A Trilogy On Entrepreneurship: Creating the Enterprise. Eduardo A. Morato Jr.
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