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Small Business for Professionals
Assignment 1, Parts A and B requirements – internal
Your business is a new business that is being developed by the three team members here in
Adelaide. The team members are the only people to provide equity to the business.
Part A — Written concepts report for use by the business
Provide a written evaluation of the concept steps, as detailed on pages 125-130 of Peacock (2004) an
edited copy of which is available on the course website, of your business idea. All elements of the
concept as detailed on pages 125-130, except the review step, must be addressed in the document.
Table of contents, executive summary, introduction and conclusion are not required for this
assignment. There is a word guidance of 500 words (approximately two pages); however there are
no other prescribed elements for this assignment.
Refer to feedback sheet below for marking criteria and standards.
Assessment feedback
Total Mark _________/100_________
Small Business for Professionals
Team: ________________________
Assessments 1 Team Report and Presentation
Assessors Initials ______________
Very Good
Comments on Components
School of Commerce
Total Weighting 20%
Date: ________________
Very Poor
Content and
Content was highly relevant,
Content was relevant, good
comprehensive understanding of the
understanding of the topic. All of the
Some content was relevant, fair Content often lacked relevance, Content lacked relevance, little analysis
___ / 50 topic. All of the essential concepts essential concepts were analyzed and
understanding of the topic. Some of
limited understanding of the topic. understanding of the topic. Analysis the essential concepts were
analyzed, Few appropriate concepts were and explanation of essential concepts were analyzed and explained explained, though not always although not always effectively.
analyzed well.
was not apparent. effectively.
Content and
understanding of the
___/ 25
Content was highly relevant,
understanding of the topic. All of the
Content was relevant, good
Some content was relevant, fair Content often lacked relevance, Content lacked relevance, little analysis
understanding of the topic. Some of
limited understanding of the topic. understanding of the topic.
topic. All of the essential concepts
essential concepts were explained, the essential concepts were not always
Few appropriate concepts were
explained effectively.
though not always effectively.
effectively explained. explained well.
not apparent.
Explanation of essential concepts was were
The presentation had a very clear and
The presentation had a clear and The presentation had a fair structure.
The presentation had some structure
The presentation was
unstructured. Structure
effective structure. The material was
appropriate structure. The material
Most of the material was delivered
but was unclear in several places. Material was not delivered
within the Time
delivered within the specified time was delivered within the specified time
within the specified time frame. Material was delivered with poor specified time frame.
notice to time.
Highly equitable contribution.
Equitable contribution. Segments were Reasonably equitable contribution.
Inequitable contribution. Segments
Inequitable contribution. Segments
Segments were very well linked.
linked well.
Segments had some links.
were poorly linked.
were not linked.
___/ 25 Body language, movement and
Body language, movement and
Some movements and gestures were
Few gestures were used.
The presentation was read with little
gestures were highly appropriate. gestures were appropriate.
use of gestures.
Pronunciation was correct and
Pronunciation was correct. Language
Familiar words were pronounced Pronunciation and tone difficulties.
Pronunciation problems made the
confident. Language used was highly
use was appropriate. correctly. Language was mostly
presentation difficult to understand.
Audio visual
Aids were visually excellent and
Aids were appealing and well
Aids had some appeal and were Aids had been prepared but had little
Aids were not used where needed aids
professionally prepared. They were
prepared. They were used
usually used effectively.
appeal. They were sometimes
and/or could not be easily read. used very effectively.
distracting and/or difficult to read.
Edited discussion of the Concept steps found in
Peacock RW, 2004, Understanding Small Business, pp125-130
Concept steps
The eleven steps encompass a portion of the start up process; that is, motivation, business idea, and
an initial estimate of the scale of the venture in terms of sales/revenue based upon industry sector
information. Important items include a determination of the owner’s reward and a preliminary
profit plan. Many of the concepts rely upon Meredith (1988).
Identify the business idea.
Objective: Identify the idea on which the venture is to be based.
This is the first Stage of the starting process and critical to all following steps. The majority of
business ideas come from prior employment experiences.
Evaluate goals
Objective: Identify the owner’s personal goals, and goals of the business.
From the outset the personal objectives of the starter need to be clarified and will include subjective
aspects such as a desire for independence and family support. Specific goals for the venture should
be stated, quantified in money terms wherever possible.
Identify personal readiness.
Identify strengths and weaknesses in becoming a small business owner in terms of
personal characteristics and abilities.
Most starters need assistance in completing this step but there are a number of checklists
available. For example: the Checklist for Starting a Business, Managing the Small Business
Series (Canberra: Auslnfo) asks the following:
Are you the type?
Prepared to work long hours?
A self starter?
A sticker?
(use your own personality types to assist in your evaluation of the team members)
Identify ‘outside’ needs somewhat.
Identify areas of the venture beyond the starter’s expertise. From item C there
will probably be areas outside the person’s expertise / experience for which it becomes clear that
internal staffing or external assistance will be needed. The step should include listing the starter’s
personal network that could be useful for the venture. The list is tentative and will change as
more planning occurs.
Validate the business idea and target market.
Progress from a raw idea to identification of a target market.
This is second phase of the starting process and can be broken into further steps. These steps are
likely to include identifying a market that is ‘large enough in order to sustain not just an embryonic
business but also a very large, hopefully multi-million dollar organisation’ (Swayne & Tucker
1973). The market is likely to be present in the long term although in a modified form, and one
that can be ‘held in the hand’ as the immediate target market. At this stage the identification of the
target market should be in detail and more precise than the overall market. Failure to clearly
identify and quantify the target market can be a major reason for the early failure of new businesses.
Page 1 of 3
Edited discussion of the Concept steps found in
Peacock RW, 2004, Understanding Small Business, pp125-130
Estimate the availability of personal investment.
Identify the starter’s equity in the business and collateral security for borrowing.
To ascertain the personal net worth of the starter/s, that is, the value of personal assets less the value
of personal liabilities a personal balance sheet should be completed. This should reveal the amount
of cash that can be invested in a business as equity, and the value of net assets that can act as
collateral security for borrowings. Most people are unaccustomed to such personal accounting and
should seek assistance.
Estimate owner’s target reward.
Objective: Estimate the annual business income required to provide a reward for management of
the business and a return on equity.
Owners of a business, like employees, are entitled to an income for time spent on the business and
its management, and this will depend upon their competence, experience and responsibilities
associated with the business. A trade or business association may be able to suggest an appropriate
income level and there are two other approaches (Meredith 1988).
The current salary rate for a senior assistant (below top management level) in the type of business
can be used as a base to which a loading can be added for experience, responsibility and extra time
spent on the business.
Alternatively, it may be possible to estimate the income that would need to be offered to attract a
manager to accept the equivalent position in the business.
Like any investor, the business owner should obtain a return on funds invested as equity (capital)
in the business. The funds have an opportunity cost of what could be earned in a safe investment
such as government securities, say 5% p.a. But a small business is a risky investment and its equity,
unlike ordinary shares in listed companies, cannot be traded on the stock market. A risk premium
should be added to the opportunity cost and the final estimate may be say 25% p.a. This may sound
high, but the return is before personal taxes and needs to compete with alternative risky
investments. If the owner pays $10,000 cash into the new business as equity, for example, then
$2,500 (25% x $10,000) is the return on equity to be added to the income equivalent to comprise
the owner’s annual reward (before personal taxes).
Complete preliminary profit plan.
Complete a preliminary profit plan to include the value of annual sales or business
income needed to cover owner’s reward.
It is essential to obtain as much information as possible regarding the industry sector of the venture.
This is very preliminary and should not contain excessive detail. For example, there should be no
more information than that shown below (however, a full profit plan should be undertaken for a
business plan).
total income
% of income
gross profit margin
overheads as
net profit margin (before owner’s
The aim of this step is to draw up a preliminary profit plan which shows the annual sales/income
which would be required to meet the owner’s reward. Let us assume a hypothetical case where a
business starter sets their owner’s reward at $40,000, comprising a salary of $30,000 plus return on
Page 2 of 3
Edited discussion of the Concept steps found in
Peacock RW, 2004, Understanding Small Business, pp125-130
equity of $10,000 (20% x $50,000). Research indicates that average industry rates for the type of
business comprise this hypothetical owner is contemplating are as follow:
sales 100% gross profit margin
30% overheads as % of
sales 22% net profit margin (before owner’s reward) 8%
Since owner’s reward is to be $40,000 and the net profit margin in this example is 8%, sales need
to be $500,000 ($40,000/.08). By working backwards (that is starting with the owners’ reward) a
preliminary plan can be drawn up as follows:
gross profit
net profit (before owner’s reward)
Some starters may believe that they should commence their venture with only a survival salary and
a low, or even nil, return on equity. Although a preliminary profit plan could be completed on these
bases, a full calculation should also be made as part of a full planning regimen before operations
commence. The amount of salary/investment return foregone will be known as will the
sales/income that needs to be obtained to meet the full owner’s reward.
Evaluate timing.
Objective: Determine whether the timing is appropriate for starting up.
Consideration needs to be given to the best time to start. Most ventures are difficult to start in an
economic downturn or when a particular industry sector is in decline, and many ventures may be
better started in a particular cycle of the economy or in a particular season of the year.
Clarify essential red tape.
Objective: To ensure that detailed planning does not proceed before a check is made of new
business requirements by law, levels of government or industry/trade associations.
It would be a waste of effort and money to plan any further without checking the legal and statutory
requirements for the intended type of venture. For example, an intention to start a hairdressing
salon at home may be frustrated by licensing and staffing requirements of the hairdressing
association, and by a local council which prohibits customer traffic and parking in a residential
area. Government business enterprise centres and industry/trade associations are useful contacts
for this step. There is a one-stop source of information on business entry requirements such as
business licences:
Page 3 of 3

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