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The purpose of this report is to provide an overview of businesses operations to Mr. Hiram B. Moneybags, which analyze the Australian environment for small and medium businesses operations. This report also outlines the nature, characteristics of small & medium businesses and the number of businesses that are working within Australia.
The details of this report also contain the information about factors that has a significant impact on the success of small businesses, which are critically reviewed. The profile of a successful entrepreneur is also mentioned in this report to facilitate Mr. Moneybags about the concept of entrepreneurship. As per his request, profile of dick Smith is also provided by comparing it with an entrepreneur’s profile. Moreover, the report outlines the enterprise idea, my business concept and the justification of its viability, by elaborating the nature of chosen business and its legal structure. In order to support the chosen business idea, a detail of market research and target market is also provided.
The range and the background of our chosen products have also been described in details, later the competitive edge of the chosen business and products is also mentioned with details. Finally the report has described in details the amount of start-up finance, working capital, legal licenses and permits (that help in starting a business) and operating capital that is required to start a business. 2. Transmittal Letter M. Numan Khan 94 Gorman Street Darling Heights TOOWOOMBA QLD 4350 31 July 2008 Mr Hiram B. Moneybags 25 Upmarket Street NOOSA QLD 4567 Dear Mr Moneybags Further to your request of our first meeting. I hereby attach my report analyzing the small and medium businesses environment of Australia.
Furthermore, this report outlines the enterprise idea, my business concept and the justification of its viability. This report begins with summarizing the Australian business environment and its share and impact on the Australian economy and on global marketplace. It proceeds further by exploring the potential of this business idea and the reasons behind the success and failure of businesses in Australia. Finally it provides the recommendation and strategies for successful business ventures in Australia. Please do not hesitate to contact me in any case, particularly if you would like to discuss any part of this report or if you have any concerns and questions. Thank you for your consideration and time Yours sincerely M. Numan Khan 3.
The nature, number and characteristics of Australian SMEs 3. 1 The Nature of Australian SMEs There isn’t a commonly accepted definition of the term “small business”. As indicated by Stanworth and Curran (1976) “defining the small firm is in itself is no easy task”. There are in fact two schools of thoughts for defining small & medium businesses. The first one is focused on the qualitative aspects of the firm and the other one focuses on quantitative characteristics. From the past three decades, qualitative criteria has been considered as the key features of small firms. A business has been regarded as small when it has the following qualitative characteristics. Schaper & Volery (p. 5) describe the nature of Small businesses in such manner as owner contributes most of the set up finance or operating capital. It is the responsibility of owner to fund the business idea, arranging the working capital, tolerate the potential risk if business is exposed to economic failure and unrestricted to most of the profits if it succeeds. ‘…the business environment in which small business works has a very small market share that is owner of the business will be confronted with competitors who are in the same industry, which means that there is a very little chance for business to control the industry. The only thing that they compete for is a limited pool of customers’ (G. Meredith 1975).
Most of Small businesses are often home based, in countries like Australia many small firms are located in the owner’s personal residence. But in many countries like Singapore this not the case, means one cannot start business from his own residence. Major decisions are made by owner of the business, who usually works full time in the firm; they are regularly referred to as owner-manager. In order to the support nature of small business, some quantitative characteristics are also taken into consideration. Such as Legal structure of the firm, small business can be a partnership between two people, it can be owned as a sole proprietorship. A firm is considered small when it employs 5 to 19 people.
The major characteristics of small firms which differentiate small from large are: turnover or revenue generated; the total value of business assets such as the building, office equipment, and machinery. (Schaper & Volery p. 83) As schaper & Volery (p. 82) suggested the quantitative characteristics are not the only way to judge the size of business whether a specific business is small or large. A lot of confusion can be raised when measuring a business on statistical basis like the number of employees; the type of employees, i. e. ; part time, full time, casual or permanent. If assets are the main pointer of the size, then how would we differentiate the business which leases assets from another which owns the same value of assets? These are the key issues regarding quantitative side of the picture of a business. 3. 2Number of Australian SMEs
According to Australian Bureau of statistics, in 2003 there were 1,868,969 Small & Medium businesses operating around Australia this was the figure at time of statistical data collection, but many businesses included in that figure could not survive till June 2007 i. e 42% didn’t make it to the year 2007which means that 58% businesses were still operating in 2007. The numbers of businesses that constitute 42% of overall business that exited till June 2007 were 777,106. Around 287,529 (37% of failed businesses) exited during 2003-04, 217,589 that is 28% during 2004-05, 155,421 that is 20% during 2005-06 and the remaining 116,565 that is 15% during 2006-07. The businesses that entered during 2003-04 were 325,935, 49% or 159,708 were still operating in June 2007.
The number of businesses which exited was 167,434, 48% quitted during 2004-05, 33% during 2005-06 and the remaining 19% during 2006-07. As per ABS counting there were over 2 million i. e. 2,011,770 actively trading businesses which constitutes 56,642 in Personal and Other Services industry, 507 508 in Property and Business Services industry, 219 308 in Retail Trade industry, 106 565 in Manufacturing industry, 214 795 in Agriculture, Forestry and Fishing industry, 322 404 in construction, 117 323 in Transport and Storage, 136 587 in finance and insurance, 16 265 in education and so on. The exit rate for businesses during 2006-2007 was 14. 6% below from the 14. % during 2005-2006 which means 291,000 businesses were failed during 2006-07 (the lowest recorded exit rate for the four year period to June 2007). The entry rate for new businesses during 2006-2007 was 17% which was higher than 16. 2% recorded in 2005-2006 meaning 340,000 new businesses. This data indicates that there is a bit increase in businesses every year. Six out of ten businesses which were operating in June 2003 are still operational in 2007. 3. 3Characteristics of Australian SME Several characteristics differentiate small business from large business. 1. The manager is most often the owner, responsible only to himself or herself. Thus the business is both a means of employment and an investment. 2.
The manager usually supplies most of the starting capital, as it’s very hard to find independent investment for small businesses. 3. In small business, management specialisation is usually minimal, ‘the owner-manager must be a jack of all trades and a master of most’. (Ratnatunga & Dixon 1993). Small business is now recognised as important because they constitute the major portion of the economy in the Pacific Rim region. They form one the keys to national goals such as wealth creation and employment growth. From these points of views small business often seen as big business because it represents a large and essential part of the economy. 4.
Factors influencing success and failure The cause of failure has been more broadly discussed and researched than the reasons for success. This is because the small businesses are much more exposed to failure when compared to large businesses when every performance factor is taken into consideration. At a micro level, almost every aspect of the business can potentially cause its failure if not dealt with properly. It is the same situation at a macro level. Cromie (p. 43-45) suggested that the factors that can impact a business’s performance at a micro level are grouped into four functional areas. These are: finance, marketing, production and personnel functions.
There is also a fifth critical area which is being identified, which is the personal factor of the owner /operator, such as lack of time, too heavy a workload and having difficulty in generating new ideas. Micro level include the factors that causes business failure, are bad management practices, poor product/service quality, poor human resource planning, deficiency or insufficient capital and or cash flow and the personal shortcomings of the owner such as a trend of dictatorial decision making or poor time management (Collins & William 1995). According to Siew (1990) ‘…research studies in Singapore showed that internal factors are predominant cause of business failure in that country’.
While macro level comprises of competitors’ activities, changes in government policies and legal system, and the introduction of new technologies or processes. There have been various suggestions about how success in small business can be measured. Like Kelmar suggested in enterprising culture vol. 1 that marketing characteristics are particularly important, like success is often believed to occur when a business shows that it can profitably sell its good or services in the marketplace. This is followed by financial consideration such as growing of profit, whereas measures of management rank third. 5. Leadership / Entrepreneurs 5. 1 Characteristics of successful entrepreneurs The objective of this section is to provide an entrepreneurial profile.
But it does not necessarily mean that the one who fits an entrepreneurial profile will become an entrepreneur but if he/she really fit into the profile, success is guaranteed. Some characteristics of successful entrepreneur are listed below; • A desire to achieve. All entrepreneurs must have a desire to achieve and the push to conquer problems and give birth to a successful venture. • Hard workers. Most entrepreneurs are workaholics and this is the requirement for them to be in many instances to achieve their goals. • Accept responsibility. Entrepreneurs accept full responsibility for their ventures. They are morally, legally, and mentally accountable. • Reward oriented. Entrepreneurs want to achieve, work hard, and take responsibility; but they also want to be rewarded handsomely for their efforts.
Rewards can be other things besides money, such as recognition and respect. • Nurturing Quality. Entrepreneurs take charge of and watch over a venture until it can be stand alone. • Optimistic. Entrepreneurs live by the doctrine that this is the best of times and that anything is possible. • Excellence oriented. Often entrepreneurs desire to achieve something that is outstanding and something that they can be proud of, something that is first class. • Organiser. Most entrepreneurs are very good at bringing together all the components of a venture to make it achieve its goals. They are normally thought of as take-charge people. • Money oriented.
As surprising as it may seem, money takes back seat to the desire to achieve and nurturing quality. Entrepreneurs want to make a profit, but the profit serves more as meter to gauge their degree of achievement and performance. 5. 2 Analysing Dick Smith against Entrepreneur’s profile Dick Smith, a well known businessman, aviator, film-maker, and explorer was born on 18 March 1944 in Roseville. Dick Smith is a person who has a sense of opportunity recognition and a desire for achievement from the very beginning. That’s why he learned to fly in 1972 and 1976 he competed for Perth to Sydney air race and was the first person to fly around the world via the poles in 1989 as well as made the first helicopter flight to the North Pole in 1987.
These also contributed to his sense of achievement. In business perspective Dick Smith founded a small electronics retailer in 1968 by the name of Dick Smith Electronics which he sold it to Woolworths for $20 million to pursue publishing, exploration, aviation and humanity. What made this business worth of $20 million? His struggle, his efforts and hard-work made it worth of that, from a nurturing quality perspective he started it from limited resources and built it to position that is worth millions and is now a well renowned Australian company. In 1999 he founded Dick Smith Food and the business continues to do well, which is the living example of his excellence orientation.
His reward oriented personality is evidenced by his achievement awards include the Baden Powell Award in 1966 after 14 years in the scouting movement; Australian of the Year in 1986; an annual world-wide award was also given to Dick Smith for lifetime achievement for a balance between technical advancement and environmental preservation in 1992. He was also appointed as an Ambassador for the Council for Aboriginal Reconciliation in 1998. In nutshell he fits into the entrepreneurial traits very sound and he is among one of the finest entrepreneurs, Australia has ever produced. 6. Analysing opportunities and developing a framework for business 6. 1 The nature of my chosen business The industry chosen is the leather industry by keeping in mind the potential market for leather products in Australia. The name of outlet will be Novelty Leather. This will be registered under “Business Names Act 1962” (Queensland Government).
The application that is used for registering name is mentioned in (appendix c). Novelty Leather is going to utilize decades of knowledge and experience to provide a fine crafted quality leather products like jackets, coats, motor bike suits, belts, hand bags, wallets and key chains etc, with a specific focus on detail and innovative design. Novelty Leather incorporates modern and classic, well-designed product with rich character, enduring quality, and the unique beauty of each leather product. The leather skins are carefully hand selected, inspected, and finished with pride by skilled craftsmen while they maintain the natural beauty of the leather.
Each piece is carefully constructed with attention to design, fine stitching, and is made using only the finest techniques and materials. The finished Novelty product can withstand the tests of time and travel for both a busy personal and professional lifestyle. 6. 2Viability of this business 6. 2. 1 Legal structure of this Business Novelty Leather will be a sole proprietorship or sole trader based business by keeping in mind its easy formation, total control over business, relatively cheap to setup and fewer regulations to follow. This doesn’t mean that Novelty leather won’t hire any other staff; of course it will hire 4 to 7 employees, who will be given proper training to operate, maintain and deal with suppliers & customers of the outlet. 2.
Market size: market research The location that is chosen for this outlet is Brisbane which is an ideal location for doing business. The selected Location in Brisbane is Queen Street Shopping mall. The Queen Street Mall is the retail hub of the country’s fastest growing city, Brisbane. The mall is said to be one of the busiest shopping precincts in Australia, with an estimated 160,000 people visiting per day. It offers businesses a supportive, pro-business approach, an excellent strategic location in the Asia-Pacific region, a highly developed business and trade infrastructure, a sophisticated industry base and skilled workforce, and low costs for doing business.
Novelty Leather competitors in Brisbane are City Yamaha which specializes in Leather motorcycle clothing specialists, Hutchison Leathers Fur and Leather garments, Southgate Le Ritze Siricco which deals in Leather accessories, Tik-Tak Alterations and Hunt Leather which also deals in a variety of leather products (Leather Stores in Brisbane) 3. Target market : segmentation Market segementation will explain about the target market in detail where the company want to be. From a demographic perspective the age profile of the target market is, people between the ages of 18-30. Novelty Leather aims to target both males and females in the age group of 18-35. The income of this target market is average to high income. From Geographical perspective the location that the company is targeting is that of Central Business District Brisbane. C. B.
D is Brisbane’s business and financial centre and home to retail, financial, legal, administrative, recreational, tourist and entertainment facilities and operates 24 hours a day, serving a wide variety of residents, workers and visitors. From psychological perspective the personality traits of this target market are that they are individuals and like to look good, love to buy new and new design products. The target market is also for those who are interested in riding on speed machine (bikers), clubbing, and going out on parties. The benefits sought by this target market are one of quality at reasonable price with dashing designs. 6. 2. 4 Nature of product
The product chosen for the Australian (Brisbane) market is leather goods like jackets, coats, motor bike suit, belts, hats, valets for men and women, hand bags, and key chains etc. The company will manufacture all the goods in china, India and Pakistan and later on import to Brisbane. These countries are well known in the world for very high quality and wide-range of finished and raw leather goods. The company will provide both high standard product and services at the same time. Novelty Leather products include backpacks, ladies bags (small to Large), Travelers’ cases, wallets, key chains, jackets (for women and men) and hats etc. We will also deal in ranges of executive products by Antler, Samsonite and many others.
All of these products will be available under one roof unlike other stores in Brisbane. 6. 2. 5 Competitive edge / USP The primary competitive advantage of Novelty Leather is going to offers a huge range of products at up to 50% less than recommended retail prices because it will import from China, India and Pakistan who are the largest producers of good quality but lowest price raw leathers and finished leather products by keeping in mind the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) which controls the international movement of, wildlife, wildlife specimens and products made or derived from wildlife, and for this we’ll need a permit under the EPBC Act . The outlet will deal n the range of leather products mentioned earlier at the lowest price without sacrificing the quality. The products will be especially made for Australians by keeping in mind their needs and wants and desires. The outlet will also deal in Australian-made jackets using the finest Italian leathers; a large selection of fashion and Italian Designer bags & shoes. Labels include Prada, MiuMiu, D&G, Fendi, Sergio Rossi, Ferragamo. Novelty leather will provide an extensive range of accessories which include wallets, Italian silk ties, belts & genuine Pashmina Stoles. Novelty Leather brings you the latest and best products from around the world at the best prices. 6. 2. Amount of finance required to get started (estimate only) The amount of finance that is required to get started for Novelty Leather will be approximately $ 0. 5 million. Which comprise of the following; The location that has been selected for this outlet is Edward Street Mall, 261 Queen Street Brisbane QLD. The Shop is within Edward Street Mall and has high exposure to the main entrance. The lease for the property via L. J Hooker is $700, 000 per annum. But for the start we have to pay app $ 70,000 for booking and advance payment of 5% and as well as legal documentation. First we will need TFN (Tax File Number) & ABN (Australian Business Number) which is free of charge (see Appendix a).
We’ll be also required to apply for fringe benefits Tax (appendix b). After that, the import and purchasing of finished and raw goods from India, China and Pakistan is considered. For the start we’ll buy $ 100,000 worth of goods and as a result of contacting Australian Customs’ Senior Information Officer (Paul Roberts), he informed us that the duty that we are going to pay will be 5% of the price of goods we purchased. The freight charges and cost of insurance to Australia is taken to be approximately $ 12,000. The 10 % GST (Goods and Services Tax) will be paid on the combination of: purchase price of goods and the cost of freight and insurance into Australia, more details are available on (Appendix d).
The initial cost which include marketing activities, accounting systems, decorating the shop activities, permit from EPBC, Communications equipment (such as telephones, computers, fax machines), Insurance, Commercial transport and its registration, initial promotion and advertisement to customers and operating capital for the outlet we’ll also need to hire 4-7 employees. (Note: These figures were given in an intention to start-up and run a business only) . List of References 1. Australian Bureau Of statistics, Counts of Australian Businesses, Including Entries and Exits Jun 2003- Jun 2007, viewed 05 August 2008, 2. Stanworth, M. and J. Curran, 1976, Growth and the small firm, Journal of Management Studies, 13, 2, May, 95–110. 3. Meredith. G 1975, ‘A national Policy for Small Enterprise Development’, university of New England, Armidale. 4. Ratnatunga, J & Dixon, J1993, Australian and New Zealand Small Business Manual, 3rd edn, name of Publication, Australia, pp. Xvii- xviii. 5. C. M. iew, Corporate Turnaround: A rewiew and case study, National University of Singapore, Singapore, 1990. 6. Collins. J. C & William. C. J 1995, managing the small to mid-sized company concept and costs, McGraw-Hill Irwin, Chicago. 7. Queensland Government, Business names Application, viewed 08 august 2008, https://govforms. business. gov. au/ 8. Queen Street Mall, Brisbane Marketing Face Sheet 2 June 2006, Viewed 08 August 2008, < http://www. realcommercial. com. au/cgi-bin/rsearch? a=o&id=5430755&f=0&p=10&t=com&ty=&fmt=&header=&cc=&c=55562561&s=qld&snf=as&tm=1219492866> 9. Leather Clothing Stores in QLD: Brisbane, Viewed 08 August 2008, http://www. startlocal. com. u/retailclothing/leatherclothing/qld_brisbane/ 10. Environment Protection and Biodiversity Conservation Act 1999, Viewed 09 August 2008, http://www. environment. gov. au/epbc/index. html 11. Schaper. M and Volery. T 2007, Entrepreneurship and Small Business, 2nd edn (Pacific Rim), John Wiley & Sons, Australia. 12. Kelmar. J. H, 1994, ‘Measurement of success and failure in small business: A two factor Approach’, Journal of enterprising culture, vol 1, no. 3, p. 421-436. 13. Cromie, S 1991 ‘The problems experienced by young firms’, international small business journal, Vol. 9, no. 3, p. 43-45. 14. Dick Smith Achievements, Viewed 03August 2008, Appendices Appendix: a.
ABN (Australian Business Number); An Australian Business Number is required by all businesses in order to comply with the provisions of the new tax system. b. Fringe Benefits Tax: Fringe Benefits Tax is payable on a range of non-salary employment-related benefits which are provided by employers, (or by a person on their behalf), to their employees or to people associated with employees such as family members. The application form for registration can also be completed online through the Business Entry Point on the Internet: www. business. gov. au c. Business Names Act 1962: Link for registering a business name is given below. http://www. fairtrading. qld. gov. au/oft/oftweb. sf/AllDocs/527E944BDA96270B4A256BF800054473/$File/Business_Names_F1_V16_0707-FSO. pdf d. Paul Roberts Email: Dear Numan Khan Thank you for your enquiry about importing leather goods Your imported goods may arrive in Australia either by airfreight, express courier, and sea cargo or via the post office. As such, the method of delivery will determine the Customs clearance formalities and charges. Irrespective of how your imported goods arrive in Australia, you will be required to lodge a formal Customs import declaration if their value is above $1,000, and to pay the calculated duty and taxes. Formal import declarations can be lodged either electronically or by document as follows: Electronic lodgment: obtain a digital certificate in order to communicate with Customs’ electronic systems to complete a formal import declaration or engage the services of a customs broker (listed in the Yellow Pages); or • Documentary lodgment: go to the nearest Customs office and present the necessary documentation including evidence of identity. Imported goods with a value of less than a $1000 arriving by post will be released duty and tax free by Customs for delivery direct to the addressee except for tobacco, tobacco products and alcoholic beverages or goods subject to import permit requirements. In these cases, you will be contacted and notified of the action you must take. Imported goods arriving otherwise than by post will require the completion of a Self Assessed Clearance (SAC) declaration before clearance from Customs control SAC declarations can only be lodged electronically.
No cost recovery charges are imposed by Customs on SAC declarations but administrative/processing charges may be imposed by carriers acting on your behalf In general this type of good would attract a 5% rate of import duty and 10% Goods and Services Tax (GST). The import duty would be paid on the purchase price of the goods. The 10% rate of GST is paid on the combination of- – The purchase price of the goods – The import duty paid on the goods – The cost of freight and insurance into Australia Regards, Paul Roberts Senior Information Officer Customs Information and Support Centre Ph: 1300 363 263 Fax: 02 8339 6714 Website: www. customs. gov. au ; This information is provided as a guide only and should be clarified