Lesson 4: Business Plan Contents – Enterprise Strategy, Financial Forecasting, Compliance, and Capital Structure

Enterprise Strategy

A set of choices and actions aimed at gaining a sustainable competitive advantage in business.

Enterprise Delivery System

The process of transforming resources into business outcomes:

1. Input – Acquiring human, financial, and physical resources.

2. Operations – Converting inputs into products/services.

3. Marketing – Packaging, pricing, promoting, selling, and distributing the output.

4. Business Outcomes – Includes high customer satisfaction, sales volume, market reach, financial returns, and productivity.

Financial Forecasting

An estimate of a business’s financial future, including capital investment, funding sources, and expected returns.

Key Financial Statements:

1. Balance Sheet – A snapshot of the business's financial position at a given time, showing assets, liabilities, and equity.

2. Income Statement – Reports revenues, expenses, and profits over a specific period.

3. Cash Flow Statement – Shows the movement of money in and out of the business, ensuring enough liquidity to cover expenses.

Environmental and Regulatory Compliance

Businesses must comply with laws and regulations to operate legally.

Key Permits and Licenses in the Philippines:

1. Tax Identification Number (TIN) – Issued by the Bureau of Internal Revenue (BIR) for tax purposes.

2. Barangay Clearance – Approval from the local barangay for business operation.

3. DTI Business Name Registration Certificate – Required for sole proprietorships.

4. Mayor’s Permit/Business Permit – Permission from the local government to operate.

5. Sanitation and Fire Safety Permits – Ensures business safety and hygiene.

6. SEC Certificate – Required for corporations and partnerships.

Capital Structure

The combination of debt and equity used to finance business operations.

Types of Capital:

1. Equity Capital – Funds provided by business owners and shareholders.

   • Contributed Capital – Money originally invested in exchange for ownership.

   • Retained Earnings – Profits reinvested for growth and expansion.

2. Debt Capital – Borrowed money that must be repaid with interest.

   • Long-Term Bonds – Loans paid over several years.

   • Vendor Financing – Selling a product before paying the supplier.

   • Policyholder Float Financing – Used by insurance companies to earn investment returns before paying claims.

Why Does Capital Structure Matter?

• Impacts business risk and financial stability.

• Determines how much debt vs. equity a business should use.

• Affects the company’s valuation and growth potential.

Key Business Plan Questions

1. Why must a business comply with legal requirements before starting?

   • Ensures legitimacy, avoids penalties, and builds customer trust.

2. Why should an entrepreneur analyze competition?

   • Helps identify market gaps and competitive advantages.

3. How can an entrepreneur predict business profitability?

   • Through financial forecasting and cash flow management.

4. Why is capital structure important?

   • It affects financial health, risk, and long-term growth.