Revision

 Objective: objective is something that people want to achieve in line with their mission
statement or vision statement.
o Every business has their own objective, they have different goal that wise to
achieve.


Mirco business Fewer than 5 employees

Small business  Non-manufacturing industry: fewer than 20 employees
 Manufacturing: fewer than 100 employees
Medium business Between 20-199 employees
Large business More than 200 employees
 Innovation: innovation is an introduction of new things or methods; improving the current
work practices, procedures and products.
 Revenue: what a business earns in the way of sales or fees.
 How does small business contribute to the Australian economy?
o Small business can perform the role of nurturing, promoting and developing
entrepreneurs.
o Small business can provide functional support to large organisations that use
outsourcing.
 The purpose of the business plan is to help establish the business and keep it on track, to
help obtain finance and backing for the business venture, and to set a direction for
business ideas.
 Starting from scratch
o Advantages:
 Complete control over the concept and form of the business
 It will be their business with their personal stamp on it
 The price of the business will not include the added cost of goodwill
 More freedom to implement their own ideas and be their own boss
 To avoid buying into mistakes of others
 Complete autonomy in the running of the business and in its
establishment decisions
o Disadvantages:
 There is a far greater degree of uncertainty with no previous sales history
or figures to refer to
 More work initially
 It will take longer to establish a client/customer base and, therefore, cash
flow
 Greater time and energy is required to establish a good name and
reputation
 Greater difficulty in obtaining finance with an unproven venture
 A suitable location will need to be sourced and the business resourced
from scratch
 Potential for unexpected competition
  More scope for error as the new business owner will need to make many
more decisions
o Extra considerations
 Locating and obtaining suitable premises
 Registration of the new business name and the need to ascertain relevant
licensing and codes of practice requirements
 Establishing relations with reliable suppliers
 Employing staff
 Buying and existing business
o Cats will be incurred
 Premises, plant and equipment
 Inventories of unsold stock purchased at valuation price
 Customer accounts
 Contractual and legal rights
 Employees
 Goodwill
o Advantages
 It is a much simpler process, as things like registration of the business
name and staffing have already been done
 Easier to obtain finance due to easy access to business financial records
 The total cost is agreed upon initially and unlikely to blow more quickly
 Business operating procedures and practices will already be in place
 Existing suppliers and client base
o Disadvantages
 Danger that the purchaser may be ‘buying a lemon’
 Goodwill can easily be overvalued
 Goodwill can be bad will if a business has a poor reputation
 Buying a franchise
o Franchising involves a franchisee paying another business for the right to use that
business’s trade name, products and operating systems
o Costs will be incurred
 An initial, up-front fee
 A percentage of sales income each month
 A regular advertising and marketing fee
o Advantages
 Reduced risk of business failure
 Avoid making the franchisor’s initial mistakes and benefit from the
training provided
 The system has been tested and usually succeeds
 Expert assistance and advice are provided
 Less responsibility for decision making
 Established suppliers and the advantages of bulk buying
 Established procedures
 Staff training is provided
 Brand name is already established
  Easier access to finance
 Guarantee of an exclusive territory limits competition
 The franchise business should be immediately competitive
o Disadvantages
 Far less independence
 Not be able to implement their own ideas
 Excessive costs and fees
 The franchise is judged by the performance of other franchisees
 Motivation behind starting a small business
o Be independent
o Become wealthy
o Be recognised as a success for self-worth
o Have flexible working hours and conditions
o overcome unemployment
o follow family tradition
o fill an identified gap in the market not currently being met
 factors to consider when selecting a location
o Personal factors – the business operator’s personal situation Is important.
o Area profile – the area under consideration must be analysed for its ability to
provide access to a sufficient number of paying customers.
 Demographics of the area – assessment of the population in regard to its
age patterns, incomes, interests, ethnicity, education, levels.
 Economic and social trends – assessment of changes occurring such as
demographic shifts in the area.
 Complementary business
 Levels of support offered in the area by traders’ associations
 Level of services and amenities in the area, such as banking and child
care
 Level of competition
 Zoning regulations
o Site accessibility and visibility
o Suitability of the buildings – the actual building must meet the physical
requirements of the business.
o Costs – the budget of ta start-up business is usually limited.
o Accessibility to transport
o Pending planning proposals
o Proximity to other large businesses
o Accessibility to labour
 Where can business owner source their finance from?
There are three sources of finance available to business operator that can be used to meet
start-up costs, capital and ongoing costs
o Owner’s/shareholder’s equity – money contributed by the business owners
o Reserves – profits that are invested back into the business
o Borrowed or invested funds – from leading institutions, other investor such as a
‘business angle’ or venture capitalists, or from family or friends
 o Types of small business finance
LOAN PERIOD DEFINITION/DESCRIPTION SOURCE/TYPES
SHORT-TERM FINANCE Money need to fund the day-to- Bank overdraft
UP TO 3 YEARS day operation of the business. Commercial bill
Repaid in short term. Debtor finance
Trade credit
Smaller amounts.
Credit cards
Higher interest rate.

MEFIUM-TERM FINANCE Mainly used to finance equipment Term loan

3 – 10 YEARS purchases, business expansion and Leasing
development of new products. Personal loan

LONG-TERM FINANCE Used to find the purchase of assets Term loan

IN EXCESS OF 10 YEARS such as the business itself, land,
buildings, plant or machinery that
will contribute to profit over the
years.

 Market research
o Initial Market research is performed to determine whether or not the business is
potentially viable. In other words, will the business survive and be profitable? This is
known as a feasibility study (initial research that is required to determine whether the
business is potentially viable).
o The initial market research should look for answers to the following questions
 Is it attractive to customers?
 Does it provide value?
 Does it do what it is meant to do?
 Who are the competition and what are the potential areas of competitive
advantage?
o Further information on the market or industry can be gained through previous research,
market reports and industry analysis. It should be able to gauge the following
information
 Is there a real market? Is there potential for growth?
 How much are customers willing to pay?
 Who is the competition and how do you compete against them?
 What are the barriers to market entry?
 What resources are required for market entry?
 What characteristics should entrepreneurs possess?
o Preparedness to take risks
o Ability to think outside the square; this means being able to think of new ideas and
different ways of approaching things; to see opportunities that others cannot
o Confidence
o Self-belief and enthusiasm
o Ability to work independently without requiring guidance
o Ability to accept responsibility
o Ability to set goals
 o Flexibility and ability to change direction when required
o Determination to see things through
o Capacity to work hard
o Ambition to achieve long-term goals
o Ability to adapt to change readily and learn from mistakes
o Being a practical ‘doer’ rather than someone who theorises
o Honest
o Reliable
o Good communication
o Be motivated
o Want a challenge
 Informal support and assistance
o Network
 It facilitate the exchange of ideas and advice and support between like-minded
individuals.
 It offer an opportunity to establish contact with owner of complementary business
who may assist the business and further enhance their chances of success.
o The previous owners of a business
 They potentially valuable sources of information and assistance
 They can demonstrate established systems operating in the business, as well as
supply important about clients
 They can help identify appropriate suppliers and advise on potential sources of
support
 Transition period allows for introduction to regular clientele, and other important
contacts
o Competitors
 They are a valuable information source; hence the term ‘keeping an eye on the
competition’.
 Industrial espionage (gaining valuable information on a competitor’s activities)
 Keeping a close eye on the opposition allows a small business operator to identify
those areas of the market that are currently inadequately catered for (market gap).
It indicates the standards of customer service the consumer is accustomed to and
likely to expect

 Formal support
o Legal assistance and advice (Lawyer)
 Advice on purchase or establishment of a business and acts on your behalf during
this process
 Selection of the best business structure
 Establishment of a debt recovery system and debt collection
 Negotiation and advice over a franchising agreement
 Negotiation of and drawing up of a lease for premises and/or equipment or their
purchase
 Negotiation, establishment and implementation of contracts like employment
agreements, conveyancing when purchasing property, and business transactions
 Securing trademarks and patents
  Interpretation of legislation and how it will affect the business, e.g. local
government by-laws, employment, consumer protection and company law
 Establishment and compliance with industry licensing requirements, and permits,
registrations and approvals
 Preparation of a partnership agreement
 Dealing with creditors
 Dealing with takeovers and acquisitions
 Representing the business in court during legal matters
 Selling the business
o Financial assistance and advice
 Accountant
 To give an accurate valuation of a business intended for purchase
 To evaluate the feasibility of a business idea
 When undertaking negotiations regarding leases and contracts
 To plan a business’s financial recording system
 To prepare loan applications
 To prepare quarterly financial statements, monthly cash flow summaries and
budgets for auditing
 For taxation
 For financial planning
 To recommend appropriate computer software
 For advice on superannuation
 To identify and understand cause of changes in business performance
 During liaison with government departments, especially the Australian
Taxation Office
 Bank management
 Give advice on the feasibility of a business expansion
 Give investment advice
 Act as a source of finance
 Provide EFTPOS facilities

 Insurance agents and brokers

 Give advice on risk management and appropriate insurance
 Agents will also try to sell their company’s product
 Brokers work for themselves and act as an agent to the person or business
seeking insurance
 Marketing and advertising consultants
 Give specialised marketing and advertising advice for a fee
 Graphic designers and printers
 Design and produce logos, letterheads, pamphlets, business cards, and
advertisements
 Information management and technology consultants
 Help to select technology, software and hardware, set up systems, train staff,
and provide ongoing backup and assistance with all technology-related areas
of the business
o Government support and assistance
  Local government assistance
 Planning and zoning regulations
 Health, hygiene and food handling regulations
 By-laws – covering matters such as parking restrictions, outdoor dining and
footpath trading (these must be clarified before entering into business)
 State and federal government assistance
 Online resources
 Business centres
 Administer government programs and initiatives, organise and
distribute local business and economic growth programs
 Provide business information on start-up
 Provide referrals to specialist as required from databases of
professional advisers
 Provide workshops and seminars on business topics
 Provide access to the business channel and the business licence
information service and appropriate literature
 Refer to appropriate advice and assistance and formal courses of study
 Run workshops and seminars
 Business incubators
 Supports new business by making available business premises,
office/secretarial services, advice, consultancy and training at minimal cost,
until that business is established.
 The incubator manager also acts as a mentor
 Allows the new business operator to interact with others in similar
circumstances.
 Encourages networking and the exchange of ideas
 Research has shown that business incubators lessen the likelihood of
business collapse
 Networks and mentoring
 Facilitate numerous local business groups and make mentoring arrangement
 Help small business operators by allowing them to share the experiences of
others.
 This is a range of programs which promote and support business networks
and provide mentoring services
o Professional, trade and industry associations
 General industry bodies
 These groups are broad-based bodies of members from different industries
providing general information and assistance
 Other networks
 Local traders’ associations
 Offer mutual support and to provide a forum for discussion of local
business issues
 Economic development units
 Aim to improve basic business opportunities in their local government
area
 Aimed at local businesses, such as seminars and workshops
  What are the different forms of business ownership?
 Business environment
STRUCTURE FEATURES ADVANTAGES
SOLD TRADER One owner who operates
the business under their
own name or a registered
business name
PARTNERSHIP  Business owned by 2-
20 partners
 Partnership agreement
to establish conditions
 Partners jointly liable
for business debts
PEIVATE  Shareholders are
COMPANY legally separate from
(PTY LTE) the business
 1-50 shareholders who
appoint directors to
run the company
PUBLIC  Unlimited number of
COMPANY shareholders
(LIMITED OR  Shares can be bought
LTD) and sold on stock
exchange
 Business environment
 Simple and inexpensive to
establish
 Owner has total control over
business
 Simple to wind up
 Minimal government
regulation
 Inexpensive and simple to set
up
 Risk is shared
 Minimal government
regulation
 Workload may be shared
 Offers broader access to
capital, knowledge, skills and
experience
 Limited liability
 Extra capital can be obtained
by issuing more shares
 Separate legal existence
 Existence is not threatened
with death or removal of one of
the directors
 Limited liability
 Extra access to capital through
selling extra shares
 Separate legal existence
 Existence is not threatened
with death or removal of one of 
the directors
Internal environment
Operating environment
Macro environment
DISADVANTAGES
 Unlimited liability
 Harder to get finance
 Reliant on own
knowledge and skills
 Unlimited liability
 Liability for debts
incurred by others
 Business could be
threatened by one partner
leaving
 Potential for disputes and
personality clashes
 High degree of
complexity in
establishment
 Higher established costs
 Higher degree of
government control and
reporting requirements
 Additional compliance
costs
 High complexity and
establishment costs
 More government
scrutiny, control and
compliance requirements
Need for more
accountability and
paperwork
o Macro environment
 Economic
 Economic is usually cyclical: a period of accelerating growth, then a boom,
then a sharp downturn (recession), and then recovery and growth.
 Government and political forces
 A change in government resulting from an election can lead to many
business opportunities (election policies).
 Should a business decide to operate major political changes in the countries
in which it operate, as this may affect the value of that country’s money or
its attitude