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Influences in Establishing a SME - Coggle Diagram
Influences in Establishing a SME
Human Resources
employees are the most valuable resource of any business
Most important are those that deal with the skill level of employees. Skilled employees are highly productive and result in creating wealth for the business
The source/employment number chosen will depend on the size of the business, the type of position available and the nature of the labour force in the business’s particular area
Hiring the ‘right’ people at the ‘right’ time, with the ‘right’ skills in the ‘right’ quantity is crucial for business success
Once the business is operating and if people are employed, the SME owner must fulfil a number of important human resource requirements that deal with:
staffing objectives, specific duties to be performed, the skill base for existing staff, forecast of future staff requirements and skills, methods the business will use to recruit extra staff, form of organisational chart and administrative records to be kept to manage the employees
Market Considerations
Price
Cost based = Pricing method derived from calculating the total cost of production then adding a mark up.
Market based = Method of setting prices according to the interaction between the levels of supply and demand.
Competition based = Choosing a price that is either below, equal, to or above that of competitors.
Location
Online Presence
Using email to communicate with customers or suppliers.
Using the internet to find information, such as prices, business contact details, different products and market trends.
Using the internet for online banking and payment of bills.
Setting up a website to provide information about available products and services, or as a means by which customers can order goods online.
Retail Shopping Strips
The busiest shopping strips are located near public transport. Retail shopping strips offer an advantage of high visibility traffic, however they suffer low parking.
Shopping Centres
Shopping centre complexes have one or more
supermarkets and a number of small specialist stores such as Macquarie Centre or Westfield
Zoning
Zoning determines where some businesses can operate. Zoning is designed to prevent households from being disturbed by businesses operating late at night.
Home Based Business
Plumbers, electricians and painters are home based businesses that are services that are performed in the customers own home or business premises. Advances in technology has enabled home based businesses to grow through online ordering and communication technologies.
Goods and Services
Business owner must conduct market analysis to ensure product meets consumer needs.
Methods of market analysis eg: surveys, questionnaires, focus groups
Market analysis = Involves collecting, summarising, and analysing information about the market.
Target Market = Who the business aims to target their product to. Based on demographic factors eg age, gender, race, socio-economic status
Looking at other competitors and their strategies
Surveys
Trends
ABS
Finance
Equity (funds contributed by the business owner)
Examples:
Capital: a large sum of money used to start a business
Retained profits: portion of a company's profit that is saved for future use
Ordinary shares: a fraction of ownership in the corporation that issues it
Private equity: capital that is not publicly listed or traded
Advantages:
Doesn't have to be repaid unless the owner leaves the business
Cheaper than other sources as there are not interest payments for the business
Disadvantages:
Owner may expect a good return for their investment
Debt (borrowing from external sources)
Short term borrowing (less than 1 year) - to fund day-to-day workings of the business
Overdrafts: bank allows a business to overdraw their account up to an agreed limit for a specified time
Factoring: the selling of accounts receivable for a discounted price to a finance or factoring company
Long term borrowing (more than 1 year) - to purchase builds, land, plant and equipment
Mortgage: a loan secured by the property of the borrower (business)
Debentures: issued by a company for a fixed rate of interest and for a fixed period of time
Legal & Government
Other Regulations
Many licences, permits, approvals and authorities must be taken into account by SME owners.
All business owners have a legal obligation to observe the statutory regulations when commencing and operating a business.
businesses that do not obey the law risk losing
customers and their reputation, being fined, or losing the right to continue trading
All SME owners need to comply with a business name registration, land zoning & health regulations
The three levels of government are federal, state and local
The regulations are imposed to provide fairness, protect customers and encourage efficiency.
Health Regulations
Local government impose health regulations under the Public Health Act 2010 (NSW). Each local council supplies businesses (primarily those dealing with food, such as cafés, restaurants, butcher shops and bakeries) with the requirements and standards to meet in order to receive a licence to operate.
Some requirements include:
• the temperature for food storage • kitchen layout
Zoning
Zoning Local government have the authority to restrict where certain businesses can locate. Zoning regulations create areas where land can be used only for particular purposes.
These regulations specify the areas in which residential, industrial, recreational or commercial activities may take place. When establishing a business, the owner must inquire with the local council to determine which zoning regulations will affect their business now and in the future
Business Name
The ASIC is now responsible for a national business name registration service - Businesses need to register their business name, except when the name is that of the owner and then it is optional. But if something is added to a personal name, such as ‘Pty Ltd’, ‘Motors’, ‘and Associates’ or ‘and Co.’, then the business name must be registered.
Taxation
Federal & State Taxes
PAYG (Pay as You Go Tax)
Imposed on the employee
Taken from the employee’s salary or wage directly
Lodged with the tax department by the business
Detailed in a group certificate that the employee receives at the end of the financial year
Taxed at progressive tax rates — the more you earn, the higher you rate of tax
Levied by the federal government
Fringe benefits tax (FBT)
Tax on the provision of a benefit to an employee
Paid by the employer at a rate of 47 percent of the value of the benefit provided
Levied by the federal government
Goods and services tax (GST)
Paid on the earnings of a company and calculated on the
company’s taxable income
Levied by the federal government
One of the most important tax obligations is the good and services tax (GST)
Company tax
Paid on the earnings of a company and calculated on the
company’s taxable income
Currently calculated at 30 per cent of taxable income
Levied by the federal government
Capital gains tax
Calculated on the profit made on the sale of assets acquired after 19 September 1985, including the sale of a business or properties bought and resold within 12 months
Stamp duty
A tax levied on the transfer of property (e.g. business, real estate and shares)
Land tax
A tax on land owned by individuals or businesses over a certain value (in 2018 it was $629000 or more)
Land used for primary production or an individual's primary residence are exempt from land tax
Payroll tax
Payable on wages paid by an employer to their employees on payrolls that exceed $750000 at a rate of 5.45 per cent (2018)
ABN
Allows businesses to participate in GST system
A business without an ABN has to pay 46.5% tax
The ABN is a single identifying number that a business uses when dealing with government departments and agencies.
Local government rates and charges
The three main areas in fees or charges are levierd:
water and sewerage
waste management services
development and building approval fees • inspectors’ fees
Parking permits
• use of public property.