SME

• Definition

  SMES are small to medium enterprises with fewer than 200 employees. Some of the characteristics of SMES include the fact of being independently owned, closely controlled/operated by owner, usually locally based, reliant on internal support services and personalised services. 
• Role of SME’s

  SMES play a vital role in the Australian economy

  • Contribute about 56% to the value of Australia’s production of goods and services.
  • Employ about 68.3% of all the people working in the private sector (workforce)
  • Earn more profits and pay more taxes than large business’ do 
  • Account for 43% of all money spent on research and development 
  • A significant number of SMES export their goods overseas. This contributes to the health of Australia's balance of payments (BOP) 

  BOP-an account of Australia’s transactions (goods, services and money flows) with the rest of the world. 
• Economic contribution of SME’s

  In Australia, the economic system is called a market capitalist economy. Most goods and services are produced by the private sector, not the government. SMES contribute about 56% to the value of Australia's production of goods and services. They employ around 68% of the workforce. These employees spend their wages on more goods and services providing more jobs for people.
• Key to SME success

  1. Entrepreneurial abilities 

  Some will have drive and enthusiasm, many will set targets or big risks.

  1. Access to information 

  It is always difficult for an SME owner to choose relevant information and to gauge the quantity of information needed.

  1. Flexibility 

  The small size of the business allows the owner to adapt quickly to changes in the external environment. 

  1. Focus on the market niche 
  2. Reputation 

  quality and service.
• SME faliure

  • After 10 years = 70% failure rate
  • Failure to plan 
  • Growing too quickly 
  • Negative cash flow
  • Economic downturn 
  • New competitors 
  • Lack of management/experience 
• Personal qualities in establishing an SME

  Qualifications 

  Skills

  Motivation

  Entrepreneurship

  Cultural background

  Gender
• Personal qualities (qualifications)

  • Possibly no formal qualifications are necessary to run SMES. However, a HSC business course or form of Tertiary study such as at TAFE or university may assist a prospective business owner. 
• Personal qualities (skills)

  • Can be attained through experience, education and/or training. Experience as an employee increases skills. Especially through aspects such as education and training courses. Some skills that may be necessary in running a business include accounting, computer, staff management, and administration/stock + marketing.
• Personal qualities (motivation)

  • Personal drive, determination and desire to achieve a goal or objective. Transform an idea into a successful product/service. 
• Personal qualities (Entrepreneurship)

  • Willing to establish a business in a bid for success. Not just an avenue for wealth but a way of making a living and achieving job satisfaction. 
• Personal qualities (Cultural background)

  • Willingness to work long and hard hours in an effort to be successful is prominent in Europe and Asian cultures. Many migrants come to Australia with few resources except desire to improve life. This also includes cultures that have expertise, and experience in business areas. Many different cultures also have a drive to improve their financial status through hard work. 
• Personal qualities (gender)

  • Creation or expansion of the small business sector. To respond to a general change in attitude, many women are setting up their own business which is continuing within business culture today. 
  • There is an upward trend in and encouragement of female entrepreneurs 
  • 68%-Male dominated, 32% Female dominated in the Australian small business sector
• Sources of information (professional)


  Accountants-Financial management and taxation advice, reporting requirements. 

  Solictors-Business formation, contracts, leases and partnership agreements. 

  Bank managers-Sources of finance and basic business management. 

  Management consultants-Management problems such as; implementing change that may be unpopular 
• Sources of information (GOV agencies)

  State gov-NSW GOV: Department of planning, industry and environment offering the following programs. Business connect: 

  A program providing advice to start-ups, productivity and resilience, assistance and digital readiness. 

  Boosting business innovation program :

  Gives access to research organisations to stimulate eco-growth in metro and regional areas. 

  Federal gov-

  ATO: Tax advice, Austrade 

  Technological advice: 

  ICT Consultant, digital business kits

   (Fed gov. Help for SMES + NFP)

  Local Gov-Zoning, land
• Sources of Information

  Chambers of commerce-Financial and legal advice, industrial relations, industry conferences. 

  Trade associations-Industry information and assistance E.g: Australian retailers association, Australian medical association (AMA).

  Libraries and reference material-

  Reference material, online databases, trade and industry journals. 

  Australian Bureau of Statistics-

  Census information, demographic info, household expenditure surveys. 

  Business mentors-

  A knowledgeable person in the field may or may not charge for advice. 
• The business idea-Competition

  Sources of a business idea: 

  • Listening and talking to other people 
  • Research Gov statistics and data e.g for future needs 
  • Identify a gap in the market e.g aged care
  • Visit displays/exhibitions e.g O/S 
  • Determine improvement to make an existing good. 
  • Books/magazines/internet research 
  • Goods/services not readily available 
• Starting from scratch

  Starting from scratch refers to setting up a new business. This may be an option for a business owner who has created something unique (innovative), recognised a gap in the market, or when the market has grown and existing business’ cannot supply all customers.

  ADVANTAGES-

  the owner has the freedom to set up the business exactly as they wish, there is no goodwill

  DISADVANTAGE-

  • Some of the most prominent disadvantages when starting from scratch is that there is a high risk and uncertainty, may not generate profits for some time. 
• Buying an existing business

  the business is already operating and everything associated with the business is included in the purchase. For example, stock and equipment, staff, location, customer base and reputation/goodwill. 

  ADVANTAGES-

  Some of the evident advantages when purchasing an existing business include sales to existing customers will generate income, a good business history increases the likelihood of success, (Immediate use)

  DISADVANTAGES-

  difficult change to the existing image and policies of the business, especially if it had a poor reputation previously,
• Buying a franchise

  refers to buying the rights from another business to distribute its products under its name. A franchisor is an individual or business that grants the franchise. A franchisee is an individual or business that purchases a franchise. 

  ADVANTAGES-

  already established and operational equipment and premises designs, immediate benefit delivered from the franchisor’s goodwill, methods already exist

  DISADVANTAGES-

  profits must be shared with the franchisor (ongoing payment of franchisor fees), franchisee must share any burden of the franchisor’s business mistakes
• Market-good or service, price, location

  (Checking the feasibility and visibility of a product before it is released)

  A new good or service is only going to be successful if customers wish to purchase it. To discover whether or not this will happen, a feasibility study as well as market research must be conducted. 
• Market:

  Market research:

  Market research is the process of systematically collecting, recording and analysing information concerning a specific marketing problem. 

  This asks: 

  • Who are our customers?
  • What do we want to know about them?
  • What is their age and gender?
  • What do our competitors offer that we don't? 
  • How can we gain more customers?
• Market: price

  Prices that are set too high or low may either drive customers away or make it difficult to achieve a profit. 

  Cost-based: Derived from calculating the total cost of producing or purchasing a product and then adding a mark-up for profit

  Market-based: A method of setting prices according to the interaction between the levels of supply and demand-Whatever the market is prepared to pay for.  

  Competition-based: Choosing a price that is either below, equal to or above that of the competitors. 
• Market: Location

  A suitable location for a business must be found. Zoning regulations affect the types of business activities that may be conducted at a particular place and must be obeyed.

  -Commercial

  -Industrial

  -Residential
• Market: Location

  Shopping centres (commercial):

  • leasing a store can be expensive, they need to remain open during centre hours (e.g 7 days a week) and rely on the centre to renew its lease.  
  • Shopping centres have parking, access to public transport, undercover areas
• Market: Location

  Shopping strips (commercial):

  • Many shopping strips have struggled to compete with shopping centres due to their parking and air conditioned environment. 
  • Offer the advantage of high visibility from passing traffic
  • Because many shopping centres close in the evening, shopping strips have become popular locations for restaurants and ‘after hours’/’late night’ entertainment. 
  • Located near public transport but suffer due to their location on major arterial roads that are clearways during peak hours. 
• Market: Location

  Online presence: 

  • Allows for the possibility of conducting business online, so the business is no longer limited to dealing with people who can physically visit its premises. 
  • Business’ seeing the need to expand through the internet, establishing an online-only presence, avoiding store expenses (e.g rent)

  Others have added this online component to ensure keeping up with competition, while retaining physical stores. 
• Market: Location

  Home-based business: 

  • Plumbers, electricians, painters and more do not need a business location/premises as they provide services in the customers home or business premises. 
  • Although home based businesses provide services but also produce goods (online ordering)  
  • Business owners do not face any substantial expenditure on rent or purchasing a premises. Risk is reduced for a new prospective business owner. Flexibility, reduced commute time difficult to keep work and home-life separate. 
  • difficult to keep work and home-life separate.