Small to Medium Enterprises Flashcards
What is a Small to Medium Enterprise?
An SME will have between 1-200 employees
Most SMEs are unincorporated businesses & incorporated private companies
What percentage of businesses & employers do SMEs make up?
They account for about 99.8% of all businesses in Australia
Together, SMEs employ 70% of private sector workers
How do SMEs contribute to the economy?
SMEs contributed to approximately 56% of Australia’s GDP in 2013
SMEs are also growing in their involvement in the export trade, earning income for Australia
They also contribute significantly to government income through business tax
Why do SMEs fail?
Economic Conditions
Lack of Business Skills/Management Inexperience
Insufficient Capital
Financial Mismanagement
Extrinsic Motivation
When a person is motivated by external factors such as income, recognition, or beating competitors
Intrinsic Motivation
When people feel satisfied by doing their work well
What is an entrepreneur?
An entrepreneur is someone who will take a calculated risk to turn an idea into a successful business operation
Where can business information be sourced from?
Information is available from sources such as the ABS, the internet, professional magazines, and government organisations
Advantages of Establishing a New Business
Owner is free to make every decision, less expensive to establish than an existing business or franchise
Disadvantages of Establishing a New Business
Can take months or years to break-even, no network of suppliers or procedures, no customer base
Advantages of Purchasing an Existing Business
Business can be purchased as a turnkey operation, where all systems, procedures, policies and operations are in place
Disadvantages of Purchasing an Existing Business
Higher cost than establishment (goodwill & purchase of assets), business may be in decline stage and difficult to renew
What is a franchise?
A franchise is a business where a franchisee pays for the right to use an established business’s trade name and business formula
Advantages of a Franchise
Reduced risk of failure (only about 12% of franchises fail) and the selling of a proven, well-established product
Disadvantages of a Franchise
High start-up costs, ongoing fees and charges paid to the franchisor
Equity Finance
Owners can choose to invest their own money as equity by contributing capital themselves and selling shares
Investors providing equity finance will expect a return that is better than other investment choices they could have made as well as a share of the ownership
Debt FInance
Loans taken from creditors such as banks
The cost of debt is the interest rate charged
Debt finance must be repaid and includes loans, overdrafts, commercial bills and debentures
Zoning
Zoning refers to local government rules that decide where a business can operate
Wage Costs
Wages & salaries are earned from doing paid work, and will reflect the number of hours/amount of work that the employee has put in
Non-Wage Costs
These include the costs of training and induction, various forms of paid leave, and superannuation
Federal Taxes
The Pay As You Go Tax (PAYG), paid every three months
The Goods & Services Tax (GST), a 10% tax on consumer goods & services
Company Tax, a tax on company profits set between 27.5% and 30% for larger companies
State Taxes
Payroll Tax, based on the amount of wages paid by an employer
Stamp Duty, a tax on asset purchases
Land Tax, based on the value of business owned land
Local Charges
Annual rates on purchased property
Stormwater Management, a fixed annual charge of $20 per property
A Waste Levy
