When a business begins trading, after meeting all legal requirements and sourcing its finance.
Must be meticulous in setting up the business.
To ensure adequately protected by law.
Structured internal and operating environments when focused on financing.
Strategic planning heavily influenced by macro environmental factors.
Legal – dictates the steps required for a start-up to become a formally recognised business trading in Australia.
Political and Economic – can also influence the options and decision-making for financing.
Internal environmental influence how effectively the business progresses through the start -up stage.
Internal Environmental Factors
Owners and management
How will the owner acquire financial knowledge and skills?
What sources of advice does the business owner need to ensure the business is financially stable in the short and long term?
Employees
How will staff be trained in minimising business costs?
Does the business need to employ staff with financial backgrounds?
Organisational structure
How should the business be funded and what impact will this have on the business's structure?
What strategic planning is needed for the business to maintain financial stability in the short and long term?
How will the business maintain positive cash flow?
Organisational culture
How much influence should financial considerations have on the business?
How will the business achieve its goals when aligned with its financial objectives, and what impact will this have on the business's culture?
Operating Environmental Factors
Customers
How will the business receive payment for its goods and services?
Should the business offer trade credit?
What other financing options are available in the market?
Competitors
How do competitors receive payments in their businesses?
Do these strategies provide a competitive edge for the business? If so, why?
How do competitors finance their business?
Suppliers
How do suppliers want to receive payment?
How does the business set up a trade credit relationship with its suppliers?
What are the time frames the business must adhere to when paying suppliers?
To what degree is this supplier stable?
Interest groups
How will the business monitor the interest in the start-up?
Will the business's financing affect the interest groups?
How will the business communicate financing information to interest groups?
How does the business maintain privacy of its information?
Levels of Management: Top-level Management
In a start-up, this is usually the owner.
Assume all responsibility for the business.
Ultimate source of authority and control.
Make strategic decisions.
Responsible for performance.
Appoint middle-management as the business grows.
Accountable for the macro-external environment.
Must keep up with trends to manage competitiveness in the market.
Levels of Management: Middle-Management
At start-up, middle-management is usually the same person as the top-level manager.
Proficient in human resources, finance, marketing or operations.
Accountable to top-level management.
Implements the business’s strategic plans and policies.
Liaise between top-level management and the rest of the organisation.
Report to top-level management on how the business is operating and functioning.
Levels of Management: Front-line Management
Supervisory role in the business.
Ensure tasks are assigned and completed.
At start-up front-line managers improve day-to-day functions of the business.
Provide direction and control in relation to quality of product and services.
Report to middle-management.
Levels of Management: Non-Management Staff
Employees in non-managerial positions do not have supervisory duties.
There are some non-managerial positions such as team leaders / trainers which provide guidance to other non-managerial employees.
These roles have no supervisory responsibilities.
Management Responsibilities (POLC)
Planning, Organising, Leading, Controlling
Management Responsibilities (Planning)
Planning responsibility during start-up are immense.
Planning responsibilities are strategic and are foundational to business goals and objectives.
Planning responsibilities include:
Conducting a feasibility study.
Securing trade marks and patents for the business.
Complying with legal requirements.
Financing the business.
Calculating break-even points and preparing budgets.
Preparing business and action plans.
Management Responsibilities (Organising)
During start-up organising is at its busiest.
Focuses on coordination, allocation and preparation of resources.
Management Responsibilities (Leading)
At start-up stage can be challenging.
Focus on building a positive organisational culture.
Communicate the vision of the business to staff.
Inspire staff to achieve business objectives.
Start-up businesses should identify their leadership styles and make sure they find balance between managing tasks and motivating staff.
Management Responsibilities (Controlling)
POLC can be the most challenging for a start-up business.
Controlled planning is important including strategic, tactical and operational.
Standards must be established.
Key objectives and key performance indicators are necessary.
BUSINESS PATHWAY OPTIONS
Opening a new business.
Buying an existing business.
Entering into a franchise agreement.
OPENING A NEW BUSINESS
Ideal pathway for moving from seed stage to start-up stage of business life cycle.
Allows owner to maintain full control over how the business will be established – includes business name, location, branding etc.
Suitable if entering into a niche market.
Key Features of Opening a New Business
All decisions made by the owner.
The business may be selling a new good or service or wanting to establish itself in a potential market.
Business owners would have prepared a feasibility report and business plan so finance can be sought.
Level of risk is high – minimal historical data to rely upon.
ADVANTAGES & DISADVANTAGES - NEW BUSINESS
ADVANTAGES
Not hampered by previous image or technologies.
Can choose location, name, logo, relationships.
Can explore new markets and directions.
See your dreams come true
DISADVANTAGES
No base, must build all new
Greater risk
No track record =
difficulty in financing
See your dream become a nightmare
Lack of experience for the business owner
BUY AN EXISTING BUSINESS
Suitable for those who are not entrepreneurial.
The business already exists and has been trading for some time.
KEY FEATURES
Business name, location, staff, equipment, customer base etc already established.
Value of business’s reputation (goodwill) factored into the purchase price.
New owners can choose to run the business as is or transform – dependent on business reputation and former owner.
Need to focus on building customer relationships.
Moderate level of risk – business owners need to research reason for selling.
ADVANTAGES & DISADVANTAGES - Buy an Existing Business
Advantages
Cash flow & good will
Actual historical results
Attractive to lenders
Established location & customer base
Employees in place
Systems may be in place
Owner financing
Disadvantages
What is the real cash flow?
What is the good will?
Hidden seller motives
Employee defection
Higher debt service
Poor training/support by the former owner
Entering into a franchise agreement
Key features:
Allows someone who aspires to be a business owner to own a business under guidance and licencing of the large business’s head office.
Is a conservative pathway option since the business’s name, reputation, policies and procedures are already established.
Allows larger businesses to set up in a range of locations and markets, especially if they engage a local owner they can more easily gain community support.
FRANCHISOR RESPONSIBILITIES
Provides all marketing materials.
Gives franchisees earning capacity information.
Ensures franchisees are trained.
Issues and monitors policies and procedures manuals.
Dictates the goods and services that are offered.
Approves location.
Advertises on behalf of all franchises
Franchisor = the owner of the business providing the product or service
FRANCHISEE RESPONSIBILITIES
Provides funds to open the franchise (capital).
Seeks a location for approval.
Undertakes training.
Co-ordinates staffing needs of the business.
Seeks professional legal, accounting and business advice prior to entering the franchise agreement
Franchisee = the independent person who is given the right to market and distribute the franchisor’s product or service and use the business name