Small business for dummies

371 Pages·2021·15.624 MB·English

by  Veechi Curtis

Small
Business
6th Australian Edition
by Veechi Curtis
Small Business For Dummies®, 6th Australian Edition
Published by
Wiley Publishing Australia Pty Ltd
42 McDougall Street
Milton, Qld 4064
www.dummies.com
Copyright © 2021 Wiley Publishing Australia Pty Ltd
The moral rights of the author have been asserted.
ISBN: 978-0-730-38484-7
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Contents at a Glance
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Part 1: Getting Started . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CHAPTER 1: Is Small Business for You? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
CHAPTER 2: Figuring Out What’s So Special about You (And Your Business) . . . . . . . 23
CHAPTER 3: Starting from Scratch, Buying a Business, or Joining a Franchise . . . . . . 39
Part 2: Finding Your Entrepreneurial Spirit . . . . . . . . . . . . . . . . . . 61
CHAPTER 4: Separating Yourself from Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . 63
CHAPTER 5: Staying One Step Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
CHAPTER 6: Creating a Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93
CHAPTER 7: Getting the Legals Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Part 3: Planning for Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
CHAPTER 8: Figuring Out Prices and Predicting Sales . . . . . . . . . . . . . . . . . . . . . . . . . 129
CHAPTER 9: Building Profit Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
CHAPTER 10: Calculating Your Break-Even Point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
CHAPTER 11: Creating Your Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Part 4: People Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
CHAPTER 12: Making Service Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
CHAPTER 13: Becoming an Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
CHAPTER 14: The Art of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Part 5: High Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
CHAPTER 15: Financing Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
CHAPTER 16: Cooking the Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
CHAPTER 17: Understanding Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281
CHAPTER 18: Taming the Tax Tyrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
Part 6: The Part of Tens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
CHAPTER 19: Ten Things to Do If You Hit Hard Times . . . . . . . . . . . . . . . . . . . . . . . . . . 323
CHAPTER 20: Ten Tips for Selling Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341

Table of Contents
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
About This Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Foolish Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Icons Used in This Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Where to Go from Here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PART 1: GETTING STARTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CHAPTER 1: Is Small Business for You? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Working for Yourself — A Dream
Come True? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Doing what you love to do . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Earning pots of money (here’s hoping) . . . . . . . . . . . . . . . . . . . . . . . . 8
Being your own boss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Staying home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Working for Yourself — Reality Strikes . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Teetering on the edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Working night and day for little pay . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Weathering feast and famine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Getting the Timing Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Timing it right for your idea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Timing it right for you . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Timing it right for the economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Staying Safe or Inventing the Wheel? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Playing it safe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Finding your own niche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Going out on a limb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Assessing your chances of survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Getting the Government to Help You . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Setting Yourself Up for Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Figuring Out What’s So Special about You
CHAPTER 2:
(And Your Business) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Understanding Strategic Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Identifying your secret weapon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Focusing on real-life examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Justifying Why You Can Succeed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Uncovering your inner mojo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Asking three key questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Growing your advantages over time . . . . . . . . . . . . . . . . . . . . . . . . . 28
Making sure a demand really exists . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Table of Contents v
Understanding How Risk Relates to Gain . . . . . . . . . . . . . . . . . . . . . . . . 29
Figuring Out Who Your Competitors Really Are . . . . . . . . . . . . . . . . . . . 30
Understanding why you need to do this . . . . . . . . . . . . . . . . . . . . . . 31
Grouping competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Profiling your competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Thinking about future competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Choosing Your Competitive Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Pick one, and only one, competitive strategy . . . . . . . . . . . . . . . . . . 35
Connecting your competitive strategy to your
strategic advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Starting from Scratch, Buying a Business,
CHAPTER 3:
or Joining a Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Weighing Up the Good and the Bad of Buying a Business . . . . . . . . . . 40
Buying an existing business — the upside . . . . . . . . . . . . . . . . . . . . 40
Buying an existing business — the downside . . . . . . . . . . . . . . . . . . 41
Asking the Right Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Finding out who owns the intellectual property . . . . . . . . . . . . . . . . 42
Analysing sales trends, profit and break-even . . . . . . . . . . . . . . . . . 43
Clarifying what the purchase price includes . . . . . . . . . . . . . . . . . . . 43
Calculating the ‘True’ Earnings of a Business . . . . . . . . . . . . . . . . . . . . . 45
Valuing an Existing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
The times earnings method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
The capitalised earnings method . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
The strategic advantage method . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Dotting Your I’s, Crossing Your T’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Buying a Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Considering the positives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Weighing up the negatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Exercising Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Wising up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Putting a franchise through the griller . . . . . . . . . . . . . . . . . . . . . . . . 56
Doing your sums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
PART 2: FINDING YOUR ENTREPRENEURIAL SPIRIT . . . . . . . 61
CHAPTER 4: Separating Yourself from Your Business . . . . . . . . . . . . 63
Deciding What Path You Want to Take . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Doing the thing you love to do . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Getting help and delegating what you can . . . . . . . . . . . . . . . . . . . . 65
Building a business that’s separate from you . . . . . . . . . . . . . . . . . . 67
Creating a way of doing business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Wearing Different Hats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Building a Business with a Life of its Own . . . . . . . . . . . . . . . . . . . . . . . . 71
vi Small Business For Dummies
Defining your difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Documenting and building systems . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Setting goals for you and your business . . . . . . . . . . . . . . . . . . . . . . 74
Planning for a graceful exit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Appreciating the Limitations of Your Business . . . . . . . . . . . . . . . . . . . . 75
CHAPTER 5: Staying One Step Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Taking an Eagle-Eye View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Looking at what’s happening in your industry . . . . . . . . . . . . . . . . . 80
Being realistic about industry decline . . . . . . . . . . . . . . . . . . . . . . . . 83
Riding the wave of opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Rating Your Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Putting yourself through the griller . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Prioritising where you need to do better . . . . . . . . . . . . . . . . . . . . . . 86
Identifying Opportunities and Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Doing a SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Putting theory into practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Translating your SWOT analysis into action . . . . . . . . . . . . . . . . . . . 90
Creating a Plan for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
CHAPTER 6: Creating a Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Getting Started with Your Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Charting a True Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Setting off on your mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Saying what you’re about . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Matching goals to your mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
Assessing the Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Analysing outside influences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Checking out the competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Justifying market demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Declaring Your Battle Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Building your SWOT analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100
Choosing a strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Expressing your competitive advantage . . . . . . . . . . . . . . . . . . . . . 101
Outlining Your Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Developing your marketing plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Defining your customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Articulating your online business strategy . . . . . . . . . . . . . . . . . . . 103
Describing Your Dream Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Presenting Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Balancing dreams against reality . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Building on history to create a picture of the future . . . . . . . . . . . 105
Staying real with benchmarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106
Table of Contents vii
CHAPTER 7: Getting the Legals Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Picking a Business Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Independent and single . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Tea for two . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
We’ve got company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Matching the Name to the Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Using your own name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111
Thinking about how others will find you . . . . . . . . . . . . . . . . . . . . . 112
Making sure you’re not on someone else’s patch . . . . . . . . . . . . . 112
Checking for trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Registering your business name . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Avoiding trouble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Protecting Your Brand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Registering trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Protecting other kinds of intellectual property . . . . . . . . . . . . . . . . 116
Registering with the Powers That Be . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Getting that baby’s number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Signing up for taxes (unavoidable, I’m afraid) . . . . . . . . . . . . . . . . . 117
Checking out what else you need . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Working with Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Understanding when you’re legally bound . . . . . . . . . . . . . . . . . . . 119
Dealing with standard form contracts . . . . . . . . . . . . . . . . . . . . . . . 120
Knowing what to look for in a contract . . . . . . . . . . . . . . . . . . . . . . 121
Signing on the dotted line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Negotiating Lease Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
PART 3: PLANNING FOR PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 .27
CHAPTER 8: Figuring Out Prices and Predicting Sales . . . . . . . . . . . 129
Choosing a Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Setting prices based on costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Setting prices based on competitors . . . . . . . . . . . . . . . . . . . . . . . . 130
Setting prices based on perceived value . . . . . . . . . . . . . . . . . . . . . 131
Building a Hybrid-Pricing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Offering a premium product or service . . . . . . . . . . . . . . . . . . . . . . 132
Cutting back the frills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Getting creative with packages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Charging different prices for the same thing . . . . . . . . . . . . . . . . . 135
Forming Your Final Plan of Attack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Monitoring and Changing Your Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Building Your Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Calculating hours in a working week . . . . . . . . . . . . . . . . . . . . . . . . 138
Increasing sales with extra labour . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Predicting sales for a new business . . . . . . . . . . . . . . . . . . . . . . . . . 141
Predicting sales for an established business . . . . . . . . . . . . . . . . . . 142
Creating Your Month-by-Month Forecast . . . . . . . . . . . . . . . . . . . . . . . 144
viii Small Business For Dummies