Business Operations

Business operations: organisations that provide support and advice to

small businesses in Australia

Regulations affecting business operations

Legislation (Laws)

1. Federal
2. State
3. Local (Ku Ring Gai Council)

Federal Tax
The following tax are applied at the federal level
● Income tax (PAYG)
❖ Sole trader & partnership
● Company tax
● GST
● Fringe benefits tax
❖ Car parking
❖ Employee’s gym membership
❖ Providing entertainment by way free tickets to concert

Income tax Aggregated turnover Tax rate for base Tax rate for all other
threshold rate entities under companies
the threshold

2021-2022 and $50m 25% 30%

future years

Turnover = sales/sales revenue

Federal Examples
1. The Fair Work Act 2009 (Fair Work Act): Governs the employee and the employer
relationship in Australia
The Act:
● Provide a safety net of minimum entitlements
● Enable flexible working arrangements
● Provide fairness at work and prevent discrimination against employees

2. The Competition and Consumer Act 2010 (CCA) covers the relationships between
suppliers, wholesalers, retailers, and consumers. Its purpose is to enhance the
welfare of Australians by promoting fair trading and competition, and through the
provision of consumer protections.
The Act covers:
● Product safety and labelling (if you have a faulty product, company has to
compensate)
● Unfair market prices
● Price monitoring
● Industry codes
● Industry regulation - airports electricity, gas, telecommunications
● Mergers and acquisitions

State
Protection of The Government Operations Act 1997 NSW (POEO Act)
The act covers:
● Water pollution
● Land pollution
● Air pollution
● Noise pollution
● Waste management
● Eg printing industry pg 18

Local
Ie Ku Ring Gai council

Oversees:
● Land zoning (use) and approving new development applications
● Fire regulations, especially fire prevention facilities
Parking regulations governing the number of spaces that need to be provided
● Health regulations, especially the safe handling of food
The size, shape and location of business signs.

Market strategies
Promotion: refers to methods used by a business to inform, persuade and remind
customers about its products

Personal selling: involves the activities of a sales representative directed to a customer in an

attempt to make a sale.

Relationship marketing: refers to the development of long-term, cost-effective and strong

relationships with individual customers.

Sales promotion: refers to activities or materials used by the business to attract interest and
support for the good or service — e.g. free samples, coupons and point-of-purchase
displays.

Publicity: refers to any free news story about a business’s products.

Public relations: those activities aimed at creating and maintaining favourable relations
between a business and its customers.

Advertising: where print or electronic mass media are used to communicate a message
about the product.

Importance of ethical decision-making and corporate social

responsibility

Ethics: it concerns what is morally right or wrong. An issue may be legally compliant
however could be considered morally wrong
● An overseas employer based in China choosing to pay staff China’s minimum
wage which is $5.50 AUD

Eg. animal testing, child labour

CSR: corporate social responsibility is the degree of responsibility business has on

the social and environmental implications of the business activities.

● Minimum wage a pollution

● Ethical supply chain practices
● Address and work towards having an inclusive and diverse workforce
● gender pay equity
● Community involvement eg working with local charitable organisations eg Eat
Up, Vinnies, ABCN Mentoring

Organisations that provide support

Banks
Banks and investment bank:
Provide financial assistance in the form of loans for business to fund their business

Business consultants
Consulting firms provide strategic advice for businesses on areas such as:
● Business strategy
● Finance
● Marketing
● Human resources
● Legal
● Technology
● Tax
Eg. EY (Earnest and Young), KPMG, PWC

Government

Service NSW Business Connect Service NSW Business Concierge Service

Business connect advisors can give Provides ongoing one-on-one guidance

business owners up to 8 hours of free over the phone, in person or online
business advice on: consultation. Advice on the following areas:
● Business planning ● Financial assistance including
● Marketing vouchers, grants and rebates
● Cash flow ● Applying for licences and permits
● Getting mental health support for
you and employees
● Disaster and emergency assistance

The Selling Process

How businesses differentiate products

Product differentiation: when your products that are the same or similar are made to appear
different from and/or better than those of their competitors
● Price
❖ Kmart VS Louis Vuitton
● Value for money (features)
❖ Toyota VS Tesla
● Quality
❖ PE Nation VS Lululemon
● Branding
❖ Nike VS Lacoste
● Customer service
❖ Apple
❖ Restaurants
● Convenience
❖ Products that are easy to use
> Coffee machines Pods vs Beans
> Restaurants dine vs fast food & takeaway
Social, ethical and environmental considerations when
promoting products

Social
The concept of Corporate Social Responsibility (CSR) is the degree of responsibility
corporations have regarding the consequences of their business operations on social and
environmental levels.

Examples include:
● Supporting charities
● Supporting diversity, inclusivity and gender rights
● Sponsoring local sports teams

Environmental
Environmentally friendly businesses operate in a sustainable manner such as having a
sustainable supply chain. As well as causing minimal damage to the environment and using
renewable resources where possible.

Examples include:
● Using recyclable materials for packing
● Policies to reduce their carbon emissions

Ethical
Moral principles, policies, and values that determine the way in which companies conduct
business operations.

Examples include:
● Paying above the minimum wage in countries where the minimum wage is below the
poverty line
❖ Eg paying employees in China, Bangladesh
● Fair and sustainable working conditions which are set above the minimum standard
in countries such as China and Bangladesh
● Not engaging in animal testing in countries where it is legal ie UK, US, China

The nature of product promotion

Advertising: Personal selling:

● A paid, non-personal message ● Sales representative directed to a
communicated through a mass customer in an attempt to make a
medium sale
● Provides businesses with the ● Sale consultants can tailor the
flexibility to reach an extremely large message and approach per
audience or to focus on small part of customer
the population ● Make and develop long term
 ● Mass marketing: television, radio, relationships and consequently
newspaper and magazines develop customer loyalty
● Telemarketing telephones to ● Car salesperson
personally contact a customer ● Real-estate
● E-marketing use of internet to ● Very common in B2B selling
deliver messages
● Billboards Establishing long term relationships

Relationship marketing: Sales promotion:

● Businesses aim to develop long ● Entice new customers
term relationships with individual ● Encourage the trial purchase of a
customers new product
❖ Customer care ● Eg
❖ After sales service ❖ Coupons: offer discounts for
❖ Loyalty programs a limited time with certain
purchases
❖ Loyalty reward programs
❖ Premiums: premium gift that
a business offers the
customer in return for the
product
❖ Samples

Opinion leaders
● Influencers
● Celebrities

Publicity
● Enhance the image of a products
● Raise the awareness of a product

Public relations
● Creating and maintain favourable relations between a business and its customers
● Design, implement and manage the public relation events of the business
● Speeches on special occasions, donation, appearing at public events

Planning for Success

Opportunities to run a small business
What is an entrepreneur?
An entrepreneur is an individual who starts and owns a business. This can either be a new
business or taking over an existing business.
1. Location
A location strategy includes identifying where the business is situated in relation to:
- Customers
- Suppliers
- Distribution centres and warehouses (transportation costs)
- Competition
 2. Competition
When establishing a business it is essential to research:
○ Trends ie (positive or negative growth and reasons for)
○ Competitors
- Strengths
- Weakness
- Market share

A lack of competitors may indicate:

- A lack of demand for a good or service OR
- Gaps in the market, which is therefore a potential opportunity e.g., Canva and Tesla

Through researching your competition a business can learn how to differentiate themselves
and achieve a competitive advantage

3. Market Research:
The process of gathering, analysing and interpreting information about the market
product or service, customers and competitors

Purpose: determine the viability of the potential product of service by assessing potential
customers and competitors strengths

Examples:
❖ Primary research: research that the business conducts themselves or hires a third
party to do such as survey, interviews
❖ Secondary research: synthesised information from existing literature i.e., ABS Data,
Government report

4. Target market

Target market: the target market is the collection of people identified by their specific
attributes who are potential customers of the product or services of a business. These
potential attributes are based on selected demographics such as age, gender, wealth etc.

Nike: 15-45 year old athletes and sport enthusiasts

“Nike’s missions is to bring inspiration and innovation to every athlete* in the world”

Apple: Middle to high income earners, B2B customers – education, government, companies
Kylie Cosmetics: Millennials and Gen Z who are makeup enthusiasts

5. Demographics
Demographics: population characteristics ie target market demographics
● Size
● Gender
● Age
 ● Wealth
● Household structure (family dynamic)
● Interests

Sources:
● Primary: interviews, surveys
● Secondary: ABS Data

Legal structures
1. Sole trader
Definition: A sole proprietorship, also known as a sole tradership, individual
entrepreneurship or proprietorship, is a type of enterprise owned and run by only one
person and in which there is no legal distinction between the owner and the business
entity.
A sole trader is legally responsible for all aspects of the business
including any debts and losses and day-to-day business decisions. E.g.,
a small business
● all debts and after-tax profits are personally yours - this is called
'unlimited liability'.
Unlimited liability: *An owner's personal wealth can be seized to cover
the balance owed. -- the sole trader is responsible for all business
debts.
● Finance is provided by the individual ie loans are only under their name
● If the business is sued, the individual is sued
● The business does not need registration

2. Partnership
Definition: A partnership is two or more people (20 maximum) or entities who do business
as partners or receive income jointly. In a partnership, control or management of the
business is shared.

A partnership is not a separate legal entity, so you and your partners are liable for all
debts and obligations of the business.

● General partners have a fiduciary duty of loyalty and trust to the other
partners and must subordinate their personal interests to those of the
partnership.
● Finance is provided by the owners ie loans are only under the owners
name
● If the business is sued, the owner’s sued
● Unlimited liability
● Partnership agreement must be either made in writing or verbal or
through implication. Partnership agreements are covered in legislation
under the Partnership Act 1982 (NSW)
*diversifying your risk = splitting the debt between all the partners

3. Private company
Definition: A private company is a firm that is privately owned. Private companies may
issue stock and have shareholders, but their shares do not trade on public exchanges
and are not issued through an IPO (initial public offering).

*initial public offering: the public auction of stocks to institutional and retail investors

A private company structure is a separate legal entity that has the ability to operate and
execute in its own right similar to an individual.

● Minimum 1 director
● 1 - 50 employee shareholders, with 50 being the maximum number of non-
employee shareholders
● Private companies are generally, SME’s (small to medium enterprises)
● Shares in company can only be approved by directors
● Private companies are legally prohibited from offering shares or raise capital
from the public
● The business must be registered under ASIC
● Limited liability: limits each owners financial liability to the amount of money
they have paid for business shares
● Incorporation: private company is a separate legal entity
- If the business is sued the owners are not sued

4. Public company
Definition: also called a publicly traded company, is a corporation whose
shareholders have a claim to part of the company's assets and profits.

The public can buy shares to invest in the company. Unlike a sole trader business
structure where you are solely responsible for all aspects of the business including
debts, losses and day-to-day business decisions, a company is a separate legal
entity.

The company has the same rights as a natural person and can incur
debt, sue and be sued.
● A legal business that is listed on the australia securities exchange
● Minimum of 3 directors of which 2 live in australia
● Must have at least 1 shareholder. There is no limit to how many
shareholders a company can have
● Anyone can buy shares, hence is the main way public companies raise
capital
● Incorporation
● Must be registered under ASIC
● Limited liability
 5. Incorporated association
Definition: an organisation incorporated under state or territory law, that is usually
not-for-profit. Its structure establishes it as a legal entity separate from its
individual members.

Usually established for recreational, cultural or charitable purposes. It

must have at least 5 members and put all profits back into the
association's activities.

● Under NSW a group of five or more people may form an incorporated

association
● Incorporated association are generally small scale in nature such as
sports clubs or at clubs
● They can only conduct business in the state at which they’re registered
● Incorporation
● The business must be registered under ASIC
● Limited liability company

Financing a business
Debt & equity
The two main sources of finance

Debt: money that has been provided by an external lender: Bank, finance
companies trade supplied (tools, equipment)
● Overdraft
● Credit card
● Mortgage
● Leasing

Advantage:
Interest Tax Deduction: interest on debt repayment is tax deductible
Maintain complete ownership without having to sell equity in the business
Raise capital for business growth

Disadvantages:
Expensive: loan repayments
Collateral: if you are a sole trader or are in a partnership your personal assets are
used to secure a loan
Increase in debt-to-quality ratio

Equity finance: funds that the owner contribute themselves (internal source)
 ● Capital/owner’s equity (internal)
● Retained profits (internal) – getting profits and reinvesting into the business
● Ordinary shares (external)
● Venture capital (external) – business will raise funds FOR your business in
exchange for profits or equity (ownership in the business)
● Crowdfunding (external) – in exchange for the public providing funds for a
business, the business will dedicate something to the public in return i.e. a
character in a game, ownership etc.

Advantage:
Don’t have to repay loan
Raise capital for business growth

Disadvantages:
Decrease in percentage of ownership of you have to sell a portion of the business ie
through the distribution of shares
Expected to pay dividends

Ways to make money from shares: sell them if the company has made a profit, or
dividends (ONLY IF THE COMPANY HAS MADE A PROFIT)

Preparation of a Loan

Loan: agreement to borrow a set amount of money which needs to be repaid within a
certain period of time

Secured loan: a loan that requires an asset to be provided as security such as a car
or a house for the loan

Unsecured loan: a loan that you can apply for that does not require details of an
asset to be provided as security for a loan (such as property or a car). Eg personal
overdrafts, credit cards

Interest rate: the proportion of a loan that is charged as interest to the borrower,
typically expressed as an annual percentage of the loan outstanding, Interest rates
can be either fixed or variable

Prospectus: a document issued by a company that wants to raise money from the
public by offering equity (shares) or debt (bonds) securities in the company or a trust.
It must contain all the information needed to make an informed decision about
investing in the company.
 ● A prospectus included the following information:
● History of the business
● Companies business model
● How the company will use the proceeds
● Financial information details of the offer
● Risks description of management

Establishing a business
How to go into a business

1. Establishing a new business (starting from scratch)

2. Purchasing an existing business
3. Purchasing a franchise
a. Whereby a person (franchise) purchases the right to use the business
name and distribute the goods or services of an existing business
(franchisor)
I. Eg McDonalds Boost

Factors to consider:
● Staff
● Location
● Equipment
● Valuation

Starting a business from scratch:

Advantages:
● The owner has the freedom to set up the business according to their
preferences
● The owners objectives can be matched more closely to the business
● The owner has more flexibility to select the location, target market, range of
products and the level of customer service
● The owner is able to determine the pace of growth and change

Disadvantages:
● There is a high risk and measure of uncertainty
● Without a precious business reputation, it may prove difficult to secure finance
● Time is needed to develop lines of credit from suppliers
● If the start-up period is slow then profits may not be generated for some time
● Lack of potential customers due to lack of reputation.

Purchasing an existing business:

Advantages:
● Have an established reputation
● Established customer base
● A good business history increases the likelihood of a business's success
● Stock has already been acquired and is ready for sale
● Equipment is available for immediate use
● Existing employees can provide valuable experience

Disadvantages:
● Customers have an expectation
● Customers have preconceived ideas
● If the business has a poor reputation, the existing image of the business may
be difficult to change
● Some employees may resent any change to the business, maybe due to the
previous owner’s personality and contracts which may be lost when the
business is sold.

Purchasing a franchise:
Advantages:
● Products, equipment, premises design and marketing are usually established
● The franchisor often provides training
● There is less need for the franchisee to have previous business experience
● The investment risk may be lower due to established brand reputation
● The immediate benefit from the franchisor goodwill

Disadvantages:
● This franchisor usually controls everything to do with price, suppliers and
health regulations
● Profits must be shared with the franchisor
● The franchisor often charges a service fee for advice
● Contracts may be biassed in favour of the franchisor

Success or Failure
Keys to success
• Prior work experience in the field — knowledge of the business
• Ability to learn from mistakes
• Work with a strong team
• Access to information
• Entrepreneurial abilities

Barriers to success
• Unwilling to take risks
• Not enough time or energy
• Difficulty raising capital to finance the business
venture
• Failure to plan
• Negative cash flow
• Inaccurate record keeping