by Felipe G. Balingit Jr., PhD
For numerous years in the past and up to the present, various government agencies and private entities have been promoting livelihood programs and entrepreneurship in many forms. The academic program Bachelor Science in Entrepreneurship also came about as a result of the perceived need to spur a multitude of economic activities into viable small and medium enterprises. Even pundits will agree that successful entrepreneurship is one of the more fundamental solutions to releasing the vast majority of our people from the stranglehold of poverty so the country can really be transformed from a basket case to an economic tiger.
The missing link: financial feasibility
In most cases, only the production or technical aspects of the proposed business plus the marketing aspects are given emphasis in entrepreneurship promotion. In seminars or presentations of numerous potential business projects, rarely do promoters of entrepreneurship discuss or cover the financial aspects of a prospective business. Occasionally, product costings are included in the training or promotion programs. However, the financial feasibility of projects and the impact on their overall feasibility are not examined. As a result, many potential entrepreneurs are motivated and lured into venturing in the business by promises of high returns, only to face operational difficulties and ultimate failure due to insurmountable problems brought about by the lack of appreciation of the financial dimensions of doing business.
In promoting micro and small enterprises, all four major aspects of project feasibility must be investigated. These are marketal, operational-technical, organizational-management and financial aspects. (The socio-economic aspects must also be looked into for large projects that will impact regional or national markets/economies.) Even if the first three of the four major areas are found feasible, the proposed project in its entirety is not feasible if the financials are found short of expectations or investor standards. This means that even if there is a market for the product and even if the entrepreneur has the technical know-how and the organization to produce the product at the right cost, but if the financials are not carefully studied and the right levels of profitability are not indicated, then the project is not feasible.
Many livelihood or entrepreneurship promoters often overlook the importance of the financial aspects of proposed projects. They assume that if there is a market for a product which can be produced efficiently by an entrepreneur, then the project is feasible. The fact remains that the financial feasibility of any prospective enterprise must be thoroughly examined before an aspiring entrepreneur should part with his first investment peso in a project. Promoters can very well do entrepreneurship seminars that cover only the marketing and/or production aspects. But they owe it to the participants to caution them that it is best to examine the financials aspects first before making a firm decision to embark in the business.
Even in the popular franchising business, prospective investors should not be deceived by enticements and appearances. It does not mean that because there are many successful business models around, one can ride the bandwagon and easily succeed. The business model is there but there are so many variables that need to be re-examined in every new case, – from suitability of location, to people traffic, up to the financials. It does not mean that only big enterprises like banks, fast food chains, malls, supermarkets, and convenience stores look into the financial feasibility of operating a new branch or outlet before launching new operations. Prudence dictates that aspiring small business operators examine the financial aspects of their proposed business as well.
Extension Service of CBA, LPU Laguna
The College of Business and Accountancy (CBA) of Lyceum of the Philippines in Laguna has accumulated a huge inventory of studies that examined the overall feasibility of many proposed micro, small, and medium enterprises in various industries. Albeit academic researches, these studies are credible because they are industry-grounded and were carried out under the supervision of faculty who are practicing academics. Business incubators and prospective entrepreneurs can reference this body of knowledge. Cognizant of the need to determine the financial feasibility of proposed business projects, the CBA of LPU Laguna has embarked on an extension program that is designed to assist entrepreneurs examine the financial aspects of a prospective business. The College will provide the service free of charge to qualified clients. Consultations online are welcome. Simply email firstname.lastname@example.org or email@example.com. To handle each business case, a CBA faculty will be assigned as financial advisor to the entrepreneur. Financial clinics can be arranged to be held in major urban centers nationwide in partnership with other cooperating business schools.
(Dr. Felipe G. Balingit Jr. is the Dean, College of Business and Accountancy, LPU – Laguna. He is an adjunct professor at various universities and a strategic management consultant. He is also the author of the book Preparing Project Feasibility Studies, 3rd Edition.)