my notes

reality of starting a business

• requires leaving job security for financial uncertainty

• success demands intensive planning, sufficient startup capital, and some luck

core motivations for starting a business

1. pursuing a passion

2. a good idea

3. income potential

4. new lifestyle

5. self-expression

1. pursuing a passion

turning personal talents or hobbies (e.g. writing, music, auto repair) into a fulfilling, happier career.

2. a good idea

capitalising on an unfulfilled market need to create a profitable venture, franchise model or teachable system

3. income potential

opportunity for unlimited income tied directly to business performance, unlike fixed corporate salary structures.

4. new lifestyle

escaping the 9-5 grind for flexible scheduling, more time with family and friends, and autonomous decision-making.

5. self-expression

freedom to be creative, alter work process, and develop custom products/services based on customer demand.

types of businesses

businesses are classified by the nature of their operations (the type of activity they conduct):

1. trading

2. service

3. manufacturing

trading

any business that buys goods and resells them, usually at a higher price.

• milk bars

• clothing stores

• supermarkets

service

business that provides a service to their customers, for which they charge a fee

• tutoring

• accounting

• plumbing

• legal advice

manufacturing

business involving in the actual construction of goods. Usually buy variety of raw materials and manufacture a finished product.

• tip top bakeries

types of small business ownership

• sole trader

• partnership

• small proprietary companies

sole trader

business owned by one person.

ad:

• easy to star (lack legal requirements)

• profits not shared

• complete control of decisions

dis:

• initial funding (start-up capital) must come from owner’s personal funds

• limited borrowing opportunities

• limited skills

• heavy workload

• all losses suffered by one person

• unlimited liability to pay business debts.

partnership

business co-owned by several individuals who share a common profit motive. owners 2-20

adv:

• easy to commence - just written agreement/handshake

• pooling of capital

• pooling of skills

• shared workload

• joint decision-making

• tax benefits

dis:

• shared profit

• decision making disputes

• unlimited liability - responsible for partner’s debts

• limited life

small proprietary company

company that cannot raise money from public. must have at least one shareholder and max of 50 non-employee shareholders. Proprietary/Pty must be inc in name.

must satisfy 2/3

1. revenue for year less than $25 mil

2. assets at end of yr less than $12.5 mil

3. less than 50 employees at end of yr

proprietary ad/dis

adv:

• separate legal existence from owners

• shareholders have limited liability

• continuity of company not dependent on owners

• generally easier to raise capital because more potential owners

dis:

• greater regulation

• set up, administration, running costs high

• record keeping/reporting requirements higher

• difficult to wind up (dissolve)

registering business name

if own name: operate business without official permission or legal formalities

other: under Business Names Act (1962), register name w department of consumer and employment protection (DOCEP)

• original

• not offensive

• not deceptive

register of business names maintained by Australian securities investment commission (ASIC)

trademarks

register trademark to make sure nobody copy logo, slogan, business name.

can be letter, number, word, phrase, sound, smell, shape, logo, picture, aspect of packaging etc.

trademarks act 1995, IP australia.

1. if good marketing tool

2. can’t be taken

3. can’t be taken to court for similar

4. inexpensive

ABN

aus business number. ATO (aus taxation office) requires businesses to have ABN so can identify all dealings.

• if not register, other business withhold tax from payments at highest rate 45c in $1

• only claim back when owner lodges annual income tax

GST

goods and services tax. broad based tax of 10% on most.

• only register if $75000 annual turnover or more

• $150 000 for non-profit org

• less then choice

if not register, still pay GST but not charge customers - not have to lodge business activity statements or collect GST on behalf of gov.

business setup

• name registration

• insurance

• licenses

• bank account fees

business identity costs

• trademark reg

• business cards

• letterhead

• envelopes

premise

• electricity

• water

• internet service provider

• furniture

transport

• car reg

• servicing

• insurance

• running costs - types, petrol

marketing

• word of mouth

• referrals

• free samples

• flyers, brochures, business cards

• signs, posters

• clothing advert

• booth at flea market

what makes business successful

1. personality: independent, creativity, self-motivation, versatility

2. management skills and experience: self-discipline, trained, assertive, resourceful, responsible, competitiveness

3. research and planning

4. innovation: pricing, quality, packaging, convenience, consistency

why businesses fail - top 5

1. growing too fast

2. failing to track finances

3. overspending

4. lack of reserve capital

5. poor location choice

business plan

written statement of goal and objects of business and steps involved in reaching.

inc:

• cover pg

• description of business

• legal considerations

• marketing plan

• financial plan