business implementations and effectively overseeing them. A strategic plan is essential for
a business as it provides a clear direction to follow, ensuring the attainment of goals, providing value to
customers, and, ultimately, achieving success. There needs to be a plan to guarantee that the desired
performance will be achieved. Similarly, having a roadmap does not guarantee that the traveler will reach
their desired destination. Effective business implementation can be a powerful tool for companies to gain a
competitive advantage.

Forecasting and Ratio Analysis

Once an entrepreneur becomes aware of the immense profit potential of their business concept, the next
important step is to carefully assess the expected daily, monthly, and annual revenue. Also known as
forecasting. Forecasting involves using past and present data and patterns to make predictions or estimates
about future events or trends. It plays a crucial role in enabling businesses to identify risks and opportunities
and efficiently allocate resources by estimating future demand for their products or services. These informed
predictions empower businesses to make well-informed decisions that can drive their success.

Factors to Consider in Sales Forecasting

Both internal and external factors can influence your sales forecast. For example, your competitor's
performance will directly impact your sales volume, so you need to adjust your forecast to accommodate it.
Here are some of the factors that would be beneficial to consider when forecasting:
 Competition. If a competitor is doing well, you may employ tactics, like discounting, to level up your
presence. Alternatively, if a competitor goes out of business, you can seize that opportunity to
capture some of their market shares and increase your own.
 Macroeconomics. Macroeconomic factors, from regional to global changes, will affect your sales.
Selling most goods in a solid economic climate is more accessible and challenging if the general
economy is terrible.
 Events. Events that affect the national or global economy can sometimes have a positive impact on
some businesses, as we have seen in the recent pandemic, which has caused many businesses to
struggle but, at the same time, has massively benefited the producers of hand sanitizer and face
masks.
 Law. Regulations or legal requirements changes can also impact your sales if your product or
business structure is affected.
 Season. The time of year can also impact your sales. For example, an ice cream shop will have
excellent projections for the summer but very slim projections for the winter, while toy stores
project big spikes in the months around Christmas compared to other times of the year.
 Employees. Internal factors such as your employees also affect your sales forecasts. For example, it
is widespread to see tech startups hire an army of salespeople when they get funding because the
number of people working to sell a new product directly impacts how much is being sold. If you are

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 1 of 11
 BMSH2301

starting a new business, you must factor in the time required to set up sales pipelines and establish
relationships with other stakeholders.

How to Create a Sales Forecast

Remember that sales forecast estimates the number of goods and services a business believes it can sell
over time. This will also include the cost to produce and sell those goods and services and the estimated
profit it will come away with.

Formulas:
 Markup = Cost per unit x Desired Markup
 Selling Price = Cost Per Unit x Markup Price
 Projected Daily Revenue = Selling Price x Volume of Items Sold
 Projected Items Sold Monthly = Items Sold Daily x 30 Days
 Projected Monthly Revenue = Selling Price x Projected Items Sold Monthly
 Projected Items Sold Annually = Items Sold Monthly x 365 Days
 Projected Annual Revenue = Selling Price x Projected Items Sold Annually

Example: Ms. Mira Bella recently fulfilled her lifelong dream by launching her business in January 2022.
She named it “La Mirabella RTW Shop,” an exquisite online boutique specializing in fashionable ready-to-
wear clothes for teenagers and young adults. After conducting thorough interviews with several
successful online businesses, she discovered that the average daily sales for summer dresses amounted
to an impressive 20 pieces, while fashionable ripped jeans sold at an equally impressive average of 16
pieces per day.

Equipped with this valuable information, Ms. Mira went on to estimate the potential revenue for her
business. She wisely partnered with a reputable local RTW dealer in the city to source her high-quality
products. Each summer dress costs her 83 pesos, while a pair of fashionable jeans costs 215 pesos per
piece. To ensure profitability and cover all business-related expenses, Ms. Mira smartly applies a 50%
markup on each item of clothing sold.

Items A. Cost per B. Markup C. Selling Price D. Items Sold E. Forecasted

Unit Price (Daily) Revenue
(Daily)
A B= (A x .50) C=A+B D E=CxD
Summer Dress P83.00 P41.50 P124.50 20 P2,490.00
Ripped Jeans P215.00 P107.50 P322.50 16 P5,160.00
Total P7,650.00
Table 1. Forecasted Daily Revenue of La MiraBella RTW Shop

Items C. Selling Price D. Items Sold F. Projected Items G.

Daily Sold (Monthly) Forecasted
Revenue
(Monthly)
C=A+B D F = D x 30 Days G=CxF
06 Handout 1 *Property of STI
student.feedback@sti.edu Page 2 of 11
 BMSH2301

Summer Dress P124.50 20 600 P74,700.00

Ripped Jeans P322.50 16 480 P154,800.00
Total P229,500.00
Table 2. Forecasted Monthly Revenue of La MiraBella RTW Shop

Items C. Selling Price D. Items Sold H. Projected Items I. Projected Revenue

Daily Sold (Annually) (Annually)
C=A+B D H = D x 365 days I=CxH
Summer Dress P124.50 20 7,300 P908,850.00
Ripped Jeans P322.50 16 5,840 P1,883,400.00
Total P2,792,250.00
Table 3. Projected Annual Revenue of La MiraBella RTW Shop

Adjusted Monthly Revenue Sales Forecast Based on Assumed Factors:

 February to May – 5% increase from previous revenue due to peak season
 June – 10% increase from previous revenue due to the start of school season
 July to August – 2% decrease in revenue from the previous month
 September to October – 9% decrease in revenue from the previous month
 November – 6.5% increase in revenue from the previous month due to Christmas season
 December – 14.7% increase in revenue from the previous month due to Christmas season

Operating Date (2022) Increase/Decrease Monthly Revenue

January P229,500.00
February + 5% P344,250.00
March + 5% P361,462.50
April + 5% P379,535.63
May +5% P398,512.41
June + 10% P438,363.65
July - 2% P429,596.38
August - 2% P421,004.45
September - 9% P383,114.05
October - 9% P348,633.77
November + 6.5% P371,294.97
December + 14.7% P425,875.33
Table 4. Adjusted Monthly Revenue Sales Forecast Based on Assumed Factors

Ratio Analysis
A financial ratio compares two (2) numbers from a company's financial statements to show their
relationship. In accounting, standard ratios are used to evaluate the financial health of a company or
organization.
A. Profitability Ratio. It refers to a financial metric used to assess a company's profitability and
ability to generate shareholder returns. It measures profitability and efficiency by comparing net
income to revenue, assets, or equity.
 Return on Investments (ROI). The return on investments (ROI) is also called return on equity

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 3 of 11
 BMSH2301

(ROE). ROI compares income or profit after taxes to total stockholder's equity, specifically
average stockholder's equity. Average asset is calculated by adding the beginning and
ending balances of total assets and dividing by two.
 Formula: Return on Investment = Net Income / (Average Assets / 2)
Example: Let's say your beginning total asset is P100,000, while your ending total asset
amounts to P25,000, and you generate a net income of P30,000.
ROI = P30,000 / ((P100,000 + P25,000) / 2 )
ROI = P30,000 / P62,500
ROI = 0.48

 Operating Income Ratio (OIR). The operating income ratio shows the percentage of profit a
company can generate from each peso of its investment. Creditors prefer a higher ratio. A
desirable interest coverage ratio is 4:1 or higher. If this ratio decreases, the company's credit
rating drops.
 Formula: Operating Income Ratio = (Operating Expenses + Cost of goods sold) / Net
Sales
Example: Apple reported total revenue or net sales of $59.68 billion for the period. The
total cost of sales (or cost of goods sold) was $37.00 billion, while total operating
expenses were $9.59 billion.
OIR = ($37.00 billion + $9.59 billion) / $59.68 billion
OIR = 0.78

 Return on Assets (ROA). ROA is a measure of how well a company has used its assets. It is
calculated by dividing the operating income by the average total assets. Using operating
income instead of income after tax is important to focus on asset utilization related to
operations.
 Formula: Return on Assets = Operating Income / Average Total Assets
Example: Assuming we have the following information: Net Income, $500,000 and Total
Assets, $2,500,000.
ROA = $500,000 / $2,500,000
ROA = 0.2

B. Financial Health Ratio. It refers to a financial metric that determines the company’s capacity to
pay its short-term and long-term obligations as they become due.
 Stockholder's Ratio. Stockholders' claims are also important as they show the firm's long-
term financial stability.
 Formula: Stockholder’s Ratio = Total Equity / Total Assets
if a company has 1,000,000 total assets and stockholders hold 800,000 equity shares.
Stockholder Ratio = 800,000 / 1,000,000
Stockholder Ratio= 0.8

 Debt Ratio. The debt ratio is a way to compare a company's total debt to its assets. It helps
creditors and investors understand how much debt a company uses. Companies with lower
ratios use less debt and have a stronger financial position. On the other hand, higher ratios
indicate a higher risk for the company.

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 4 of 11
 BMSH2301

 Formula: Debt Ratio = Total Liabilities / Total Assets

Company XYZ has total debt of $500,000 and total assets of $1,000,000.
Debt ratio = $500,000 / $1,000,000
Debt ratio = 0.5

 Debt-to-Equity Ratio. The debt-to-equity ratio shows how much of a company's balance
sheet is financed by suppliers, lenders, creditors, and obligors compared to what
shareholders have invested. A lower percentage indicates less leverage and a stronger
equity position.
 Formula: Debt-to-Equity Ratio = Total Liabilities / Total Shareholder’s Equity
Company ABC has a total debt of $1,500,000 and a total equity of
$2,500,000. Debt-Equity Ratio = $1,500,000 / $2,500,000
Debt-Equity Ratio = 0.6

C. Liquidity Ratio. It refers to the company’s ability to pay its short-term obligations or liabilities.
The entrepreneur can use the following ratio formula:
 Quick Ratio (Acid-Test Ratio). Quick ratio measures a company's short-term liquidity and
ability to meet obligations with liquid assets. A ratio below one (1) doesn't imply bankruptcy
but could depend on inventory or other assets. A higher ratio indicates better liquidity, but
too high may mean excessive cash reserves. It may also mean that the company has a high
accounts receivable, indicating that it may be having problems collecting its account
receivables.
 Formula: Quick Ratio = Quick Assets / Current Liabilities
Company XYZ has the following financial information: Cash: $50,000, Accounts
Receivable: $30,000, Inventory: $20,000, Short-term investments: $10,000, Current
liabilities: $40,000
Quick assets = $50,000 + $30,000 + $10,000 /
$40,000 Quick ratio = $90,000 / $40,000
Quick ratio = 2.25

 Current Ratio. The current ratio shows a company's ability to pay short-term bills and debts.
It compares current assets to current liabilities. A ratio of 2:1 means that the company has
P2 worth of current assets for every peso of current liability. A higher current ratio indicates
better solvency and liquidity.
 Formula: Current Ratio = Current Assets / Current Liabilities
A company has the following financial information: Current assets of $100,000 and
current liabilities of $50,000.
Current Ratio = $100,000 / $50,000
Current Ratio = 2

Value Chain Analysis (VCA) Model

The value chain represents a firm's internal activities when transforming inputs into outputs. Value Chain
Analysis (VCA) is a process that involves identifying the primary and support activities of a particular

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 5 of 11
 BMSH2301

organization or industry and capitalizing on these activities to reduce costs or increase differentiation. The
VCA model is applicable for both product and service types of business.

Primary Activities

Inbound Outbound Marketing Margin

Operations Service
Logistics Logistics and Sales
Support Activities

Firm Infrastructure
Human Resource Management Margin
Technology Development
Procurement

Figure 1. Value Chain Analysis (VCA) Model

Source: Strategic Management: Creating Competitive Advantage (10th ed.), 2021, p.
74

Primary Activities
 Inbound logistics. It involves raw materials handling and warehousing.
 Operations. It involves machining, assembling, and testing.
 Outbound logistics. It involves warehousing and distribution of finished products.
 Marketing and sales. It involves advertising, promotion, and pricing channel relations.
 Service. It involves installation, repair, and parts.

Secondary Activities
 Firm infrastructure. It involves general management, accounting, finance, and strategic
planning.
 Human resource management. It involves recruiting, training, and development.
 Technology development. It involves research and development and product or process
improvement.
 Procurement. It involves purchasing raw materials, machines, and supplies.

Managing Human Resource

The People Strategy
A people strategy is the organization’s prioritized people plan that enables a business to be successful by
attracting, developing, retaining, and inspiring the workforce. It is designed to inspire and achieve company-
wide alignment on goals that concern the people.

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 6 of 11
 BMSH2301

Figure 2. The Eight (8) R’s of Human Resource Management

Source: Strategic Management: Creating Competitive Advantage (10th ed.), 2021, p.
74

The Eight (8) Rs of HR (Morato, 2016)

1. Recruiting – Recruitment is the process of finding and attracting potential resources for filling up
vacant positions in an organization. It sources the candidates with the abilities and attitudes
required for achieving the organization's objectives.
2. Routing – When people are hired, their potential must be assessed regarding their ability to
contribute to the organization in various functions and responsibilities several years later. The more
versatile a recruit is, the more opportunity the person has to assume multiple organizational roles.
3. Retaining – Retaining people, or retention, is holding on to people, provided that a company wants
to keep them in the first place. Retaining workers may involve giving just wages that would satisfy
the minimum basic needs of employees. Beyond the minimum basic needs, people in the workplace
also aspire to work-life balance.

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 7 of 11
 BMSH2301

4. Resonating – Emphasizes that employees must embrace and internalize the company's goals to
achieve these goals efficiently. Moreover, when people's personal goals are realized while they are
in the company, their productivity tends to improve.
5. Reviewing – Measuring and evaluating their performance with the organizational goals in mind.
Employees' potential can be measured through existing job requirements or prospective job
promotions in this function.
6. Rewarding – Concerned with compensating, giving incentives, and recognizing employees for their
work, loyalty, and accomplishment, which can be monetary or non-monetary.
7. Retooling – This means re-orienting employees to the new directions of the enterprise, such as
giving updates about the performance of an organization in a quarter or a year. This also includes
changing attitudes and behavior that do not help the organization's progress, creating a healthier
corporate culture, and adopting more responsive approaches to superb customer service.
8. Recycling – This allows employees to change jobs or even careers. Sometimes, people get bored
with what they do daily or land a job unsuitable for their personality, competency, and
temperament. In this case, recycling allows workers to reinvent themselves to choose whether to
seek job alternatives inside or outside the organization.

Business Model Canvas (BMC)

According to an article published by Creately on their website in 2022, a business model canvas, sometimes
called a "Business Management Canvas," is merely a plan that outlines a company's financial goals. It
explains who your customer base is, how a business provides value to them, and the specifics of financing
that go along with it. The business model canvas lets businesses define these parts on a single page.

In its simplest form, a business model canvas provides information about a company's target market, the
market need, and the role the market offerings will play in satisfying those needs. Businesses will think of
ideas and research each aspect as they fill out a Business Model Canvas. They can place the data they collect
in any relevant canvas area.

The business model canvas consists of nine (9) components, which are:
1. Customer Segment – These are the various groups of people or organizations that an enterprise
aims to reach and serve. Any business model is centered on its customers. No business can last very
long without (profitable) customers.
2. Customer Relationship – Relationships can be personal or automated, transactional or long-term,
and the goal can be to get new customers, keep existing ones, or increase sales. The overall
customer experience is significantly influenced by the customer relationships you establish.
3. Channels – These are ways a company reaches out to specific customer groups. Channels are
situated in BMC between Customer Segments and Value Propositions. Businesses can tailor a
particular value to a particular customer segment through the appropriate channel with this layout.
4. Revenue Streams – Revenue streams are crucial and should align with the business model's cost
structure. The profit or loss of the business is the difference between the cost and the revenue
streams. In a simple explanation, this is where a business can verify the business model's
profitability.

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 8 of 11
 BMSH2301

5. Key Activities – A business must take these most crucial actions to run smoothly. They are needed to
reach markets, maintain customer relationships, create a value proposition, and generate revenue,
just like critical resources are.
6. Key Resources – Necessary for each business model. A company can reach markets, maintain
relationships with customer segments, and generate revenue thanks to its resources. Depending on
the business model, distinct Key Resources are needed.
7. Key Partners – Relationships a business has with other people or organizations that make the
business model work, such as suppliers, manufacturers, or advisors. These partnerships are
necessary to succeed in areas where the company alone would be inefficient.
8. Cost Structure – The idea of a cost structure is to help figure out how to focus on innovation and
developing a value proposition. Businesses can aim to cut costs and get the most out of every cost
the business incurs by comprehending cost structures.
9. Value Proposition - Customers choose a business over others because of its value proposition, which
meets their needs or solves the customers' problems. Each Value Proposition is a set of products and
services designed to meet the needs of a particular customer segment.

Figure 3. Business Model Canvas

Source: https://miro.medium.com/BMC

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 9 of 11
 BMSH2301

Business Permits and Licenses

Launching your business may seem like the next step, but opening a business in the Philippines requires
obtaining several business permits and licenses. Before registering for any business permit or license,
business owners must identify the type of business they have to determine their requirements.

According to Tycoon PH, Here are some essential business permits and licenses you should secure before
launching your business.
1. Bureau of Internal Revenue Tax Identification Number. To acquire all the necessary permits and
licenses for your business, you must have a tax identification (TIN) number issued by the Bureau of
Internal Revenue (BIR). At the end of each fiscal year, business owners must submit a tax statement
using their TIN.
2. Barangay Clearance. Barangay clearance certifies that your business complies with the requirements
of the barangay where it is situated. To secure a barangay clearance, you must submit a community
tax certificate or cedula, a duly accomplished form, and a valid government-issued ID.
3. Department of Trade and Industry (DTI). Business Name Registration Certificate You need to obtain
a registration certificate from DTI, which will be valid for five years, so that you'll be able to use your
trading name for any business-related operation. It also protects your business name from being
used by others. Applicants must be Filipino citizens and should be at least 18 years old. Create a list
of business names in case your preferred name has already been taken. Certain businesses like
dental clinics, hospitals, brokers, and services may need additional requirements. Moreover, fees will
depend on the scope of your business.
4. Mayor’s Permit/ Business Permit. Getting a business permit from the mayor’s office ensures your
business is safe under your city or town’s ordinance. To secure a mayor's permit, you must register
your business first with DTI for self-employed individuals and the Securities and Exchange
Commission (SEC) for corporations and partnerships. Remember that business permits in the
Philippines must be renewed annually.
5. Securities & Exchange Commission (SEC) Registration Certificate. You must secure an SEC certificate
if your business falls under the corporation or partnership categories. Ensure to bring a name
verification slip, articles of incorporation and by-laws, and a joint affidavit of two incorporators to
change the corporate name. Non-stock corporations must submit a list of members certified by the
corporate secretary, the list of the names of contributors or donors, as well as the amounts
contributed or donated certified by the treasurer.

Businesses with employees must secure government-mandated permits from the following:
1. Social Security System (SSS). SSS Employer's Registration will ensure employees are covered with
insurance benefits like sickness, disability, maternity, and death per Republic Act No. 8282.
2. Philippine Health Insurance Corporation (PhilHealth). PhilHealth Employer’s Registration will cover
their employees’ health insurance.
3. Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno (Pag-IBIG). Pag-IBIG
Employer's Registration will benefit employees who intend to apply for housing loans.

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 10 of 11
 BMSH2301

References
Atrill, P. & McLaney, E. (2017). Accounting and finance for non-Specialists (10th ed.). Pearson Education Limited.
Bamford, C., Hoffman, A., Hunger, D., &Wheelen, T. (2018). Strategic management and business policy: Globalization, innovation,
and sustainability (15th ed.). Pearson Education Limited.
Bossidy L., Charan, R. (2011) The Discipline of Getting Things done. Emerald Group Publishing Limited.
Business Benefits Group. (n.d.). The five strategic planning models that all executives should know.
https://www.bbgbroker.com/strategic-planning-models
CFI Team (2022). Strategic Planning. https://corporatefinanceinstitute.com/resources/management/strategic-planning/
Creatly
De Guzman, A. (2018) Fundamentals of Accountancy, Business, and Managent: A Textbook in Basic Accounting 1. Lori Mar Publishing
Elder, R. L., Agee, M., & Adamson, C. (2018). Workplace counselling and the contemporary world ofwork. Herringthon Publishing.
Frias, S. A. & Pefianco, E. C. (2016). Fundamentals of accountancy, business, and management: Atextbook in basic accounting 2. The
Phoenix Publishing House Inc.
Hannan, M. T. (2015, November 19). Organizational analysis. https://www.britannica.com/science/organizational-analysis
Kenton, W. (2019, August 30). How ratio analysis works. https://www.investopedia.com/terms/r/ratioanalysis.asp
Medina, R. G. (2015). Business organization and management. Manila: REX Book Store.
Morgan, J. (2015, July 20). The 5 types of organizational structures. http://www.forbes.com/sites/jacobmorgan /2015/07/20/the-5-
types-of-organizational- structures-part-5-holacratic-organizations
Morato
Pineda, A. (2022) Fundamentals of Accountancy, Business, and Managent: A Textbook in Basic Accounting 1 . Mindshapers Co., Inc
Republic of the Philippines. (1992). The Labor Code of the Philippines (As Amended by Republic Acts Nos.6715, 6725, and 6727): And
Its Implementing Rules and Regulations, with Appendices. http://laws.chanrobles.com/republicacts
/68_republicacts.php?id=673
Sridharan, M., Gadjji, M., Agrawal, S. (2022) Minszberg’s 5PS – How to define strategy? https://thinkinsights.net/strategy/
mintzbergs-5ps/
Team Asana (2022.) 7 strategic planning models, plus 8 frameworks to help you get started. https://asana.com/resources/strategic-
planning-models
Tycoon PH
Weller, J. (2021). How to Use Strategic Planning Frameworks and Models. https://www.smartsheet.com/strategic-planning-models

06 Handout 1 *Property of STI

student.feedback@sti.edu Page 11 of 11