Prelim Business Studies Mod 2 - Business Planning

What is an SME

A business that has less than 200 employees and / or less than $10m in annual sales revenue

What is the role of SME’s

Profit employment income choice innovation entrepreneurship and risk wealth quality of life

What are the 4 economic contributiosn of SMEs

GDP - total value of goods and services produced in a country over a period of time, employment, balance of payments - record of a country’s financial transactions with the rest of the world, innovation and invention

Success and failure of an SME

Success - flexibility, entrepreneurship, access to information, market niche, reputation. Failure - insufficient leadership, planning and execution. Failure of an unincorporated business leads to bankruptcy either voluntarily or involuntarily and failure of an incorporated business leads to liquidation either voluntarily or involuntarily

Personal quality influence in sme

Skills motivation entrepreneurship gender cultural background qualifications

What are the influences in an SME PEBSHFMLT

Personal qualities, establishment options, business idea, sources of information, human resources, finance, market considerations, legal, taxation

Pesonal qualities

Skills motivation entrepreneurship gender cultural background qualificationsE

Establishment options

Starting from scratch, buying an existing business, buying a franchise

What is a franchise

A business where the owner buys the rights from another business to operate under its name rather than buying the business itself

Business idea 2 components

Identifying business opportunities, considering the competition

Sources of infomration

Owners seek information from professional advisors, government agencies and others

Human resources ( 2 component)

Skills, costs - wages, on costs (non wage benefits) eg sick leave, long service leave, superannuation

Finance 2 components

The funds required to fund a businesses activities. Sources of finance - debt - borrowed money. short term - Overdrafts - bank allows business to overdraw their account up to an agreed limit for a specified amount of time. Commercial bills - short term agreement with a third party to pay commercial debt at a later date. Factoring - business sells invoice to another company which collects the money themselves from customers. Long term - mortgage - a loan used to purchase real estate. Leasing - where one party pays the owning party for the use of an asset over a set period of time. Debentures - when a company borrows money from investors and repays it with interest.

Equity finance - sale of shares / ownership to private investors, self funding, retained profits - keeping a portion of company profits to reinvest back into the business, crowdfunding - raising money from a large number of people

Cost of finance
- must consider source of finance, type of finance, term of finance

Market considerations

Goods and services - knowing what to sell to ensure product market fit, price - deciding an optimal product pricing based on cost, market and competition. Location - where the business should be located

Legal considerations

All business owners are legally obligated to follow statutory regulations when establishing and operating a business. If they do not obey, they risk getting fined, losing customers and reputation and even business closure. Business name registration, zoning, health regulations, other

Business name registration - Legal consideration

NSW business names act 1962, every business name must be registered to state government. Name registration does not protect rights to that name or denote intellectual property, businesses must trademark the name if they want this, ecommerce businesses must ergister the domain name with the australian domain administration

Zoning legal consideration

Allocating land for different uses eg industrial commercial agricultural recreational. Local governments control zoning regulations to ensure that activities that don't belong together are kept separate to keep a high quality of life. Local councils have planning schemes that describe activities that can occur in certain areas.

Health regulations legal consideration

Public health act 2010 nsw - councils supply food businesses with requirements and standards to meet eg food handling, health inspectors accessing premises without warning. Food act 2003 - ensures food for sale is suitable for consumption. Competitor and consumer act 2010 ensures consumers are not subject to deceptive or misleading practices

Other regulations legal considerations

Fair work act 2009 national framework that gives employers and employees rights and obligations eg NES, minimum wage. Work health and safety act 2011 ensures the health safety and welfare of employees

Taxation

Compulsory payment of a portion of earnings to the government. Local - council property rates, waste management fees. State - stamp duty - tax government charges for certain documents and transactions eg vehicle registration, payroll tax - tax employers must pay if their employees wages exceed 1.2m a year. Federal - personal income tax, GST - 10% tax on all goods and services. An abn is required for businesses to register for GST, if a business does not operate with an abn 47 percent of payments are sento the ato. Businesses with 75k rev yearly must apply for gst. Paid at every stage of the supply chain but it is passed onto the consumer

Business plan and its compoenetns

Written statement of the business goals and the steps taken to achieve it. Executive summary, goals, strategies, business description and outlook, management and ownership, operational, marketing, finance, human resource plans

Situational analysis internal external

Internal - strengths, weaknesses. External - opportunities, threats

Vision statement

Broad statement about what the business aspires to become in the future, allows company to develop a positive business culture

Goals, the framework, and the 3 types

A desired outcome the business intends to achieve within a certain time frame. Smart framework - specific, measureable, attainabile, relevant, time based. . Strategic goals - applies to the business as a whole, long term, broad aims, determined by senior management. Tactical objectives - focuses on issues relevant to the different departments within a business, months, specific aims, determined by middle management. Operational objectives - focuses on the courses of actions needed to achieve short term targets, short term, specific aims, determined by front line management

Objectives

A specific statement detailing what a business needs to achieve in order to accomplish a goal

Strategies for long term business growth

Customer feedback, supplier customer partnerships, cost, sigma six, staff motivation

Strategies for overseas sales for SMES

Local distributor - distributors buy stock from the SME and resell it to customers, but the SME has no control over the distributor’s activities. Joint ventures - forming a relationship with a local business partner, allows brand presence in the region with the benefit of local market knowledge. Website - allows easy overseas sales with just a language and currency converter