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New Biz

Are you suited to business

1.1 Is Entrepreneurship For You?

There is no way to eliminate all the risks associated with starting a small business. However, you can improve your chances of success with good planning and preparation. A good starting place is to evaluate your strengths and weaknesses as the owner and manager of a small business. Carefully consider each of the following questions.

Are you a self-starter? It will be up to you – not someone else telling you – to develop projects, organise your time and follow through on details.

How well do you get along with different personalities? Business owners need to develop working relationships with a variety of people including customers, vendors, staff, bankers and professionals such as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor or cranky staff person in the best interest of your business?

How good are you at making decisions? Small business owners are required to make decisions constantly, often quickly, under pressure and independently.

Do you have the physical and emotional stamina to run a business? Business ownership can be challenging, fun and exciting. Bur it’s also a lot of work. Can you face 12 hour days six or seven days a week?

How well do you plan and organise? Research indicates that many business failures could have been avoided through better planning. Good organisation – of financials, inventory, schedules, production – can help avoid many pitfalls.

Is your drive strong enough to maintain your motivation? Running a business can wear you down. Some business owners feel burned out by having to carry all the responsibility on their shoulders. Strong motivation can make the business succeed and will help you survive slowdowns as well as periods of burnout.

How will the business affect your family? The first few years of business start up can be hard on family life. The strain of an unsupportive spouse may be hard to balance against the demands of starting a business. There also may be financial difficulties until the business becomes profitable, which could take months or years. You may have to adjust to a lower standard of living or put family assets at risk.

ON THE UPSIDE

It's true, there are a lot of reasons not to start your own business. But for the right person, the advantages of business ownership far outweigh the risks.

  • You get to be your own boss
  • Hard work and long hours directly benefit you, rather than increasing profits for someone
  • Earning and growth potential are far less limited
  • A new venture is exciting
  • Running a business will provide endless variety, challenge and opportunities to learn.

1.2 Small Business in Australia

  • Independently owned and operated
  • Owners responsible for all aspects of business
  • There are 1,827,715 small businesses in Australia.
  • There are 608,171 small businesses in NSW.
  • (Source: Australian Bureau of Statistics 2013)

For statistical purposes, small businesses (excluding agriculture) are defined with the following size categories:

  • Non-manufacturing industries employing less than 20 employees, and
  • Manufacturing industries employing less than 100 employees
  • There are benefits and drawbacks associated with being self-employed.

1.3 The Upside of Being in Small Business

Some of the common reasons people cite as being the upside of being in small business include:

  • Financial Rewards: A prime reason for starting your own business
  • Independence: Both in being your own boss and also in making decisions on your business
  • Personal Satisfaction: The sense of fulfilment of shaping and managing something you own
  • Status: This includes recognition by your family, your friends and the community in which you live or work, that you are achieving something
  • Job Creation: Creating your own job as well as providing employment to others.

1.4 The Downside of Being in Small Business

Some of the common reasons people cite as being the downside of being in small business include:

  • Risk of Failure: Financial loss, plus a loss of self esteem, effect of financial loss on the family
  • Being Responsible to Others: Though it is your own business you are now responsible to customers, your family, your financier, the landlord and other businesses
  • You Cannot Blame Someone Else: It is your business. You will need to make and accept the decisions you make
  • Lack of Time: When you work for yourself you usually work long hours, have few holidays and no one is there to replace when you are sick. This is especially so in early years
  • Isolation: You may not have many people with whom you can discuss your business problems. Your family may not always understand the significance of the business
  • Opportunity Costs: By going ahead with your business opportunity you will not have the opportunity to undertake alternative activities.

1.5 Skills and Qualities for Working in the Business

When thinking about going into small business it is important you consider the following points:

  • Personal Qualities: Personal qualities may include honesty, integrity, patience, empathy and networking ability. Communication skills may include listening, problem solving, negation, assertiveness, conflict resolution, clarity of language (both verbal and written), networking ability and a sense of humour!
  • Entrepreneurial Drive: This is the ability to look for new opportunities. An Australian example is Dick Smith, who started Dick Smith Electronics, also started Australian Geographic products and is now involved in Australian made food products. Enthusiasm for the business will help bring customers and involve others. Bing innovative allows the owner/operator to focus on customer needs. Health and stamina is important if owner/operators are to cope with long hours and few breaks. Other skills and qualities might include persistence, ambition and motivation to succeed.
  • Interpersonal Skills: These are skills that are used in dealing with other people. For example: strong leadership means to have a direction for the business, a sound set of ethics and values, listening to what customers are saying and taking notice of competitors; learning from others, looking for the best possible examples of how to do tings, giving and receiving feedback and being prepared to listen to complaints. Using complaints as an opportunity to improve what is being done and giving feedback to suppliers on their products and level of service. Owner/operators should ask for feedback themselves.
  • Technical Skills: Technical Skills may involve the following: Sound/current product/service knowledge is important. Be sure staff are also technically competent. Current industry experience is important in terms of providing up to date products and services. Being able to use new technologies, this is important, both in terms of the technical expertise brought to the business as well as the use of technology to contact clients and suppliers.
  • Business Negotiation Skills: Business negotiation skills involve the owner/operator bringing together all their personal qualities, skills and knowledge to achieve business outcomes. It makes use of ‘soft’ skills including empathy and persuasiveness and ‘hard’ skills such as technical knowledge and financial expertise.

1.6 Skills for Working on the Business

  • Sound financial skills
  • Service orientation skills
  • Market knowledge skills

When thinking about going into small business it is important you consider the following points:

  • Sound Financial Management Skills: Small business owner/operators need to have sound financial skills. They should not just leave financial matters to their accountant. They should be able to talk with the accountant about the information he or she is providing.
  • Service Orientation: It is important to emphasise that knowing the product or service is not enough. Owner/Operators need to be able to relate to customers.
  • Market Knowledge: Small business owner/operators need to know their current market and potential markets including the global marketplace and e-commerce.

1.7 Focus on Financial Management

When thinking about going into small business it is important you consider the following points:

  • Good Record Systems: What do I need for taxation and management decision-making?
  • Costing and pricing of products and services: What should I include?
  • Stock Control: How much stock should I keep? Can I get direct delivery from my suppliers?
  • Budgets: What sorts of things should I budget for?
  • Working Capital: How much working capital do I need?
  • Markets: Do you know the size of your potential market? What is your anticipated market share?

Profit is:

  • A measure of financial performance
  • A reward for risk taking
  • A return on investment
  • A source of future growth.

Cash flow is:

  • Required to keep the business operating
  • More important than profit to a business on a day to day basis.

Good and Services Tax (GST)

  • Registering for an ABN and registering for GST are two separate actions. A business may choose to have an ABN without registering for GST. However a business cannot register for GST without an ABN. If a business does not register for GST then it cannot charge it or claim it back
  • A business turning over – Gross Revenue (not earnings) more than $75,000 turnover p/a is required to register for both an ABN and GST
  • For a business with less than $75,000 turnover p/a registering for both the ABN and GST is optional
  • A company with less than $75,000 turnover p/a may choose to register for GST so it can claim GST that they have paid (input credits).

1.10 Initial Assessment

You, Your Motivation and Your Family

QUESTION 1: Why do you want to start a business?
Are you: Yes No Uncertain
Frustrated with your present job?      
Unemployed?      
Seeking independence      
Wanting to be your own boss?      
Looking for a change?      
Bored with life?      
Want early retirement?      
Other      

 

QUESTION 2: Do you regard yourself as:
  Yes No Uncertain
A self-starter      
Prepared to work long hours?      
Prepared to work nights/weekends?      
Stable in your approach?      
A good manager?      
Fit and healthy?      
A leader?      

 

QUESTION 3: Have you considered your family
  Yes No Uncertain
Is your family to be involved?      
Is your family enthusiastic about the idea?      
Will your family support you in ALL ways?      
Are they willing to go into debt?      
Are they prepared to mortgage your home?      
Are they willing to risk everything?      
Will the business affect your family time?      
Will you still take holidays?      

You and Your Proposal

QUESTION 1: Do you understand your business?
  Yes No Uncertain
Have you attempted to outline your business idea on paper?      
Have you had any experience working in a similar business?      

Have you spoken about your idea to:

An Accountant?
     
A Business Adviser?      
The appropriate Trade Association?      
Others in the same type of business?      
Potential customers?      
Potential suppliers?      

 

QUESTION 2: What are your chances of success?
  Yes No Uncertain
Is your product/service superior to your competition?      
Why?      
How competitive will your pricing by?      
Will your location suit your business?      
Why?      
Is there room for your business in the market place?      
What will make you different?      

 

QUESTION 3: Do you need assistance in any of the following areas?
Area Yes No
Management    
Selling    
Pricing    
Manufacturing    
Customer Service Skills    
Credit Control    
Obtaining Finance    
Taxation    
Staff Selection    
Staff Motivation    
Staff Control    
Record Keeping    
Stock Control    
Financial Management    
Time Management    

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New businesses become customers of other businesses thereby generating economic growth.