ABOUT THE LEARNER MATERIALS FOR THE CERTIFICATE III IN

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Introduction

ABOUT THE LEARNER MATERIALS FOR THE CERTIFICATE III IN MICRO BUSINESS OPERATIONS

BSB30315

These learner materials have been developed specifically to assist participants undertaking the Certificate III in Micro Business Operations BSB30315 to meet the required competencies. The units include:

• BSBSMB301: Investigate micro business opportunities• BSBSMB302: Develop a micro business proposal• BSBSMB303: Organise finances for the micro business• BSBSMB304: Determine resource requirements for the micro business• BSBSMB305: Comply with regulatory, taxation and insurance requirements

for the micro business

• BSBCUS301: Deliver and monitor a service to customers• BSBFIA301: Maintain financial records• BSBSMB306: Plan a home-based business• BSBWOR301: Organise personal work priorities and development• BSBSMB403: Market the small business

The information required to address the Performance Criteria of each of the Elements of the above units has been integrated where appropriate, and is presented in six Modules as follows:

MODULE 1: RESEARCHING THE BUSINESS OPPORTUNITY

Chapter 1: Describing business ideas BSBSMB301: 1.1-1.6

Chapter 2: Market research BSBSMB301: 2.1-2.6

Chapter 3: Factors affecting the market BSBSMB301: 3.1-3.3

MODULE 2: BUSINESS PLANNING

Chapter 1: Evaluating business opportunities BSBSMB302: 1.1-1.6

Chapter 2: Preparing a business proposal BSBSMB302: 2.1-2.2, 3.1-3.3

Chapter 3: Running your business from home BSBSMB306: 1.1-1.6

Chapter 4: Planning your workspace BSBSMB306: 2.1-2.6

Chapter 5: Planning for the smooth running of your home-based business

BSBSMB306: 3.1-3.4

MODULE 3: BUSINESS STRUCTURE AND LEGAL REQUIREMENTS

Chapter 1: The legal structure of your business BSBSMB305: 1.1-1.3

Chapter 2: Legislation codes and regulatory requirements BSBSMB305: 2.1-2.5

Chapter 3: Negotiating and arranging contracts BSBSMB305: 3.1-3.3

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BSB30315 Training Package rules

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Introduction

MODULE 4: MARKETING

Chapter 1: Marketing strategies BSBSMB403: 1.1-1.5

Chapter 2: Your marketing mix BSBSMB403: 2.1-2.4

Chapter 3: Implementing and monitoring your marketing strategies

BSBSMB403:BSBCUS301:

3.1-3.3, 4.1-4.61.1-1.4, 2.1-2.5, 3.1-3.5

MODULE 5: OPERATIONS

Chapter 1: Resources required in the business BSBSMB304: 1.1-1.4

Chapter 2: Appropriate sources BSBSMB304: 2.1-2.5

Chapter 3: Preparing to use the resources BSBSMB304: 3.1-3.4

Chapter 4: Personal work priorities BSBWOR301: 1.1-1.4, 2.1-2.5, 3.1-3.4

MODULE 6: FINANCES

Chapter 1: Personal financial position BSBSMB303: 1.1-1.2

Chapter 2: Cash flow for the business BSBSMB303:

BSBSFIA301:

2.1-2.7, 3.1-3.4

3.1-3.4

Chapter 3: Profitability of the business BSBSMB303: 4.1-4.4

Chapter 4: Maintaining financial records BSBFIA301: 1.1-1.3, 2.1-2.4

Each Module presents:• Content which is relevant to the elements within the units specified.• A range of training tools including:

– Key concepts: list the key concepts at the beginning of each module to focus participants on the major topics covered.

– Activities: clarify various concepts through individual, partner or group work. (Note: the activities are intended as an aid to learning, not necessarily as assessment tasks.)

– Examples and case studies: utilise a wide range of small business scenarios to clarify the content.

– Checklists: summarise information in relation to various concepts.– Summary tables: list such aspects as advantages and disadvantages, or key

features.

The resource also includes:

• Further information: provides a list of websites, which contain up-to-date information relevant to micro business.

• Table of contents: presents an overview of the topics and concepts presented.

• Glossary: defines key terms related to the resource.

• Index: utilises key words to facilitate the efficient location of concepts.

• Download: available on the Innovative Business Resources website and presents a Business Proposal Proforma and a set of Financial Tables in both linked, unlinked and hard copy versions.

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Introduction

The program provides for flexible approaches to learning, and individual trainers/facilitators are able to vary the delivery of the course according to individual and group needs.

Practical demonstrations and examples, action learning processes, group participatory discussions, and an application of the various aspects to participants’ own business ventures is recommended, wherever possible.

To supplement the Learner Materials, a Trainer Resource including Assessment Materials is available.

THE TRAINER RESOURCEThe Trainer Resource is an important tool for the trainer/facilitator, to assist in the delivery of the Certificate III in Micro Business Operations BSB30315. This resource is a Download that supports all six modules of the Certificate III Learner Resource and incorporates:

1. Assessment materials

The Assessment Materials are specifically written for the Units included in this version of the Certificate III in Micro Business Operations BSB30315 and is intended for use in conjunction with the IBR Learner Materials. The materials:

• are fully customisable

• cover the competency elements and address all performance criteria within each Unit

• meet the five ‘rules’ of evidence, being: valid, authentic, reliable, sufficient, and current

• provide a Marking Key which addresses the assessment tasks

• provide a Record of Assessment Overview for the facilitator to record each participant’s achievement on the performance criteria within each Unit.

As there are many potential sources of evidence, and many methods and techniques for gathering evidence in competency-based assessment, the assessment material chosen for the units within the Small and Micro Business specific competency field are diverse. However, the main platform for assessment is based on ‘Questioning’. Other evidence techniques utilised include simulation, review of products/work samples, portfolio, structured activities, and third party feedback.

2. PowerPoint presentations

These colour slides are for use in the delivery of each module. They allow the trainer to reinforce concepts presented in the Learner Materials. Each slide references the specific page in the IBR Certificate III Learner Resource.

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Contents

CONTENTS

Copyright i

About the Learner Materials for the BSB30315 Certificate III in Micro Business Operations ii

MODULE 1: RESEARCHING THE BUSINESS OPPORTUNITYChapter 1: Describing business ideas 3

What is a micro business? 3• Industry sectors 3• Types of businesses 5

Exploring business ideas 8• Using an online search as a starting point 9

Identifying business opportunities 11• Testing your idea 12

Personal characteristics and skills to consider when exploring your business ideas 161. Personal characteristics 162. Abilities and skills 17

Chapter 2: Market research 19Gathering information: the concept of market research 19

• The scope of market research information 20• The market research process 21• The stages in market research 24• Standards of information 49

Analysing your market research 51• Quantitative data analysis 51• Qualitative data analysis 53

Chapter 3: Factors affecting the market 55The business environment 55

1. Macro environment 562. Operating environment 573. Internal environment 57

Examples of business environments 58

MODULE 2: BUSINESS PLANNINGChapter 1: Evaluating business opportunities 63

What is a micro business? 63Reasons for starting out in micro business 63Benefits and pitfalls of micro business ownership 65The essentials for success in micro business 66

• Why do micro businesses fail? 66The secrets of success in micro business 70The personal characteristics and skills necessary for success in micro business 75

1. Personal characteristics 752. Abilities and skills 79

Evaluating business opportunities 85

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• Testing your idea 87• Feasibility study 89• A SWOT analysis 91

Chapter 2: Preparing a business proposal 99Presenting an overview of your business to key stakeholders 99The importance of a business proposal 101The business planning process 102

• Elements of the planning process 102The essential elements of a business proposal 108

1. Executive summary 1092. The business concept 1113. Market research 1114. Marketing plan 1125. Operations plan 1126. Financial plan 112

Presentation of the business proposal 113The basic business proposal proforma 113Business proposal checklist 123

Chapter 3: Running your business from home 137Considering a home-based business 138

• Secrets to success 139• Some possible pitfalls 139

Advice and support 142Planning for a home-based business 143Specific aspects of your business to plan 144

A. Business activities to be undertaken 144B. My workspace 146C. Facilities and equipment required 148D. Services and infrastructure 149E. Legal requirements, regulations and restrictions 151F. Set-up costs 157G. Access requirements 161H. Insurance requirements 162

Chapter 4: Planning your workplace 165Selecting an area for your workspace 166The layout of your workspace 170Workplace health and safety issues 173

• Model codes of practice 173• Duties of care 173• Developing a strategy to address work health and safety 175• Workplace health and safety record keeping 178

Chapter 5: Planning for the smooth running of your home-based business 181Minimising conflict with family members 181Minimising conflict with neighbours 184Contingency plans 185

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MODULE 3: BUSINESS STRUCTURE AND LEGAL REQUIREMENTSChapter 1: The legal structure of your business 193

Business ownership structures 1931. Sole proprietor/trader 1932. Partnership 1953. Company 1964. Trust 198

Your business name 201• Registering a business name 201• The legalities of a business name 203

Chapter 2: Legislation codes and regulatory requirements 205Regulations, licences and permits 205

• Regulations 205• Licences and permits 206

The protection of intellectual property 210The legal implications of operating a business from home 214Other possible restrictions which may impact on your business 215

• Trade practices 215• Consumer protection 215• Equal opportunity 216• Workplace health and safety 217

Insurance 219Superannuation 220Statutory and regulatory requirements of taxation 223

• The Australian Taxation System 223• Elements of the Tax System 223• ATO definitions relating to the tax system 224• The GST and how it works 227• Registering for the GST 230• GST payable and input tax credits 235• Accounting for GST 241• Special GST rules 253• The Pay As You Go system 253• Your rights and responsibilities 263

Small business tax concessions 264• The concessions 264

Other taxation matters 265• Tax file number 265• Keeping tax records 267• Stocktaking (unless you are using small business tax concessions) 267• Business structures and taxation considerations 268• Personal income tax 269• Income tax for partnerships 270• Income tax for companies 271• Superannuation guarantee charge 273• Business deductions 274• Personal services income 279

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Chapter 3: Negotiating and arranging contracts 281The law of contract 281

• Terms of a contract 282• Your rights and obligations within contracts 282• Discharge of contract 283

MODULE 4: MARKETINGChapter 1: Marketing strategies 287

An overview of marketing 287• The marketing process 288• Essential steps in marketing 288

Market segmentation: identifying your target market 289• Types of segmentation within the industrial market 290• Types of segmentation within the consumer market 290• Identifying your target market 284• Customer profiling 293

Conducting a SWOT analysis 298Your competitors 298

• Analysing your competitors 299• My competitive advantage 299• Positioning strategies 303

Chapter 2: Your marketing mix 307The marketing mix 3071. Product 308

• Features of a product/service 308• Benefits of a product/service 308• Product/service life cycle 311• Product/service mix 313

2. Price 315• Methods of pricing 316• Specific pricing strategies 317

3. Place 319• The physical location 319• The premises and its layout 321• Methods of distribution 321

4. Promotion 328

Chapter 3: Implementing and monitoring your marketing strategies 331A. Product presentation 331

• Business image 331• Branding 335• Packaging 335• Labelling 336• Design 337• Quality 337• Warranty 339• Servicing 340

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B. Promotional objectives 340• The principles of marketing communication 341

C. Promotional methods 343• Advertising 345• Sales promotion 354• Publicity and public relations 356• Product launches 357• Functions 359• Media announcements 359• Direct response marketing 361• Personal selling 361• Digital platforms 365

D. Your promotional budget 384

Chapter 4: Coordinating and reviewing promotional activities 387A. Your promotional mix 387B. Your marketing plan 390

• Your marketing action plan 392C. Monitoring your marketing efforts 392

• Analysing your promotional activities 394

Chapter 5: Coordinating and reviewing promotional activities 401A. Relationship vs transactional marketing 401B. What is the customer looking for? 402

• Your customer service makes a difference 402• Features of quality customer service 403• Benefits of quality customer service 404

C. Keeping your customers loyal 405D. Dealing with customer complaints 407E. Reviewing customer service strategies 410

• Gathering information 410• Evaluating the feedback 419• Making recommendations for change 422• Monitoring changes 423

MODULE 5: OPERATIONSChapter 1: Resources required in the business 427

Types of resources 4271. Consumables 4282. Equipment 4293. Machinery 4314. Facilities 4325. Materials 4346. Technology 4357. Vehicles 4588. Personnel 4599. Capital 462

Determining the quantities of resources you require 4631. Business activity levels 4642. Financial position 465

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Gathering information about the resources 4671. Cost 4672. Delivery 4673. Set-up 468

Chapter 2: Appropriate sources for the resources you need 469A. Purchasing 469

• Borrowing funds 470B. Leasing 470C. Hiring 472

• Human resources 472D. Outsourcing 474

• Selecting the most appropriate source 476Establishing relationships with suppliers 478

Chapter 3: Preparing to use the resources in the business 479Procedures and systems 479

• Budgeting limits and approval process 479• Developing and monitoring resource contracts 480• Ordering of stock and materials 482• Delivery and receipt of stock and materials 485• Storage of stock and materials 487• Installation and support for digital technology 489• Installation of machinery and equipment 490• Maintenance and repair of machinery and equipment 492• Recruitment, induction and supervision of personnel 493

Monitoring and maintaining your resources 506• Facilities 507• Consumables 510• Equipment and machinery 511• Stock and materials 512• Technology 514• Vehicles 514• Human resources 515

RISK MANAGEMENT 517• Step 1: Identify the risks 518• Step 2: Assess the risks 518• Step 3: Control the risks 520• Step 4: Monitor and review the plan 521

ENVIRONMENTAL CONSIDERATIONS 521• Environmental regulations 522• Carbon footprint 523• Measuring compliance with sustainability regulations 523• Measuring sustainability 523• Sustainability targets 524• Sources of information 524

Corporate Social Responsibility 526• Code of ethics 527

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Chapter 4: Organising personal work priorities and development 528A. Work goals and objectives 528

• Goal setting 529• Prioritising tasks 533• Factors affecting the achievement of work goals and objectives 536• Digital technology 538

B. Monitoring your work performance 542• Monitoring the performance of employees 543• Monitoring your own performance 544

C. Stress 549• Types of stress 549• Levels of stress 549• The stress development process 550• Causes of stress 551• Effects of stress 553• Strategies to deal with stress 554

D. Personal skill development and learning 558

MODULE 6: FINANCESChapter 1: Your personal financial position 563

The importance of organising finances 563Identifying your financial goals and targets 563Your personal financial position 566

• Schedule of personal drawings (Financial Table 1 and 1Y2 for NEIS) 566• Statement of personal net worth (Financial Table 2) 569

Chapter 2: Cash flow for the business 573The financial requirements of your business 573

• Typical business expenses 573Estimating the cash flow for your business 577

1. Pricing your products and services 5782. Completing a sales mix (Financial Table 3 and 3Y2 for NEIS) 5793. Estimating establishment costs (Financial Table 4) 5824. Source of funds (Financial Table 5) 5875. Cash flow forecast (Financial Table 6 and 6Y2 for NEIS) 599

Monitoring your cash flow 608• Factors influencing your cash position 608• Strategies to control your business performance 609• Outstanding accounts 610

Chapter 3: Profitability of the business 613Financial information requirements 613

• Types of records you should keep 614• Financial record keeping to meet taxation requirements 614• Developing a record keeping system 615• Source documents 616• A system for keeping financial records 618

Profit and loss projection (Financial Table 7 and 7Y2 for NEIS) 620Assessing the likely performance of your business 624

• Profitability ratios 625

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Chapter 4: Maintaining financial records 629Accounting procedures 629

• Accounting packages 630Maintaining daily financial records 632

• Transactions 632• Accounts 633

Journals 641• Functions of journals 641• The General Journal 641• GST 643

The General Ledger 651• Posting journal transactions to the General Ledger 654• Accounts payable and receivable 664

Completing a trial balance 671• Steps in preparing a trial balance 682

Solutions to activities 684

Appendix A: Lease agreement extract 681Appendix B: Financial tables and workplace planning grids 687Further information 701

Glossary 709References 725Index 727

DOWNLOAD (available from www.ibr.net.au)

– Business proposal proforma – Financial table notes – Unlinked financial tables – Linked financial tables – Financial tables for hard copy – For NEIS Candidates only

Business proposal proformaFinancial tables notesUnlinked financial tablesLinked financial tablesFinancial tables for hard copy

www.ibr.net.au

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Chapter 1: Describing business ideas

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CHAPTER 1DESCRIBING BUSINESS IDEAS

WHAT IS A MICRO BUSINESS?

A micro business is a type of small business that has fewer that five employees. Broadly stated, it is a business started with as little capital as possible, or less capital than would

be usual for a business. The term is often used in Australia to refer to a business with a single owner-operator, and no employees.

According to the Australian Bureau of Statistics, of the total 1,282,000 businesses in Australia, 370,000 of these are micro businesses. These form the backbone of our economy, making a vital contribution to industry gross product, and are a key component of regional Australia. Micro businesses also act as a ‘seedbed’ for entrepreneurial talent. In recent years they have made a major contribution to employment growth, and are becoming the main source of employment for women, young Australians and employees affected by the downsizing of larger organisations.

The nature of the Australian economic environment, in which diversity and private enterprise feature highly, provides great opportunities for those with the innovation, initiative, confidence and motivation to embark on a micro business venture.

INDUSTRY SECTORSA way to classify businesses is based on the type of activity they undertake. Businesses conducting similar types of activities can be grouped into an industry sector. There are four main types of industry – primary, secondary, tertiary and quaternary, as illustrated below.

Agriculture, farming, fishing

Mining

ManufacturingConstruction

Wholesale trade

Retail trade, entertainment

Services

Information technology

Culture

PRIMARY SECTOR SECONDARY SECTOR TERTIARY SECTOR QUATERNARY SECTOR

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MODULE 1: RESEARCHING THE BUSINESS OPPORTUNITY

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list of every page that contains that word. It will take time to sift through them all to find useful information. Your search results can be refined by using a Boolean search techniques.

Boolean searches allow you to combine words and phrases using the words AND, OR and NOT (otherwise known as Boolean operators) to limit, widen or define your search. Most Internet search engines and Web directories default to these Boolean search parameters anyway, but an effective researcher should know how to use basic Boolean operators.

Examples of search results using the basic Boolean operators are presented below.

You can also combine exact phrases and keywords with Boolean operators by using quotation marks. The search engine will only look for pages with that exact phrase or keyword. For example:

‘small business grants’ AND ‘Western Australia’

Search results would only contain the phrase ‘small business grants’ and ‘Western Australia’.

Search Term Hits

Trigg 1000 hits

Gardening services 800 hits

Trigg AND Gardening services 200 hits

Search Term Hits

Small business grants 100 hits

Small business subsidies 70 hits

SB grants OR SB subsidies 170 hits

Search Term Hits

SBM training 1000 hits

Online 900 hits

SBM training NOT online 100 hits

The words ‘Trigg’ and ‘Gardening services’ will both be present in each record.

Either ‘small business grants’ or ‘Small business subsidies’ (or both) will be present in each record.

Each record contains the words ‘SBM training’, but not the word ‘online’.

‘AND’

‘OR’

‘NOT’


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Chapter 2: Market research

Social bookmarking sites

During the secondary information gathering stage you may find many websites that provide useful information, different perspectives, examples and case studies. It is too time consuming to copy and paste (and reference) everything you find. Social bookmarking sites allow you to tag a valuable website and create a list of website sources categorised under topics, questions or objectives. Sites also provide a source of information for your research as other people may have collated lists on the same research you are conducting.

Examples of social bookmarking sites include:

• www.delicious.com• www.digg.com• www.reddit.com• www.stumbleupon.com

Watch a simple explanation of social bookmarking at:

www.commoncraft.com/video/social-bookmarking

ACTIVITY 1.2.2

SECONDARY SOURCES WHICH ARE LIKELY TO PROVIDE YOU WITH USEFUL RELEVANT INFORMATION

List secondary sources of information that you think will be useful, and the type of information they will provide regarding the marketplace for your proposed small business venture.

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MODULE 2: BUSINESS PLANNING

THE ESSENTIALS FOR SUCCESS IN MICRO BUSINESS

Owning and managing a micro business can be rewarding or demoralising. Whether your business will succeed or fail depends on your abilities, initiative and capacity to work, and

most importantly, on knowing the basics and doing them well.

Contrary to common perceptions, most Australian businesses survive for a considerable time. For example, around two-thirds of businesses are still operating after five years and almost one-third are still operating after ten years. Around 7.5 per cent of businesses exit each year, and cessations account for 80 per cent of exits, with changes in ownership accounting for the remainder. Most exits are not the result of firm failures. In fact, less than one per cent of businesses exit each year due to bankruptcy or liquidation. Unfortunately this failure rate has shown an increase in the past five years due to global financial pressures.

WHY DO MICROL BUSINESSES FAIL?

A business is said to have ‘failed’ when it stops trading because:

By far the largest number of micro business failures are due to poor management.

In analysing the reasons for micro business failure, the mistakes which tend to occur repeatedly include:

• Poor planning: ‘Failing to plan is planning to fail’ is an old adage which describes a major reason for business failure. Thorough planning and adequate research into the potential of the business venture are essential, and can dramatically reduce the chances of failure. You, and your ability to plan and address issues before they become crises, are the most important determining factors in your business’s success.

• Lack of capital: It is easy to underestimate the total cost of setting up a business, and to overlook the fact that there may be a period of non-income earning, while the business is becoming established.

• Partnership problems: Partners should be chosen on the basis of their ability to contribute to the business, not on friendship. Making a partnership work is a difficult task.

• Lack of management expertise: The ability to set goals, organise, administer, plan, delegate and budget are all essential qualities for effective management.

• Incorrect pricing structure: Many small firms tend to underprice their products/services, because they have not given consideration to the actual cost of providing these products/services. It is not necessary to be the cheapest, as long as you remain competitive. Instances of overpricing occur less frequently.

It is declared bankrupt (a legal process to distribute among the creditors the property of a person or firm which will not, or cannot, pay outstanding debts)

It voluntarily closes down, because the owner is experiencing financial, or personal difficultiesOR

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Chapter 1: Evaluating business opportunities

• Inadequate record keeping: It is essential to keep accurate records in order to monitor the progress of the business, and to comply with government regulations.

• Failure to seek and/or take advice: Many micro business starters perceive legal and accounting advice, and training in managerial skills, as too expensive and unnecessary. However, professional assistance is an investment in your business, and may prevent difficulties at a later stage. It is important to seek help before it is needed.

• Cash flow problems: A lack of strict credit procedures and debit collection strategies have resulted in the bankruptcy of many businesses. A sale is not a sale until you have been paid!

• Neglect: The failure to invest sufficient time and energy in the business, and not remaining ‘hands on’ can lead to its downfall. You must be prepared to work hard and for long hours, particularly in the early years.

• Marketing problems: This is one of the most important elements in business. If you don’t have customers, you don’t have a business. Survival in micro business is dependent upon knowing and understanding what is happening in the marketplace.

Poor planning Lack of capital

Lack of management expertise

Inadequate record keeping

Partnership problems

Failure to seek/take advice

Neglect

Cash flow problems

Marketing problems

Incorrect pricing structure

Failing to plan is planning to fail


MODULE 3: BUSINESS STRUCTURE AND LEGAL REQUIREMENTS

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ADVANTAGES DISADVANTAGES

simple and low cost to form and operate partners are personally liable for all debts and obligations

additional expertise available to the business divided authority and potential incompatibility

additional sources of capital limitations on number of partners

shared managerial responsibilities and decision making powers lack of flexibility in transferring ownership interest

limited outside regulation each partner is generally liable for the acts of other partners

partnership shares cannot be transferred without the authority of other partners

death, bankruptcy or retirement of a partner result in dissolution, unless provision is made in the contract

3. COMPANY

The company structure is very different from both the sole trader and partnership structures. A company is formed when a group of individuals, or firms, combine as shareholders and incorporate under the provisions of the Companies Act.

Companies can be either proprietary limited companies or public companies. The difference is that proprietary limited companies cannot offer their shares to the public, as do public companies. For this reason, they are often called private companies. Our discussion will focus on proprietary limited companies.

The company is a separate legal entity, quite apart from the individuals (shareholders) who own or operate it. The company can:

• own property• enter into contracts• lend and borrow money• operate its own bank account• sue and be sued• be bought and sold.

The liability of the company is limited. That is, shareholders risk only their respective contribution of capital, and not their personal assets. The separateness of the company is also recognised for tax purposes.

When a company is formed it must comply with required legalities. A written constitution must be submitted, including the memorandum of association, which states the company’s name, address, objectives and capital; and the articles of association, which details the company’s internal rules of operation. The company must also be registered with the Australian Securities and Investments Commission and will receive an Australian Company Number (ACN), which should appear on all stationery.

Company: a separate legal entity capable of holding assets in its own name. Shareholders own the company while directors run it.


Chapter 1: The legal structure of your business

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The advantages and disadvantages of being a company are outlined in the table below.

ADVANTAGES DISADVANTAGES

shareholders are not liable for financial commitments of the company

compliance with government regulations is monitored

the directors are elected on the vote of shareholders and are therefore selected on expertise

one of the most expensive structures to establish and operate

the business continues as an entity on the bankruptcy, death or retirement of an owner

the memorandum and articles of association may place limitations on executives

start-up and expansion capital can generally be obtained easily

separate tax returns required for the company and the individuals

shares in a public company can be easily purchased or sold

extra reporting requirements necessitate more record keeping

only one person is required to constitute a public company

transfer of shares in a private company can be restricted

greater superannuation benefits are available because owners of the company can become employees

less privacy regarding financial and other affairs – financial performance available to the public

possible tax advantages – small business companies are taxed at a flat rate of 28.5% and this may be lower than the personal tax rate of a business owner

requirement to lodge details of capital structure, share holdings and all publicised documents with the Australian Securities and Investments Commission

There are two main methods of forming a company.

1. STARTING FROM SCRATCH

This involves:

• selecting and registering a business name

• writing a suitable memorandum and articles of association

• lodging all documentation with the Australian Securities and Investments Commission (ASIC)

• obtaining a certificate of incorporation and Australian Company Number (ACN).

2. PURCHASING A SHELF COMPANY

Shelf companies have been formed by solicitors or accountants, and have a ready-made structure. They are literally ‘put on the shelf’, waiting for someone to buy them.

Shelf companies generally require a change of name, or registration of a business name, together with amendments to the memorandum and articles of association, before lodgement with the Australian Securities and Investments Commission.


MODULE 4: MARKETING

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• Psychological pricing: involves the use of odd and even numbers to suggest a pricing position in the market. An odd number such as $10.99, tends to suggest a bargain, while an even number such as $50.00, tends to imply quality. Similarly, a higher than average pricing tends to suggest exclusivity.

• Loss leader pricing: involves setting a price on a particular product/service below market price, in order to attract customers to your outlet, so they will be exposed to, and potentially buy, other products/services you offer, for example weekly specials.

• Discount pricing: involves reducing the price for a product/service in order to attract new customers to the business. Discounts can be offered in the following ways:

– cash discount: a small discount for prompt payment

– seasonal discount: cheaper prices offered for buying products during the off -season

– bulk discounting: a discount offered for buying a large quantity of items. The discount is such that it does not exceed the cost savings to the seller

– allowances: reductions from the listed price.

• Distress pricing: involves problem sales due to liquidation and closing down of the business.

• Differential pricing: involves setting different prices for different groups of customers. The differentiation may be geographic; product version; place or time, for example, off-peak travel rates are cheaper than peak rates; student or pensioner discounts; loyalty or bulk discounts; levels of seating for a football game and so on.

Remember that price is one of the most important features of a product/service. As a marketing tool, price, more than any other factor, will affect customer acceptance of your product/service, the cash flow of your business, and its profitability. Therefore, pricing requires careful thought and calculation.

So far, we have talked about the first two of the 4Ps of the marketing mix, that is product and price. We will now explore the third aspect – place.

Pricing structures are dealt with in detail in MODULE 6: Chapter 1.


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Chapter 2: Your marketing mix

3. PLACE

The word place in marketing terms, refers to where the exchange of a product/service occurs between the seller and the buyer. Marketing strategies dealing with place dictate the

interface between products/services and customers. Deciding on a ‘place’ means finding the most effective and efficient way to get your product/service to your customers. This decision involves three aspects:

• the location• the premises and its layout• methods of distribution.

The physical location

There are many factors to consider when deciding upon the most suitable location for your business. Perhaps you want to start your business in a small way from your home, or due to the nature of your business you may need to lease larger premises. If you are a consultant and spend most of your time visiting your clients, then your considerations would obviously be different from those of a retailer, or engineering parts manufacturer.

Some of the fundamental factors you need to consider in deciding on the best location for your business include:

Before making a final decision on the location for your business, you should thoroughly check the proposed area. Speak with neighbouring tenants, observe the flow of people to the area, check why people are coming to the area, identify any empty premises and the reasons for this, and so on. Gather as much information as possible on the area so that your decision can be based on objective facts rather than your feelings about the location. Remember, the location you choose can either make or break your business.

The nature of the business and its requirements

Whether location is essential to the survival of the business

The zoning of the location and its appropriateness for

the type of business

The target market

The visibility needed to attract customers

Proximity to public transportParking facilities required

Location of competitors

Size of the premises required

Location in relation to suppliers

The amount and kind of customer traffic you need to

sustain the business

Cost of rent, transport, etc.

Local Council regulations


MODULE 4: MARKETING

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Search engine advertising is one of the most popular forms of PPC – it allows advertisers to bid for ad placement in a search engine’s sponsored links. Try doing an Internet search and check the PPC ads that come up on the search results page – these are the winners of the bid. Each time an ad is clicked and the visitor is taken to the respective website, that advertiser pays the search engine a small fee. The price of a ‘click’ depends on a combination of factors, including the quality and relevance of their keywords and ad campaigns, as well as the size of their keyword bids.

Google AdWords is one of the most well-known examples of PPC. Other platforms include LinkedIn advertising, Facebook advertising and Twitter ads.

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•

•

•

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ACTIVITY 4.3.12

WEB ADVERTISING

Can you make a case for considering the inclusion of web advertising in your marketing plan?


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Chapter 3: Implementing marketing strategies

iv. EMAIL MARKETING

Email marketing involves the communication of a promotional message to an individual or group of people using email, in order to build brand awareness, encourage customer loyalty and repeat business or convince customers to purchase something immediately. Emails may take the form of an advertisement, a request for business, a product update, a notification of special offers or a newsletter.

One of the biggest challenges with this form of promotion is the development of a database of past, present and prospective clients. Anyone who comes in contact with your business, whether through your website, a visit to your store or a personal interaction, should be given the opportunity to subscribe or 'opt-in' to receive your messages. This is important, because it is considered unethical/illegal to send emails to people without their permission.

Email marketing generally takes one of two forms – direct or relational.

• Direct email is email sent to communicate a promotional message. This may take the formof a targeted message, an advertisement or a newsletter, for example. Such emails must givethe recipient the opportunity to ‘unsubscribe’ and be removed from the database should theyno longer wish to receive these communications. This is a requirement set by the AustralianSpam Act (2003).

• Relational email is email triggered by the interactions of a customers with the business.This may be in response to a customer query, a purchase order confirmation, a receipt, anorder status update or password reset information. While the primary purpose of such emailis to respond to the action of the customer, they also provide an opportunity to further engagecustomers and extend the relationship with them.

Email is a cheap, efficient and convenient method of sending and receiving messages between suppliers, customers, and other business contacts. It can be used to send items such as newsletters, surveys, product catalogues and financial reports, or to place orders, make or answer enquiries, and maintain business relationships. For example, a café may target local corporate customers through an email marketing campaign advertising lunch specials.

The effectiveness of an email marketing campaign will depend largely on the quality and timing of the ‘message’, and its relevance to the recipients. Important considerations include:

• The goal of your email – be clear on why you are sending it. Is it an special offer, theannouncement of a new product, a product update, a request for feedback and so on.

• The consistency of communications – establish a schedule for sending you messages, be itdaily, weekly, monthly and so on.

• The relevancy of the message – think of what initially brought the contacts to you andfollow up on theirinterest to developan ongoingrelationship withthem.

• The tone of thecommunication– make it personalby addressingthe individual andadding a personalsignature.

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located throughout the world. When you access a particular webpage, the server sends the data you have requested to your computer or mobile device via the Internet. The web browser software then interprets this data and displays the webpage on your screen.

d. Cloud computing

In the simplest terms, cloud computing means storing and accessing data and software/applications over the Internet instead of on your computer’s hard drive. Its major advantage is that with an Internet connection, cloud computing can be done anywhere, anytime on a range of devices from desktop computer, laptop, tablet to smartphone.

Cloud computing can be divided into three broad service categories:

• Software-as-a-service (SaaS): SaaS delivers software applications over the Internet based on a subscription model. Users can access SaaS applications and services from any location using a computer or mobile device that has Internet access. Examples include Microsoft Office 365, Xero Accounting and Adobe’s Creative Cloud.

• Infrastructure-as-a-service (IaaS): IaaS providers supply a virtual server and storage, as well as application program interfaces (APIs) that let users migrate workloads to a virtual machine (VM) which has an allocated storage capacity. Examples include Amazon Web Services, Microsoft Azure, and Google Compute Engine.

• Platform-as-a-service (PaaS): PaaS providers host development tools that users can access over the Internet to create their own custom applications for use by all in the business. Many PaaS providers will host the software after it’s developed. Examples include Salesforce.com’s Force.com, Amazon Elastic Beanstalk and Google App Engine.

The ‘cloud’ is redefining the way micro businesses do business. Advantages include:

• Lower costs: moving core business tasks to the cloud can reduce upfront costs for hardware, installation, maintenance, software upgrades and IT support. The subscription model, generally in the form of monthly payments, can also improve cashflow.

• Collaboration: the ability to save and access various files through the cloud enables those involved in the business to easily work from the same master document or have access to live data files.

Software

Infrastructure

Platform

Virtual server: a computer and various server programs at someone else’s location that is shared by multiple website owners, each of whom can use and administer it as though they had complete control of the server.

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Chapter 1: Resources required in the business

• Flexibility: one of the greatest benefits of cloud computing is being able to access work-related files and information from any device in any place at any time. As workplaces and customers become more mobile, and businesses need to cater for remote workers and flexible working arrangements, being able to access work materials when not at the office, is essential. Cloud computing makes it easier for both employees to work outside the office and for micro business owners to manage their business at any time of day, from anywhere.

• Integration: adopting a cloud-based business solution creates multiple opportunities for integration. Micro businesses can take advantage of specialised services that integrate with back-office operations, from human resources to marketing to accounting.

The one major drawback of cloud computing is that if the Internet is down, there is no access to cloud facilities, which could effectively bring your business to a standstill.

To follow are two examples of cloud computing applications that can benefit micro business, namely Microsoft’s Office 365 and Xero Accounting.

Your go-to Office – anywhere

Whether you’re working in your office or on the go, you get a familiar, top-of-the-line set of productivity tools. Office applications – always the latest versions – let you create, edit, and share from your PC/Mac or your iOS, Android™, or Windows device with anyone in real time.

Tools for the professional

Brand your business-class email address with your company name to build name recognition, and market your business with customised marketing materials that are easy to create. Connect better with customers and colleagues with a range of communication tools, from email and IM to social networking and video conferencing.

Tools for teamwork

With 1 TB of storage per user, you’ll have plenty of space for all your files. Plus, because your files are stored online, you can share with people in or outside your company, from wherever you’re working, whenever you need to. And with multi-party HD video, content sharing, and shared calendars, you’ll always be in sync with your team.

Easy setup and management

With step-by-step guidance, you can set up users easily and start using the services fast. You can access the easy-to-use admin center from anywhere to manage all your services. And Office 365 takes care of IT for you, so your services are always up and running and up to date.

Visit https://products.office.com/en-au/business/office for more detailed information regarding the range of Office 365 products suitable for small business.

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• staff morale, their work ethic and job satisfaction• the ratio of sales dollars per employee• the ratio of direct workers to those who support, supervise or manage them• the percentage of chargeable hours or days per week.

To enable performance to be measured in a meaningful way, it is necessary to establish performance standards. These should focus on outcomes, be readily observed and measured, and clearly understood and agreed upon by all those involved.

Performance appraisal

A performance appraisal is aimed at assessing the ability of your employees to meet the requirements of your business. It begins the moment an employee starts work, and culminates in a formal interview.

* * * * *

The regular monitoring of your business resources is the most effective means in which to maximise your capital investment and achieve the greatest profit for your enterprise.

From our preceding discussion, it is evident that a great deal of your funds are spent on the range of resources required in order for you to effectively run your business. Over, under or inappropriate utilisation of these resources can result in inefficient production processes, inadequate administration and overall business decline.

Therefore, be vigilant in monitoring and maintaining your stock and materials, equipment and machinery, vehicles, technology, consumables and human resources. This is best achieved by developing and documenting processes and systems that guide your efforts. An operations or procedures manual can be a powerful tool in this regard, because it sets down the roles, tasks and procedures associated with every aspect of business operations. It can be used by all of those working in the business to guide their actions, even if you are not present.

This is discussed in Chapter 4 of this module.

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Chapter 3: Preparing to use the resources in the business

C. RISK MANAGEMENT

Standards Australia defines risk as ‘the chance of something happening that will

have an impact on objectives’. In operating a micro business, you are faced with many different kinds of risks – some internal such as staffing issues and technology breakdowns, and others external to the business such as natural disasters and economic downturns. Because these risks can affect your business operations, it is essential that you have a risk management plan in place, both to minimise the impact of unexpected incidents and recover from them to resume normal operations as quickly as possible.

Risk management involves a four step process as shown in the figure below.

Risk management: the process of identifying, assessing and treating risks that could potentially affect their business operations.

1

2

3

4

Undertake a review of each role, task, function and process in your business to identify potential risks.

Assess each identified risk by establishing the likelihood of it occurring and the consequences if it occurred.

Develop cost-effective options to deal with each risk – decide whether to avoid, reduce, transfer or accept it.

Regularly monitor and review to ensure the control measures are adequate and you have adequate insurance cover.

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MODULE 6: FINANCES

FIGURE 6.1.1: FACTORS CONTRIBUTING TO LIQUIDITY AND PROFITABILITY

Using the above as a framework, you now need to establish the specific financial goals, objectives and targets for your proposed business. Remember that it is important to keep your personal and business goals and objectives in harmony.

The financial objectives you set for your business should be clearly stated, realistic, time-based (weekly, monthly, or yearly), attainable and measurable. Your goal may be as simple as:

‘To provide an adequate living for myself in the first year of business operations.’

In this case, you would need to clearly define ‘adequate living’ in monetary terms. This would be expressed in the dollar values of your personal drawings from the business.

At the end of your first year of trading, you would then assess the achievement, or otherwise of your financial objectives, and make appropriate adjustments to your business operations and management. Alternatively, you may develop a new set of more appropriate or realistic objectives for the second year.

Completing a Schedule of Personal Drawings (Financial Table 1) will provide you with an indication of the amount of money you will need to draw from your business in order to support yourself. This figure should be an important consideration when developing your financial goals, objectives and targets.

INNOVATIONS:The ability to accept and utilise new technology

for your business

RISK MANAGEMENT:The ability to minimise the

potential for risk in terms of the

financial base of your business

QUALITY:The insistence on maintaining and improving

the quality of your products/services

EFFICIENCY:The ability to

increase efficiency by reducing

operating costs

CONTINUITY:The ability to continue to provide your goods/services in a changing

personal/business environment

GROWTH:The ability to develop

and expand your business

LIQUIDITY AND

PROFITABILITY

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Chapter 1: Your personal financial position

Completing a Statement of Personal Net Worth (Financial Table 2) will assist you to determine the funds and assets from personal and family sources that are available for your proposed micro business venture.

ACTIVITY 6.1.1

MY FINANCIAL GOALS AND OBJECTIVES

List your financial goals and objectives for the first year of your proposed micro business. Remember that objectives should be measurable and stated within a time frame.

YEAR 1...

Goals

Objectives

NOTE: The discussion on organising the various aspects of your personal and business finances will focus on AUTOGLEAM, a mobile car detailing enterprise owned and run by Jill Johnston. Each of the components of the financial plan will be presented, using this fictitious micro business as the example.

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MODULE 6: FINANCES

SOLUTIONS TO ACTIVITIES

ACTIVITY 6.4.3: GENERAL JOURNAL ENTRIES

Extra Wings General Journal

DATE DETAILS DEBIT CREDIT

June 1 Cash at bankInventoryMotor vehicle

CapitalCommencement of business

27 00017 0001 200

45 200

5 InventoryGST paid

Wright EnterprisesPurchase of inventory

5 454546

6 000

7 Wright EnterprisesInventoryGST paid

Purchase returns

55050050

8 Wright EnterprisesCash at bankDiscountGST paid

Payment of account

5 4505 178

24527

10 TelephoneGST paid

Cash at bankPayment of telephone bill

15015

165

14 Cash at bankSalesGST collected

Sale of inventory

2 6402 400

240

Cost of salesInventory

Cost of sales

1 5001 500


Further information

FURTHER INFORMATION

SOURCES OF INFORMATION AND ASSISTANCE FOR MICRO BUSINESS DEVELOPMENT

The details provided in this section were accurate when this resource was prepared in June 2016, however it is inevitable that changes will occur.

If you find any inaccuracies, or additional relevant information, we would appreciate your comments, so that this section can be updated regularly.

Innovative Business ResourcesPO Box 200Cottesloe WA 6911

Facsimile: (08) 9286 4207Email: [email protected]

1. STATE GOVERNMENT SMALL BUSINESS AGENCIES

Small Business Agencies have been established in each state and territory to provide information and advice for small business operators. The agencies offer a wide range of services, which vary from state to state, but their aim is to increase the chances of business success.

MAJOR STATE CENTRES

Western AustraliaSmall Business Development Corporationwww.smallbusiness.wa.gov.au

VictoriaBusiness in Victoriawww.business.vic.gov.au

QueenslandBusiness and Industry Portal: Starting a Businesswww.business.qld.gov.au/business/starting

New South WalesNSW Small Businesswww.smallbiz.nsw.gov.au

South AustraliaDepartment of State Development: Industry and Businesswww.statedevelopment.sa.gov.au/industry/smallbusiness

TasmaniaDepartment of State Growth: business.tas.gov.auwww.business.tas.gov.au

Northern TerritoryDepartment of Business: Territory Business Centreswww.tbc.nt.gov.au

Australian Capital TerritoryInnovation, Trade and Investment ACT Governmentwww.business.act.gov.au

BUSINESS ENTERPRISE CENTRES

Approximately 150 Business Enterprise Centres operate across Australia in both regional areas and major cities. Each is independent with its own board of directors and funding responsibilities.

Business Enterprise Centres aim to stimulate enterprise development and employment growth with a particular emphasis on providing free advice and support to new and existing small businesses.

Contact details of your closest Business Enterprise Centre can be obtained from your State Government Agency, or the White Pages Directory.

Documents

ABOUT THE LEARNER MATERIALS FOR THE CERTIFICATE III IN