CHAPTER 4

STARTING A NEW
ENTREPRENEURIAL
VENTURE

TYPES OF VENTURES
An entrepreneur has several ways to start
a new venture.
3 forms available;
Buying An
Existing
Business

Start Up

Franchising

START UP
A start up company is a company that
recently formed.
It is a process where the entrepreneur
creates a completely new business
starting from scratch
Use their own funds from their saving
or borrowing from others
Needs a lot of experience, knowledge,
skills and interest in the field involved

Advantages
1. Freedom of making own decisions
2. Opportunity of using ones idea
and developing own image
3. Freedom to select the ideal
location, plant, equipment,
products/services, employees,
suppliers and bankers
4. Ability to make changes to
business
5. Will not affect the reputation of the
business as it is a new venture

Disadvantages
1. Time consuming and costly
2. At the initial stage (1-2 years),
obtain only minimal profits or
losses
3. No business record to forecast
sales, expenses and profits
4. No ready customers
5. Difficulty of obtaining loans from
financial institutions

BUYING AN EXISTING
BUSINESS
Buying or acquiring either the shares or all
of the assets of an existing company or
businesses
It is safest and most effective way for
entrepreneurs to go into business
Need to put time effort into finding the right
business
It allows the company to expand and
provide the opportunity to enter new
market

Steps And Processes In Buying An

Existing Business
Personal priority
Business opportunities
Reviewing potential
target
Arrangement for
financing
Conduct further
investigation
The formal agreement
Ready for business

Advantages
1. Immediate
operations
2. Easier financing
3. Existing inventory
4. Existing customer
5. Existing employees
6. Less competition
7. Can resell the
business

Disadvantages
1. Costly to buy
2. Outstanding contracts
3. Problem of the
business
4. Personal conflicts
5. Obsolete goods

FRANCHISING
Any agreement in which the owner of a trademark, trade name
or copyright has licensed others to use and sell its goods or
services
A franchisee can operate as an independent businessperson but
still realise the advantages of regional or national organisations

Advantages
1. Training and guidance
provided
2. Brand name appeal
3. Proven track record
4. Financial assistance

Disadvantages

1. Franchise fees
2. Franchisor control
3. Unfulfilled promises

LEGAL FORMS OF BUSINESSES IN

MALAYSIA
Before registering a business,
entrepreneurs need to identify the
legal structures that will best suit the
demands of the venture.
Three
primary legal forms of
Sole
organisation
Proprietorshi are;
Partnership
p
Corporation

SOLE PROPRIETORSHIP
A business is owned and operated by
one person
To become a sole proprietor, a person
need to obtain whatever local and state
licenses necessary to begin the
operations
The most widely used legal form of
organisation

Advantages
1. Ease of formation; less formality
with fewer restrictions
2. Sole ownership profits
3. Decision making and control
vested in one owner
4. Relatively freedom from
governmental control
5. Freedom from corporate
business taxes

Disadvantages
1. Unlimited liability including own
assets
2. Lack of continuity
3. Less capital available
4. Relatively difficult to obtain long
term financing
5. Relatively limited viewpoint and
experience

PARTNERSHIP
Is an association of two or more
persons acting as co owners of a
business for profits
Agreement clearly outlines the financial
and managerial contribution of the
partners and carefully delineates the
roles in the partnership relationship
Partner contributes money, labour,
skills, profits or losses

Advantages
1. Ease of formation
2. Direct rewards; direct sharing of
profits
3. Growth and performance
facilitated
4. Flexibility in carrying the
business; quick action
5. Relatively freedom from
governmental control and
regulation

Disadvantages
1. Unlimited liability; at least one partner
decisions or actions and may involve
personal assets
2. Lack of continuity
3. Relatively difficult to obtain large sums
of capital
4. Bound by the acts of just one partner
5. Difficulty of disposing of partnership
interest

CORPORATION
A corporation is a separate legal entity apart
from the individuals that own it
Governs by the Company Act 1965 which
based on the company law authorised in
Australia and the UK
Characteristics;
1.Rights and responsibilities
2.Life span
3.Liabilities
4.Members

There are three types of corporation

provided by the Company Act 1965;
1.Corporation limited by share
2.Corporation limited by guarantee
3.Corporation unlimited by share

Characteristics Of Companies
Limited By Shares
Corporations must have capital share
and can be categorised into 3 kinds;
1.Private corporation
2.Public corporation
3.Foreign corporation
Must have a clear documentation of
internal regulations for references

Requirements Of A Private Limited

Company Or Corporation
1.
2.
3.
4.
5.
6.
7.
8.

Corporation secretary
Corporation auditor
Corporation seal
Power of attorney
Memorandum of association
Articles of association
Capital shares
Board of directors..

Advantages
1. Limited liability; limited to individuals
investment
2. Transfer of ownership; through sale of stock
3. Unlimited life as long as the company exist
4. Relative ease of securing capital in large
amounts, through issuance of bonds and
shares.
5. Increased ability and expertise from
stockholders who invest in the venture

Disadvantages
1. Activities restriction by various laws
2. Lack of representation; majority stockholders
outvote minority stockholders
3. Extensive government control and
regulations
4. Organising expenses are large in forming
corporation
5. Double taxation; taxes are levied both on
corporate profits and individual salaries n
dividends

Questions;
Compare the characteristics of the
two major forms of business in
Malaysia.

SOURCES OF CAPITAL
Personal
funds
Retirement
account
Government
loans

Family and
friends
Bank and
financial
institutions
Stock
markets

1. Personal funds
Savings account, current account,
money safe at home or cash in hand
2. Family and friends
Parents, sibling, son or daughter,
other relatives
Friends officemate, school mate,

3. Retirement account
Insurance plan, KWSP/EPF, unit trust etc
4. Bank and other financial institutions
Loan money to those who have assets
that can serve as collateral for the loan
Long term 5-25y, medium term 2y,
short term below 12 months

5. Government loans
To assists businesses and industry as a
whole
MARA, KBS, 1MDF, 1AZAM, TEKUN etc
6. Stock markets
Obtain by offering stock in the venture
to the public and must comply with
federal regulations (issuing prospectus)
Bank Rakyat, UEM, POS Malaysia etc

PROCEDURES AND LEGAL

ASPECTS
License
Permit
Letter Of
Authority
Others

PROCEDURES AND LEGAL

ASPECTS
Entrepreneurs need know and abide by the procedures
and rules governing business entities in Malaysia
1.Licence
Business licence
Wholesaling licence
Manufacturing licence
Food manufacturing licence
Sales tax licence
Excise licence

2. Permit
Foreign workers entry permit
Transportation permit
3. Letter of authority
The certificate of fitness

OTHER PROCEDURES TO BE
CONSIDERED
1. Assembling of machinery and
equipment
2. Pollution control
3. Business right;
a) Trademark protection
b) Patent protection
c) Copyright

Cont
4.
5.
6.
7.
8.

Standard and quality

Hire purchase act
Workers social needs
Infrastructure needs
Import and export regulation

BUSINESS SUPPORT SYSTEM

1. Courses, seminars and workshops
MEDEC,PUNB,MARA,MPC,SEDC
2. Technical assistance
SIRIM,MARA,MARDI,RRI,MPOB
3. Marketing assistance
MITI,MATRADE,FAMA,GUTHRIE
4. Infrastructure assistance
MARA,SEDC,SIRIM,UDA,KKLW,MIDA

etc
etc
etc
etc

6. Research & Development

MARDI,SIRIM,UTP,UiTM,UKM,UPM
7. Financial assistance

Banks, government agencies

8. Advisory assistance

Government agencies, private consultant

9. Extension assistance

MEDEC,MITI,SIRIM,MARA,MATRADE
10.Information assistance

MITI,MATRADE,MARDI,MIDA,FRIM

etc
etc
etc
etc
etc

CHAPTER 5
BUSINESS
PLAN

WHAT IS BUSINESS PLAN?

A BP is a written document that serves as
a blueprint and guide for a proposed
business project that one intends to
undertake

 A business plan must communicate

ideas and goals clearly
Is an ideal tool to check facts and to
comprehensively examine the
practicality of an idea before putting
it into action

THE IMPORTANCE OF A BP
1) Increase opportunity for
success
2) Develop mission and vision
3) Identify barriers to business
4) As a performance tool
5) Identify the main competitors
6) Identify the right way of
managing the business
7) Increase stakeholders
confidence

AUDIENCE OF A BP
Management
Team
Bankers Or
Creditors

Suppliers

Shareholders

Customers

Employees

ELEMENTS OF A GOOD BP
a)
b)
c)
d)
e)
f)
g)
h)

Executive summary
Market analysis
Market and sales strategies
Services or product line
Organisation and management
Funding request
Financials
Appendix

GUIDELINES IN PREPARING
BP
1. Keep the BP short
2. Be focused
3. Reveal people involved and
their roles
4. Avoid the use of jargon
5. Information should be
based on study
6. Be realistic and objective

BUSINESS PLAN FORMAT

1. Cover letter
2. Cover page
3. Table of contents
4. Executive summary
5.Main body of a business plan
6. Appendices

5. Main body of business

plan
a. Introduction
b. Purpose
c. Company background
d. Owner or partners
background
e. Location of business
f. Administrative plan
g. Marketing plan
h. Operations plan
i. Financial plan
j. Conclusion

PITFALLS TO AVOID IN
FORMULATING BP
Kuratko (2004) suggests 5 pitfalls
that should be avoided;
1. No realistic goals
2. Failure to anticipate
obstacles
3. No commitment or
dedication
4. Lack of business or technical
experience

How To Avoid Those Pitfalls

1. A BP should include a clear schedule with
specific steps of action to be
accomplished within specific time frame
2. Listing down all possible obstacles that
may arise and list all steps or contingency
plans if the problems occur
3. Follow up important appointments and
willing to demonstrate financial
commitment to their business
4. Entrepreneurs should get assistance from
those with technical qualifications
5. To establish a specifically targeted market
segment and demonstrate why and how

GROUP ASSIGNMENT
You are required to set up a new business.
In the early stage, you need to identify
certain items
The items discussed should be supported
by realistic and relevant data and
information
Be creative and professional to get the best
marks
items that you need to cover are;

1.
2.
3.
4.
5.
6.
7.
8.
9.

Table of Contents
Name of the company
Organisational structure
Role/responsibility of each member
Nature of business
Industry profile
Location of the business
Date of business commencement
Factors in selecting the proposed
business
Future of the business