Chapter 3
Small Business
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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
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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
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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
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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
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Alternatives to Owning a
Small Business
There are three main asset groups that can
be used as alternative investment options
to starting a small business
• cash
• property
• shares
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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
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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
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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
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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
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Ownership Structures
• The three principle ownership structures
are sole proprietorships, partnerships
and companies
• Sole proprietorships and partnerships
have unlimited liability; companies have
limited liability
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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
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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
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