SMEs
What percentage of SME fail in the first year?
Define goodwill.
The monetary value attached to the reputation of a business.
Define a grant.
Any monetary or financial assistance that does not generally have to be repaid.
What is Taxation?
The compulsory payment of a proportion of earnings to the government.
What are forecasts?
A business’s predictions about the future.
What are 2 (of the 5 keys) to SME business success?
What does an ABN stand for? And who needs one?
Australian Business Number.
Every business except when the name of the business and the owner have the same name.
Give an advantage and disadvantage for equity finance.
Advantage:
No interest to pay.
Disadvantage:
Have to save/may not have required funds.
Give an advantage and disadvantage for debt finance.
Advantages:
Fast money/no saving.
Disadvantages:
Interest.
What is a vision statement?
A statement that states the purpose of the business.
What are 3 common characteristics of SME?
Local markets/locally based
Personalised service
Independently owned and operated
Bulk of capital provided by owner
Between 5 and 199 employees
Name an advantage and disadvantage of starting a business from scratch.
Advantages:
Freedom to set business as they wish.
Don’t have to pay goodwill.
Disadvantages:
High risk of uncertainty.
Time is needed to develop customer base.
With examples, explain the difference between establishment costs and operating costs.
Establishment costs – include those costs involved in setting up the business. Such as property or equipment purchases.
Oongoing costs – include those costs involved in the ordinary day-to-day running of the business. Such as rent and utility bills.
Explain the difference between fixed costs and variable costs. Give an example of each.
FC – costs that do not vary regardless of how many units of a good or service are produced. Such as rent or employee salaries.
VC – costs that depend on the number of goods or services produced. Such as ingredients or building materials.
Describe the difference between external and internal recruitment.
IR – filling job vacancies with present employees.
ER – filling job vacancies with people from outside the business.
Name 3 reasons why SME often fail.
Failure to plan
Lack of information
Inaccurate record keeping
Failure to delegate
Poor market strategy
Poor location
Lack of financial planning
Negative cash flow
Illness
New competition
Supplier problems
Economic downturn
New taxes
Change in government policies
Partner problems
Lack of management experience
Failure to seek advice
Not enough sales
Staff difficulties
Being under-insured
Name an advantage and disadvantage of buying an existing business.
Advantages:
Business already has customer base.
Easier to obtain finance.
Existing employees can provide assistance.
Equipment available for immediate use.
Disadvantages:
Not as much design freedom.
Have to pay goodwill.
Existing employees may resist change.
Compare debt and equity finance. Give an example of each.
Debt – Money obtained through loans. Such as banks, financial companies, credit unions or trade credit.
Equity – The owners money. Such as the owner's savings or retained business profit.
Name and explain 2 pricing strategies.
Cost based – covers expenses with a mark up.
Competition based – similar to competition in order to compete with competitors.
Demand based – costs change depending on how many people want to purchase a product.
What does SWOT in a situational analysis stand for?
Strengths, Weaknesses, opportunities and Threats
Outline the Economic contributions of SMEs in Australia.
•SMEs contributed about 50% of Australia’s GDP – approximately $560 billion.
•In 2009-10, SMEs employed 7.5 million people, which represents about 75% of total private sector employment.
•Only 4% of SMEs export, but this % is growing rapidly.
SMEs are the main source of most inventions and innovations in Australia.
What is the relationship between a franchise, franchisee and franchisor?
A franchise is where a business design is sold to other businesses under the same name. Franchisors are the owners of the original business, and sell their business design to franchisees.
How does a break-even analysis work?
Quantity = total fixed costs / (unit price – variable cost)
Lets the business know how many items they need to sell to cover their costs.
Distinguish between accounting and finance.
- Accounting is a managerial and administrative tool for recording financial transaction, so that a summary of what happened to business money can be traced (information).
- Finance refers to how a business funds its activities (sources).
Name 2 forms of involuntary separation.
Retrenchment.
Dismissal.
Redundancy.