All information sources from: Business in Action (2010),
INFLUENCES IN ESTABLISHING A SME
There are a thousands of SME owners across Australia and the world. They needed to consider a few influences before entering the world of SME’s. This information will consider personal qualities including qualifications, skills, motivation, entrepreneurship, cultural background, gender
PERSONAL QUALITIES
QUALIFICATIONS
Hundreds of thousands of people start a new business every year. Would you like to be one of them? You do not have to be an exceptional champion of legendary dimensions. Mainly, those who decide to 'give it a go' are ordinary people rather than sensational opportunists who desire adventure. Many start out with only a small amount of money, operating informally from home, at least in the beginning while they are getting established.
Exceptional grades and a dazzling history in business are not essential. What does appear to be important is the eagerness to work long hours. Recent research revealed that about 75 per cent of people who started their own SME spent at least 50 hours a week in the business; 25 per cent of them put in 65 hours or more.
Starting a SME knows no age limits. From the very young to the very old, people are starting new businesses at a rapid rate. Particularly encouraging is the large number of young people aged between 20 and 25 who are operating a SME. Older people are also involved in starting new SMEs; this type of business offers the most opportunities and flexibility to retirees.
For some types of SMEs, there are few or no formal academic requirements needed to commence operating. However, for those who want to gain academic qualifications in small business, there are many tertiary courses available. The Business Studies course you are studying is of enormous value should you decide to become a SME owner. Such courses give you knowledge and understanding of what is required to successfully own and operate a SME. Knowledge and understanding can also come from experience through working for other businesses. Your part-time job, for example, is providing you with experience in a business's day-to-day operations, how to manage your time and other people, purchasing and pricing decisions, and a variety of other business functions.
SME owners are a varied group. It is extremely difficult to categorise them or the qualifications they possess that make their business a success. As well, a variety of personal factors encourage individuals to go into business. However, two factors that are often mentioned are motivation and the 'entrepreneurial spirit'. They combine to form a powerful desire to create a new business.
ACTIVITY:
1. Pick out the 3 key points from the text above (can represent as a mind map)
SKILLS
Luck has little to do with business success. Skills are essential. These skills can be attained through experience, education and/or training.
Experience
If a person has been working the last few years as a dedicated employee, then during that time, they will have gained valuable experience. They probably also developed new skills as a result of training or exposure to various aspects of the business's operations. Consequently, apart from well-developed management skills, a person with hands-on experience will have a greater chance of achieving business success.
The best time for a person to gain management experience is before establishing the business. This can be done by either completing a management training course or by undertaking a management role within a business. The best way a person can gain business experience is to work in the type of business in which he or she intends to become self-employed.
These experiences provide a platform from which to work. The experienced person will understand and be realistic about the demands, both financial and personal, that a business will place on them. Figure 11.3 outlines possible experiences, from working in other businesses, that could help someone establish their own business.
Education and/or training
Education and/or training is another way to gain skills. Universities, TAFE and business colleges offer courses in many business and industry fields. These courses may be broad in nature, such as a degree in business management, or specific, such as a degree or diploma in marketing, human resource management, computing or accounting. TAFE and business colleges also offer vocational courses and courses for establishing a SME. The main problem is that some courses are expensive and take years to complete. For this reason they are not always an option, especially for small business owners who may wish to gain the knowledge quickly.
Some government agencies provide opportunities to learn about starting a business. The Business Enterprise Centres in New South Wales are an example. The centres are run by business facilitators who have experience in establishing and operating a business. They offer a range of services, such as a business start-up kit that gives an overview of the requirements and regulations involved in starting a business, and of how to write a business plan.
All of these avenues for education allow the business owner to develop the essential skills necessary for establishing a business. These skills may include: accounting, computer skills, staff management, business administration, including inventory control and rosters, marketing.
MOTIVATION
Motivation refers to your personal drive, determination and desire to achieve a goal or objective. The desire to be your own boss is a major reason for wanting to start your own business. Many people start on their own because they believe they can do better for themselves than if they remain with their present employer. Often they desire the freedom to choose when and where they work, with whom they work and whether to work from home. The underlying attraction is the desire to transform an idea into a successful product by capturing the attention of potential customers (see the following Snapshot).
SNAPSHOT: Rachel Chippendale — Ruby's Closet
Ruby's Closet is home to an amazing collection of uber-chic products created by designer Rachel Chippendale.
How do you describe your business?
My business is a combination of working with the things I love and the things I have skilled expertise about.
My launch product is a patent pending and registered design jewellery storage device that solves all problems people have complained about when storing their fashion jewellery. It's unique, can be hung on the back of a door or in a wardrobe, keeps jewellery separated, easily accessible, and free from tangles and tarnish. I aim to have an online store that sells the most unique jewellery, accessories and gifts from all around the world.
Did you always want to run your own business?
Yes, I started 'Trendy and Co.' when I was seven years old, going door to door around the neighbourhood selling scrunchies and headbands that I sewed myself — I think I made a dollar here and there!
How did the idea come about and what inspired you to get into action?
When I returned from overseas, I came back with the most amazing samples of boots, jackets, jewellery and the like. But I knew the industry was very competitive and that I needed to differentiate myself first by inventing unique base products to develop my brand. I constantly noticed jewellery storage was a real problem for so many people — a lot of research, sketches, an engineer and prototypes later, my jewellery hanger is a reality.
What are some of the things you enjoy most about running your own business?
I love the challenges every day presents, seeing an idea come to life, receiving feedback from customers who love the product and the freedom. I am a country girl at heart, but I love to travel and want to live back in a capital city. So, having an online business that can be operated remotely gives me the freedom to do all these things and continue to source amazing products abroad. I also love the fact that you get out what you put in — rewards are only capped by your own efforts.
What's the biggest challenge you've had to overcome to make your ideas a reality?
Finding a reliable manufacturer that could bring my idea to life with the highest quality I envisaged, as well as marketing with limited start-up capital. It is incredibly frustrating having a great product that customers rave over and yet not being able to reach enough people to tell them about it yet.
What advice can you share with other people trying to start a business?
Be prepared to work very hard and make sacrifices, believe in yourself and have a contingency plan for absolutely everything. Finding a market before you develop a product or service is a great idea. I found a problem and developed the solution, and solutions to problems are good business! Never give up — I have always been a firm believer that if you work hard and smart, and want something enough, eventually it will happen. But it takes time and determination. Most of all never lose sight of the big picture — success in life is not measured in dollar signs. You will only be good at what you do if you are happy with what you are doing.
Source: The Frank Team, www.youngentrepreneurs.net.au.
Figure – Mindmap of possible advantages of own business owernship
ACTIVITIES
1. Make notes on Motivation as a personal quality
2. Classify the above information into:
Monetary Rewards / Non-Monetary Rewards3. Interpret the information.
ENTREPRENEURSHIP
As was outlined in chapter 1, an entrepreneur is someone who starts, operates and assumes the risk of a business venture in the hope of making a profit. The term can apply to any person — male or female, mature age or young — willing to establish a business in a bid for success. Not all entrepreneurs begin by setting up a business premises. An increasing number of people work from home, especially as computers have allowed greater access and communication with business markets. Entrepreneurship is not just an avenue to wealth, but a way of making a living and achieving job satisfaction.
Society is constantly changing and thus creating new opportunities for innovative products and services to be developed. The entrepreneur must have a range of personal characteristics that enable them to take advantage of, and be successful with, these opportunities (see figure 11.5).
Figure: General Personal characteristics of an entrepreneur
First, entrepreneurs must be prepared to take a risk and incur the results of this risk, whether it is a success or a failure. They must be confident in decision making and willing to accept all responsibility for their decisions. Sometimes a decision requires 'guts and determination' and such times often lead to success. The entrepreneur must always have a will to succeed: they may not achieve the desired goal with the first venture, so they need drive, determination and an ability to recover from poor decisions or mistakes.
Flair and creativity are also essential for an entrepreneur. They allow the entrepreneur to create or seize new opportunities for business, new niche markets or new products and/or services. Success can sometimes depend on finding a new and more innovative way to sell a good or service. Rachel Chippendale — Ruby's Closet, — is an example of an entrepreneur who successfully developed a niche market. Finally, the most important quality for an entrepreneur is the ability to set goals and have a vision for the business's future. Having achieved their goals, they must set new goals — continually adjusting to changing business, economic and customer markets (see the following Snapshot).
SNAPSHOT: Yuan Wong — entrepreneur
At age 15, Yuan Wong was already turning a profit. In his spare time he designed brochures and posters for local rock bands and concert events. After completing his High School Certificate, Yuan's creativity was rewarded when he won a scholarship to undertake a Graphic Design course at the local TAFE. Today, Yuan operates on a much larger scale.
Yuan is the driving force behind Eclipse Publishing & Design, a graphic design business specialising in advertising, brochures, digital photography, logos, publication design and stationery. Yuan started the business in 2005, and at the time had no idea it would eventually employ 15 people and have 18 overseas clients. 'The business is successful because we offer a diverse range of unique designs not available from many other graphic design businesses.'
In the beginning, cash flow was tight and Yuan had little experience in operating a business. However, he was highly motivated and keen to learn. 'Creating an idea in my head and then seeing it actually appear out there in the world, that's huge to me,' Yuan says. 'I get enormous satisfaction from creating products that delight my clients.'
'If you want to go into business, then you have to realise there will be good days and bad days,' he says. 'I understood there would be risks but good entrepreneurs should take only moderate risks, which is what I did.' In addition to Yuan's self-confidence is his ability to identify business opportunities when they arise. 'If I become aware of an opportunity that will be profitable and help grow the business, it is my responsibility to act. That's the life of an entrepreneur.'
Yuan realised early on that the venture's success would mainly depend on his level of business knowledge. Consequently, while completing his graphic design course, Yuan also completed some business management courses run by the local Business Enterprise Centre. 'During this time I met with people in the graphic design industry and talked to potential clients. I knew that commencing a business would require hard work and long hours, but I was totally committed to the idea. I was determined to succeed. Ultimately, it comes down to self-belief. If you want it to work, you've got to believe it will.'
Yuan is now 29 years old. His venture into the business world has been financially and personally rewarding. He says, 'Successful entrepreneurs are passionate about what they do and where they want to go'.
Snapshot questions
1. Identify the entrepreneurial characteristics exhibited by Yuan Wong.