PLANNING: SMEs + influences in establishing

Question 1

what is an SME

Answer 1

business who hires fewer then 200 people or fewer than 500 people

Question 2

role of SME’s

Answer 2

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

Question 3

economic contribution

Answer 3

• 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

Question 4

key to success of sme’s

Answer 4

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

Question 5

when is an SME classified as failure

Answer 5

• unicorporated: declare bankrupt
• incorporates: liquidation, insolvent

Question 6

causes of failure in SMEs

Answer 6

undercapitalisation
lack of experience
lack of adequate financial reporting and evaluation
failur to develop a business plan

Question 7

influences in establishing SMEs

Answer 7

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

Question 8

sources of info + examples

Answer 8

• 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

Question 9

business idea

Answer 9

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

Question 10

establishment options

Answer 10

start from scratch
purchase existing business
purchase franchise

Question 11

adv + dis of starting from scratch

Answer 11

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

Question 12

adv + dis of buying existing business

Answer 12

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

Question 13

adv + dis of purchasing franchise

Answer 13

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

Question 14

market based influences

Answer 14

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.

Question 15

influence of finance

Answer 15

internal or external sources - equity, capital, debt (overdrafts, mortgages)

debt financing: cost = interest
equity finacne: cost = return (dividend)

Question 16

legal considerations + influence

Answer 16

name: register - Australian securities and investments commission (ASIC)

zoning: areas of land that can only be used for specific purposes, residential, industrial etc
Health regulations: public health act 2010
Competition and consumer act 2010

Question 17

human resources influences

Answer 17

• have required skills, train etc
• costs - only employ if return is greater than the cost
• superannuation: requires all employers make financial contribution to fund that employees access after leave/retire job

Question 18

taxation influences

Answer 18

• compulsory payment of proportion of earnings to governemnt
• income tax (Pay as you go) : federal
• fringe benefits: federal
• goods and services tax: federal
• company tax: federal
• capital gains tax: federal
• payroll: NSW