Small to Medium Enterprises

Question 1

What is a Small to Medium Enterprise?

Answer 1

An SME will have between 1-200 employees

Most SMEs are unincorporated businesses & incorporated private companies

Question 2

What percentage of businesses & employers do SMEs make up?

Answer 2

They account for about 99.8% of all businesses in Australia

Together, SMEs employ 70% of private sector workers

Question 3

How do SMEs contribute to the economy?

Answer 3

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

Question 4

Why do SMEs fail?

Answer 4

Economic Conditions

Lack of Business Skills/Management Inexperience

Insufficient Capital

Financial Mismanagement

Question 5

Extrinsic Motivation

Answer 5

When a person is motivated by external factors such as income, recognition, or beating competitors

Question 6

Intrinsic Motivation

Answer 6

When people feel satisfied by doing their work well

Question 7

What is an entrepreneur?

Answer 7

An entrepreneur is someone who will take a calculated risk to turn an idea into a successful business operation

Question 8

Where can business information be sourced from?

Answer 8

Information is available from sources such as the ABS, the internet, professional magazines, and government organisations

Question 9

Advantages of Establishing a New Business

Answer 9

Owner is free to make every decision, less expensive to establish than an existing business or franchise

Question 10

Disadvantages of Establishing a New Business

Answer 10

Can take months or years to break-even, no network of suppliers or procedures, no customer base

Question 11

Advantages of Purchasing an Existing Business

Answer 11

Business can be purchased as a turnkey operation, where all systems, procedures, policies and operations are in place

Question 12

Disadvantages of Purchasing an Existing Business

Answer 12

Higher cost than establishment (goodwill & purchase of assets), business may be in decline stage and difficult to renew

Question 13

What is a franchise?

Answer 13

A franchise is a business where a franchisee pays for the right to use an established business’s trade name and business formula

Question 14

Advantages of a Franchise

Answer 14

Reduced risk of failure (only about 12% of franchises fail) and the selling of a proven, well-established product

Question 15

Disadvantages of a Franchise

Answer 15

High start-up costs, ongoing fees and charges paid to the franchisor

Question 16

Equity Finance

Answer 16

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

Question 17

Debt FInance

Answer 17

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

Question 18

Zoning

Answer 18

Zoning refers to local government rules that decide where a business can operate

Question 19

Wage Costs

Answer 19

Wages & salaries are earned from doing paid work, and will reflect the number of hours/amount of work that the employee has put in

Question 20

Non-Wage Costs

Answer 20

These include the costs of training and induction, various forms of paid leave, and superannuation

Question 21

Federal Taxes

Answer 21

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

Question 22

State Taxes

Answer 22

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

Question 23

Local Charges

Answer 23

Annual rates on purchased property

Stormwater Management, a fixed annual charge of $20 per property

A Waste Levy