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An Organizational Plan is basically a ´to doµ
list for an organization.
It lists out the plan of work, programs, and organizational
growth over a period of time - six months, a year or five.
The tasks involved, who is responsible for them, and when
they·ll be done.

An Organizational Plan Helps To:

‡ Set priorities for work
‡ Make sure tasks get done on time
‡ Focus on one thing at a time
‡ Share work among staff, board members & volunteers
‡ Make goals clear to investors
‡ Get a handle on big projects by breaking them down
‡ See the big picture of what organization is doing
building the
±Execute the business plan

The team must be able to ±Identify fundamental

accomplish three changes in the business as
they occur
±Make adjustments to the
plan based on changes in the
environment and market
that will maintain
developing the
±Management·s ability and
±management team to operate
commitment to the new
the business full time at a
venture are significant to
modest salary
±Drawing out large salaries for
±Investors demand that the
the management team is
management team not
unacceptable to an
operate the business as part
Entrepreneur and considered to
time venture.
be a lack of psychological
commitment to the business
Legal forms of
Proprietorship form of
business with single owner;
unlimited liability; control over
all decisions; receives all profits
basic legal
Partnership form of business
forms are with 2 or more individual with
unlimited liability, pooling
resources to own a business.

Corporation form of
business with separate legal
entity, run by stockholders
having limited liability &
regulated by statute
Factors of the three forms of Business
Factors Proprietorship Partnership Corporation

No Limitation on
No Limitation on
Ownership Individual number of
Number of partners

In general
individuals are
Amount of capital
Individual liable for business
contribution is
Liability of Liable for liabilities. In
limit of
Owners business Limited
Liability Partnership
partners are liable
for capital
Factors Proprietorship Partnership Corporation

Created only by
agreement, legal
statute, Articles of
cost, and minor
filing fees for trade
Costs of filing fees, taxes,
Only Filing Fees name. Limited
Starting and fees for states
for trade name partnership
Business in which
requires more
corporation is
registers to do
agreement, hence
higher cost
Factors Proprietorship Partnership Corporation
Death or
withdrawal of one
partner terminates
partnership unless
Greatest form of
continuity. Death
otherwise. In
or withdrawal of
Continuity Death dissolves limited partnership
owner(s) will not
of Business the business death or
affect legal
withdrawal of one
existence of
partner has no
effect on
continuity. Limited
partners can
withdraw capital
six months after
notice is provided
Factors Proprietorship Partnership Corporation

General Partner Stockholders can

can transfer sell or buy stock at
his/her interest will. Stocks·
Complete only with consent transfer may be
freedom to sell of all other general restricted by
ability of
or transfer any partners. Limited agreement. In S
part of business partner can sell corporation, stock
interest without may be transferred
consent of general only to an
partners. individual

New Capital raised

Loans or new by sale of stock or
Capital raised
contributions by bonds or by
Capital only by loan or
partners require a borrowing in name
Requiremen increased
change in of Corp. In S Corp.
ts contribution by
partnership only one class of
agreement stock & limited to
75 shareholders
Factors Proprietorship Partnership Corporation
All partners have
stockholder(s) have
equal control and
Proprietor most control from
majority rules. In
makes all legal point of view.
Management limited
decision and Day-to-day control
Control partnership, only
can act in hands of
the general
immediately management who
partners control
may not be major
the business.
Proprietor Depends on
Shareholders can
Distribution responsible and partnership
share in profits by
of profits receives all agreement and
receipt of
and losses profits and investment by
losses partners.
With limited
Depends on
Attractive- Depends on liability for
capability of
ness for capability of owners, more
proprietor and
raising partners and attractive as an
success of
capital success of business investment
building a successful
Once legal
form of
organization is
determined, the
entrepreneur will need to The job analysis will be
serving as a guide in
prepare a job
determining hiring procedures,
description and job training, performance
analysis. appraisal, compensation
program, and job description
and specification.
building a successful
Job description Specify
the details of the work that is Job specification outlines
to be performed and any the skills and abilities needed
special conditions or skill to perform the job including
involved in performing the prior experience. Outlining the
job. Job description should job specification for a trained
contain a job summary, skills employee is easier than for the
or experience required, a untrained people who will be
summary of the trained on the job. So the
responsibilities and duties entrepreneur should focus on
the authority of the specific qualities that will be
individual and standards of required, such as personality,
performance. physical traits, interest, or
sensory skill.
role of the Board of

±Supporting day to day

±Reviewing operating and activities
capital budgets
±Resolving conflicts among
±Developing long-term owners or shareholders
strategic plans for growth
and expansion ±Ensuring the proper use of
assets or

±Developing a network of
information sources for the
selecting Board
± Select individuals who can
work with a diverse group
and will commit to the
venture mission
The member of board
± Select candidates who
members should be understand the market
carefully selected
environment or can
considering the following contribute important skills
criteria to the new venture·s
achievement of planning

± Select candidates who will

show good judgment in
business decision making
Board of
± Loosely tied to the organizations

± Serve the venture in an advisory

Uses of Board of Advisors
± Has no legal status
± Formal part of a venture
± Meet less frequently; depending on the
± Outside advisors, such important venture decision
as lawyers, accountants,
ad agencies, etc. ± Useful in a family business

± Selection process similar to the BOD

± Compensated per meeting basis or with


± Provide reality check




± Debt financing (asset based financing)- is a financing method
involving an interest-bearing instrument, usually a loan, the
payment of which is only indirectly related to the sales and
profits of the venture
± Typically requires that some asset (such as car, house, plant,
machine or land) be used a collateral
± If the financing is short-term (less than one year) ,the money is
usually used to provide working capital to finance inventory,
accounts receivable, or the operation of the business.
± Long-term debt (lasting more than 1 year) is frequently used to
purchase some assets such as a piece of machinery,land,or a
building with part of the value of the asset (usually 50-80%of
the total value) being used as collateral for the long term loan.
± When interest rates are low debt financing allows the
entrepreneur to retain larger ownership portion in the venture

± Does not require collateral and offers the investor

some form of ownership position in the venture.

± The investor shares in the profits of the venture, as

well as any disposition of its assets on a pro-rata

± In small ventures, the equity may be provided by the

owner (ice-cream stand, push-cart in the mall etc)
Internal & External
Internally & Externally generated funds can come from several
sources within the company:

± Profits from sale of assets, reduction in working capital, extended

working capital, extended payment terms and accounts
± Sometimes, the needed funds can be obtained by selling little-
used assets (assets should be on a rental basis (preferably on a
lease with an option to buy).
± In every new venture, the start-up years involve putting all the
profits back into venture (even outside equity investors do not
expect payback in the early years).
± Sometimes cash can be generated through extended payment
terms from suppliers.
± Another method is collecting bills more quickly.
Alternative sources
± Suppliers and trade credit
± Commercial banks
± Asset-based lenders
± Institutions and insurance
± Pension funds
± Venture capital
± Private equity placements
± Public equity offerings
± Government programs
± These are the least expensive funds in terms of cost
and control .
± They are absolutely essential in attracting outside
funding particularly from banks private investors
and VCs.
± It is not the amount but the fact that all money
available are committed that makes outside
investors feel comfortable with the entrepreneur·s
commitment level .
Family &

± Provide a small amount of equity funding for new

± Keep the business arrangements strictly
± Settle everything upfront and in writing.
± A formal agreement containing the amount of money
involved, the terms of money, the rights and
responsibilities of the investor and remedies in case
of failure be highlighted.

Types of bank loans :

1) Accounts receivable loans

2) Inventory loans
3) Equipment loans
4) Real estate loans
Accounts Receivable
± Suitable when the customer base is well known and credit
± Bank may finance up to 80%of the value of their accounts
± In case of government customers ´factoring" arrangement may
be developed.
± Factor (bank) actually ¶buys ·the accounts receivable at a
value below the face value of the sale and collects the money
directly from the account.
± Cost of factoring is higher than the cost of securing a loan.
± Factoring costs involve both the interest charge on the amount
of money advanced until the time the accounts receivable are
collected ,the commission covering the actual collection, and
protection against possible uncollectible accounts .

± Usually the finished goods inventory can be financed

up to 50% of its value.
± Trust receipts are a unique type of inventory loan
used to finance floor plans of retailers such as
automobile and appliance dealers
± In Trust Receipts, the bank advances a large % of
invoice price of the goods and is paid on a pro rate
basis as the inventory is sold.
Can be used to secure longer-term financing usually 3-10 years

1) Financing the purchase of new equipment.
2) Financing used equipment already owned by the company.
3) Sales leaseback financing-the entrepreneur ¶sells' the
equipment to a lender and then leases it back for the life of
the equipment to ensure its continued use.
4) Lease financing- the company acquires the use of the
equipment through a small down payment and a guarantee
payment and that is made over a period of time. The total
amount paid is the selling price plus the finance charges.
Real Estate

± Is also frequently used in asset-based


± Is usually easily obtained to finance a

company·s land,plant,or another building
usually up to 75%of its value
Cash Flow

1) Installment loans
2) Straight commercial loans
3) Long-term loans
4) Character loans

± Can also be obtained by a venture with a

track record of sales and profits

± Are used to cover working capital needs for a

period of time such as when seasonal
financing is needed

± Usually for 30-40 days

± Funds are advanced to the company for 3-90

± These self liquidating loans are frequently

used for seasonal financing and building up
Long Term

± Can make funds available up to 10 years

± Usually available to strong, more mature
± The debt incurred is usually repaid according
to a fixed interest and principal schedule
with interest only being paid in the 1st year
and principal amount sometimes start being
repaid in the 2nd and 3rd year.

± When the business itself does not have the

assets to support a loan, the entrepreneur
may need a character (personal) loan.
± Must have the assets of the entrepreneur or
other individual pledged as collateral or the
loan co-signed by another individual
± Frequently pledged assets are-cars, homes,
land and securities.
Bank Lending Decisions
The basis of the evaluation of a client rests on the well
known 5 C's of banking:

± Character or determination of the borrower to meet its

future obligation,
± Capacity or ability to generate the cash flows to repay
the loan from normal operations,
± Capital which the owner must have put in the business
for the business to run,
± Collateral which is pledged by the borrower as a
secondary - but in no case, as primary - source of loan
± Conditions of the economy and the industry that will not
threaten the business.