Business planning

Quantitative definition of SMEs

An enterprise that employs fewer than 199 people and has an annual turnover of less than $20 million.

Qualitative definition of SMEs

Businesses that are independently owned and operated, financed mainly by family and banks, with a high level of control exercised by the owner/operator.

List characteristics of SMEs

Personalised service, local markets, independently owned and operated, closely controlled by owner/operator, not dominant in the industry, locally based, owner responsible for most decision making, bulk of capital provided by owner.

Economic contribution of SMEs

Employs 68.3% of private sector workers, produces around 55% of Australia’s GDP, increases exports, contributes 43% of total R&D, supplies goods and services to larger businesses, and generates tax revenue for the government.

Why are SMEs economically important?

They are a major employer, drive innovation (R&D), boost exports, support larger businesses, and contribute significantly to Australia’s GDP and tax revenue.

Methods SMEs use to enter global markets

Direct exporting, using local distributors, joint ventures, and e-commerce.

What is direct exporting?

When an SME sells and sends goods directly to customers or businesses overseas.

What is a local distributor?

A business in the overseas market that purchases the SME’s product and uses its own expertise and contacts to sell it locally.

What is a joint venture?

When an SME partners with an existing business in the overseas market to share expertise, contacts, and reduce risk.

What is e-commerce in a global context?

Using websites and online platforms to sell products overseas — a low-cost method of entering global markets.

What is the Balance of Payments?

A record of all financial transactions made between Australian residents and the rest of the world.

List reasons why SMEs succeed

Strong entrepreneurial ability, access to accurate and timely information, high level of flexibility, focus on a market niche, and strong reputation through quality and personalised service.

Why is flexibility a key success factor for SMEs?

SMEs can adapt quickly to changes in the business environment because they have fewer layers of management.

Why is focusing on a market niche a strength for SMEs?

It allows them to develop deep expertise, provide better customer satisfaction, and face less direct competition.

List reasons why SMEs fail

Lack of planning, entering unknown target markets, intense competition, poor financial management, staffing problems, inability to adapt to change, and impact of new laws.

Main causes of SME failure

Lack of proper planning, poor financial management, not understanding the target market and competition, and failure to adapt to the business environment.

Entrepreneur

A person who establishes and takes risks in starting and operating a business.

Entrepreneurship

The willingness and ability to take risks to start and manage a business.

Business success

The achievement of business goals such as profit, growth and market share.

Business failure

The inability of a business to generate sufficient revenue to cover costs, leading to closure.

Personal qualities

The skills, motivation, experience and characteristics of a business owner.

Qualifications

Formal education or training relevant to operating a business.

Motivation

The drive and determination to achieve business goals.

Sources of information

Resources used to gather data for business planning, such as market research and government statistics.

Business idea

A concept for a product or service that meets a market need.

Competition

The rivalry between businesses offering similar goods or services.

Establishment options

The ways a business can be started, including new, existing or franchise.

New business

A business created from scratch by the owner.

Existing business

A business purchased from a previous owner.

Franchise

A business operating under the name and system of an established brand.

Goods

Tangible products sold to customers.

Services

Intangible products provided to customers.

Price

The amount charged to customers for goods or services.

Location

The geographical site where a business operates.

Finance

The funds required to start and operate a business.

Source of finance

The origin of business funds, such as loans, savings or investors.

Cost of finance

The expense associated with borrowing or using funds, such as interest.

Business name

The registered name under which a business operates.

Zoning

The government regulation of land use in particular areas.

Regulations

Government rules that businesses must follow.

Human resources

The employees of a business and their management.

Wage costs

The payments made to employees for their labour.

Non-wage costs

Employee-related expenses other than wages, such as superannuation and leave.

Business planning process

The systematic approach to setting goals and determining how to achieve them.

Situational analysis

An assessment of internal and external factors affecting a business.

Vision

A statement outlining the long-term aspirations of a business.

Business goals

Broad targets a business aims to achieve.

Objectives

Specific, measurable outcomes a business plans to accomplish.

Long-term growth

The expansion of a business over an extended period.

Organising resources

The allocation of operations, marketing, finance and human resources to achieve goals.

Operations

The business activities involved in producing goods or services.

Marketing

The process of promoting and selling goods or services to customers.

Forecasting

The prediction of future financial performance.

Total revenue

The total income received from sales.

Total cost

The sum of fixed and variable costs of production.

Break-even analysis

The calculation of the sales level at which total revenue equals total costs.

Break-even point

The level of sales where no profit or loss is made.

Cash flow projections

Estimates of future cash inflows and outflows.

Monitoring

The ongoing review of business performance.

Evaluation

The assessment of business results against objectives.

Budget

A financial plan outlining expected income and expenses.

Profit

The financial gain when total revenue exceeds total costs.

Corrective action

Steps taken to fix problems and improve performance.

Business plan

A formal written document outlining a business’s goals and strategies.

Trend analysis

The examination of past data to identify patterns and predict future performance.

Over-extension

Expanding a business too quickly beyond its financial or resource capacity.

List common motives for starting a business

money, passion, flexibility/work-life balance, positive contribution to society

List characteristics of an entrepreneur

tolerates failure, manages risk, energetic, emotionally stable and logical

Benefit of Professional advisors

provides specialist knowledge and expertise in areas beyond owners.

Benefit of Accountant

assists with budgeting, record keeping. Help with assessing whether a business idea is viable.

Benefit of Solicitor

provide legal advice on business structures, contracts, leases and employment. Helps understand legal rights and ensure compliance.

Benefit of Business consultant

offers expert advice on planning, operations,marketing and growth.Improves performance and solve complex problems.

Benefit of Financial advisor

provinces guidance on funding options, investments and long-term financial planning.

Benefit of Government agencies

provides info, support services, and resources to assist entrepreneurs.

Benefit of Australian Securities and Investments Commission (ASIC)

provides information about business structures, company registration and legal obligations.

Benefit of Australian taxation office (ATO)

provides info and tools about tax requirement

Benefit of Business connect

provides mentoring, advice and support services for small businesses.

Benefit of Local government councils

provide info about zoning

List common sources of information for a business owner

Where can business oppurtunites originate from?

• Personal interests

• Work experience 

• Tech

• Consumer preferences, demographics, socials

• New problems or improvements

Define competitive advantage

a feature that makes a business more attractive to a customers.

Ways to gain a competitive advantage

• Pricing 

• Quality

• Customer service

• Product

• Strong branding

cons of starting your business as an establishment option

- high risk

- long time to establish business

- low profits in starting period

pros of starting your business as an establishment option

• Freedom to do whatever you want 

• no goodwill to pay for .

• - If funds are limited, it is possible to begin on a smaller scale.

cons of purchasing an existing business

• Hard to change business policies and reputation 

• Success may have depended on contacts

• Difficult to assess value of goodwill

•  There may be hidden problems.

•  Some employees may resent any change to the business operation.

pros of purchasing an existing business

• Sales to existing customers will generate instant income.

•  A proven track record makes it easier to obtain finance.

•  Stock has already been acquired and is ready for sale.

•  The seller may offer advice and training.

•  Equipment is available for immediate use.

• Existing employees can provide valuable assistance

cons of franchising

• Franchisor has total control

• Profits must be shared with franchisor

• Stock purchase is controlled

•  Contracts may be biased in favour of the franchisor.

•  The franchisee must share any burden of the franchisor’s business mistakes.

pros of franchising

• Franchisor’s goodwill

•  The franchisor often provides training and management backup.

•  A franchisee can succeed despite having limited experience.

•  Equipment and premises design are usually established and operational.

•  Well-planned advertising often exists.

•  Volume buying is possible, often resulting in cheaper stock.

•  A business plan and proven business methods already exist.

What to consider when designing a product?

• Consumer needs/wants - meeting these will 

• Trends

• Competition

• Product quality

• Features

• costs

Define market research

 process of collecting, recording and analysing information about customers, competitors and market conditions.

Pros of market research

• Identify consumer needs and wants

• Assess demand for a product

• Understand competitors

• Identify opportunities and reduces risk

What to consider when deciding price

• Production cost

• Competitor price

• Customer expectations and willingness to pay

• Quality and perceived value

• Profit objectives

What to consider when deciding location

• Proximity to customers

• Access to suppliers

• Transport and parking availability 

• Exposure

• Costs

• Proximity to competitors

Define business plan

a written document that explains the business idea, evaluates its potential and outlines strategy

Purpose of business plan

provides direction, clarifies goals, identifies strategies and guides decision making

Benefits of a business plan

• provide direction and focus
• improve decision-making
• test whether a business idea is viable
• identify strengths, weaknesses and potential risks
• encourage proactive rather than reactive management
• demonstrate commitment to lenders and investors
• save time, money and effort by reducing costly mistakes
• increase the likelihood of long-term success.

Define Vision statement

a broad statement about the business’ aspirations.

Purpose of a vision statement

provide a long term goal and guide decisions.

Define Strategic goals

long terms goals by senor management

Characteristics of strategic goals

broad, long term,