© Cambridge University Press 2012 Chapter 3 Small Business

© Cambridge University Press 2012 Small Business Small businesses are owned and managed by the same person and employ fewer than 15 people They represent 96% of all private sector businesses

© Cambridge University Press 2012 Small Business Small businesses employ almost 5 million people in Australia They also contribute strongly to Australia’s level of economic activity and production, exports and tax revenue

© Cambridge University Press 2012 Owning a Small Business Reasons for owning a business include the profit motive a desire for greater independence the identification of a market opportunity employment

© Cambridge University Press 2012 Owning a Small Business Most successful business owners are experts in their field, entrepreneurial, determined, confident, cordial, patient and willing to recognise their own limitations and seek assistance

© Cambridge University Press 2012 There are three main asset groups that can be used as alternative investment options to starting a small business cash property shares Alternatives to Owning a Small Business

© Cambridge University Press 2012 Alternatives to Owning a Small Business Investors must take into account the correlation between the level of risk and the rate of return, the term, and the liquidity of any alternative investment

© Cambridge University Press 2012 Planning A detailed business plan is essential before operations commence. The more information included in the plan, the greater the business’s chances of success A business plan may make it easier to convince a financial institution to provide finance

© Cambridge University Press 2012 Business Operations Business can be classified by the nature of their operations as trading, service or manufacturing businesses In some cases, businesses will combine one or more types of operation

© Cambridge University Press 2012 Ownership Structures The choice of ownership structure will have consequences for a whole host of issues, including the owner’s personal accountability for the debts of the business

© Cambridge University Press 2012 The three principle ownership structures are sole proprietorships, partnerships and companies Sole proprietorships and partnerships have unlimited liability; companies have limited liability Ownership Structures

© Cambridge University Press 2012 Small Business A prospective business owner can start a new business, buy an existing business or buy a franchise Small businesses can also gain assistance from a variety of sources

© Cambridge University Press 2012 Recipe for a Successful Small Business Successful small businesses have a high demand for their product or service, a good location, a thorough business plan, sufficient starting capital and a knowledgeable and resilient owner