PLANNING: SMEs + influences in establishing Flashcards
what is an SME
business who hires fewer then 200 people or fewer than 500 people
role of SME’s
provide majority of private sector employement
produce hald australia’s total yearly production
exporting
provide wide range of products used by large businesses
earn profits and pay taxes
economic contribution
- 50% OF Australia’s GDP
- employ greatest number of people: 70% total private sector employment
- 50% of balance payment exports
- level of Research and Development
key to success of sme’s
entrepreneurial abilities: drive & ambition to success, ability to solve problems and take risks
access to information : inform decisions, track progress, productivity, performance
flexibility- adapt quickly to changes, quick decision making
focus on market niche
reputation
when is an SME classified as failure
- unicorporated: declare bankrupt
- incorporates: liquidation, insolvent
causes of failure in SMEs
undercapitalisation
lack of experience
lack of adequate financial reporting and evaluation
failur to develop a business plan
influences in establishing SMEs
personal qualities: suit personality and build strengths
skills and experience: job training, experience, provide specific skills + insights
motivation
entrepreneurship : must be prepared to take risks
cultural background
gender e.g femenism in workplace
sources of info + examples
- more info they have about market they enter, greater ability to plan and chance success
- up to date info = better plans+ gain competitive advantage
- accountants who have an interest in the business owner’s industry and want to provide advice, not just complete tax returns
- Australian Bureau of Statistics data
- websites that provide starting point for business and have links to info sites
business idea
competition: indentify using SOW, develop customer base
- do through business ideas
costs - product lowest possible price , difficult for new business
non-cost competitive advantage - differentiation, unique products etc
establishment options
start from scratch
purchase existing business
purchase franchise
adv + dis of starting from scratch
adv: freedom to set up, operation and change, no goodwill (money paid for reputation/hard work of owner)
dis: no reputation - higher risk, time to set up, develop cash flow, no guaranteed customers
adv + dis of buying existing business
adv: existing customer base, reputation - easier fiannce and repeat sales, stock, staff and equipement available
dis: difficult to shift culture, image, rep, must pay goodwill - difficult to value, hidden problems
adv + dis of purchasing franchise
adv: reduce risk of failure, suppliers and materials already established, easier to obtain start-up finance for known product and a reputable franchise
- guaranteed customer base
dis: cost more to extablish, ongoing fees and chagres paid to franchise, less independence, more competition between franchises already
market based influences
G&S: target market, legal aspects, product details, level of demand, competitors products, cost of providing products
Price: competitors pricing, costs plus mark up , recommended retail price, what consumer will pay
Location: availibity of support services, rent/buy, visibility, access to transport, zonng, size of requied space etc.
influence of finance
internal or external sources - equity, capital, debt (overdrafts, mortgages)
debt financing: cost = interest
equity finacne: cost = return (dividend)
