Forms of Business ownership Established Business, New Business or Franchise? Business Proposal

Quickly Read Chapter 2.4 & 2.5 Quickly!!

Types of Ownership unincorporated business entities: sole traders and partnerships incorporated business entities: privately and publicly owned companies and cooperatives other types of privately owned business entity: trusts.

Types of Business Ownerships Sole Trader PartnershipCompanyCooperative Unincorporated = unlimited liability Private Public Incorporated = limited liability

SOLE TRADER FEATURESADVANTAGESDISADVANTAGES One owner who operates the business under their own name or registered business name Owner has total control over the business Unlimited liability Has an Australian Business Number (ABN) Minimal government regulations Harder to get finance Unlimited LiabilitySimple and inexpensive to establish Reliant on own knowledge and skills

PARTNERSHIP FEATURESADVANTAGESDISADVANTAGES Business is owned by 2 – 20 people Risks are sharedUnlimited liability Partnership agreement to establish conditions Minimal government regulations Business can be threatened by one partner leaving Partners jointly liable for business debts Offer broader access to capital, knowledge, skills and experience Potential for disputes and personality clashes Workload may be shared Liability for debts incurred by others

These two businesses are usually Unincorporated – which means?

COMPANY (private) FEATURESADVANTAGESDISADVANTAGES Shareholders (owners) are legally separate from the business Limited liabilityHigher establishment costs Between one and fifty shareholders who appoint directors to run the company Separate legal existence Higher degree of government control and reporting requirements ABNExistence is not threatened with death or removal of one of the directors Higher degree of complexity in establishment

Incorporated means?

Established Business New Business Franchise

Established business ADVANTAGESDISADVANTAGES It is a much simpler process as things like staff, registration and business name are already in place Purchaser may be ‘buying a lemon’ The business will become operational and generate cash flow quickly The business could have a bad reputation E.g.: CAFE VAMP! There is already a customer and supplier base The business could have previous financial problems

New business ADVANTAGESDISADVANTAGES Complete control over the concept and form of the business There is a far greater degree of uncertainty with no previous sales history or figures to go by More freedom to implement their own ideas and be their own boss More work initially Avoidance of buying into the mistakes of others Unexpected competition Complete autonomy in the running of the business and in its establishment decisions More scope for error as the new business owner will need to make more decisions

Franchise Definition: Involves paying another business (franchisor) for the right to use that businesses tradename, products and operating systems. E.g.: Mc Donald's ADVANTAGESDISADVANTAGES Reduced risk of business failureLess independence The systems have been tested and usually succeeds Franchise owner will not be able to implement their own ideas Established procedures and staff training provided Excessive costs and fees. Initial service fee as well as monthly service fees and percentage of the takings Buyer awareness as the brand name is already established Franchise is judged by the performance of other franchisees. Poor service by someone will affect all.

Location

BUSINESS LOCATIONS BUSINESS LOCATIONS Home based businesses Shopping centres Online business Online business Retail shopping strip

Selecting a location for your business is one of the most important decisions for small business operators. Business location provides a link between: customers/clients Suppliers Products Labour

Factors to consider when selecting a location: Personal Factors: Is the business close to home? Is there an attachment to the area? Site accessibility and visibility Are a number of customers/ suppliers able to locate and access the business Costs Size Place Budget of business Quality of location Proximity to other large businesses Certain businesses will attract customers into an area Large businesses such as Target /Myer

Area Profile Demographics of the area – age patterns /incomes/ interests/ ethnicity/ education levels Economic and Social trends – younger people moving into the area / aging population. How will business cope with trends? Complementary businesses – E.g: Pharmacy complements doctors surgery Levels of services and amenities – banks? Childcare? Reputation of area – Broadmeadows vs Toorak Area Profile Demographics of the area – age patterns /incomes/ interests/ ethnicity/ education levels Economic and Social trends – younger people moving into the area / aging population. How will business cope with trends? Complementary businesses – E.g: Pharmacy complements doctors surgery Levels of services and amenities – banks? Childcare? Reputation of area – Broadmeadows vs Toorak

True or False? The first stand-alone shopping centre in Australia was the Chadstone centre, which opened in It is now the largest regional shopping centre in Australia with over 500 retail outlets and parking for over 10,000 cars.