1. Industrial Experience
Types of Enterprises
Industrial Experience

2. Objectives Define ‘Small-Medium Enterprise’
Discuss and evaluate types of animal enterprises
Research specific types of enterprises for upcoming assignment

3. What is an S.M.E? Small-Medium Enterprise How is it defined?
Employee definition
Characteristics definition
Turnover definition
(The Bolton Report, 1972)

4. Employee definition Dependant on the type of enterprise- e.g.
Manufacturing: 200 employees or fewer
Construction: 25 employees or fewer
Farming: 25 employees or fewer

5. Characteristics definition
It has a small share of the market
It is managed by its owners or part-owners in a personalised way
Limited investment and resources
On-the-job learning
It is operated independently
(Clarke, 1972)
Major decisions are made by one or two people who manage and risk their own money
Investments are made usually with owners’ personal money and are therefore limited as opposed to impersonal investors such as shareholders in big businesses. May also be a reluctance to spend money on any resources except bare essentials for short-term obvious returns.
Many business owners acquire their business knowledge on the job, and will have devised the business systems based on their own experiences
Operated independently- no shareholders, government is not involved, not a branch of larger firm, etc.

6. Turnover definition Dependent on type of enterprise- e.g.
Retail: Turnover of £50,000 pa or less
Wholesale: Turnover of £200,000 pa or less
Services: Turnover of £50,000 pa or less

7. SMEs are often... Run by an owner/manager … usually the ‘founder’
Family businesses
Other structures, for example ….
Venture capitalists / angel investors
Consortiums
Franchises
Venture capitalists: invest money for start-up or expansion but generally want a higher rate of return than more traditional investors- e.g. dragon’s den
Angel investors-offer business experience as well as money to a business e.g dragons den
Consortium-combination of businesses, investors, etc participating in a joint venture
Franchise: owner sells goods under a trademark name. Trademark name takes a % of profits.

8. It is often said that, when compared with larger businesses, SMEs...
Are more flexible
Can rapidly adapt to changing markets/environment
Are more creative
Have a clearer sense of direction
Have more ‘drive’
Make better use of teamwork
Can you see any reasons why the above may not be correct ??
Some areas of the business may be lacking due to the owners’ experience- e.g. the owner may understand good marketing but on the other hand may lack experience in financial forecasting.
Owners may have been in the job a long time- change may be feared- e.g. reluctance to create a website due to good existing customer base (Hunscote kennels)
Owners may lack creative skills and therefore need an ‘intrapreneur’
Clear sense of direction is only achieved with regular reviews of missions, aims, objectives and SWOT analysis
Teamwork is an attribute of individuals coming together- not all employees may possess these skills and therefore training is needed (which costs time and ££!)

9. Some areas of the business may be lacking due to the owners’ experience - e.g. the owner may understand good marketing but on the other hand may lack experience in financial forecasting
Owners may have been in the job a long time - change may be feared- e.g. reluctance to create a website due to good existing customer base
Owners may lack creative skills and therefore need an ‘intrapreneur’
Clear sense of direction is only achieved with regular reviews of missions, aims, objectives and SWOT analysis
Teamwork is an attribute of individuals coming together - not all employees may possess these skills and therefore training is needed (which costs time and ££!)

10. Types of Enterprises Type of Enterprise Who Owns Who Controls
Sources of Finance
Sole Trader
1 person
Owners savings, bank loans, overdrafts, profits
Partnership
2+ owners
partners
Partners savings, bank loans, overdrafts, profits
Company
2 to any number of shareholders
Major decisions by directors
Shares, bank loans, overdrafts, venture capital and profits
Franchise
Franchisee with license from franchisor
Franchisee with guide by franchisor
Franchisee’s savings, borrowings, profits
Lecture 01 M McNeil

11. Sole trader Owned and run by one individual
No legal distinction between owner and business
Unlimited liability
Discuss and list some advantages / disadvantages of being a sole trader
All profits and losses accrue to the owner, all assets belong to the owner
Unlimited liability- all debts are to the owner and they must pay with their personal resources should the business collapse e.g. house may need to be repossessed etc

12. Sole trader Advantages Easier to set up
Owner has full autonomy with decisions
Fewer regulations applied (certain taxes wavered)
Owner takes all profits
Disadvantages
Harder to raise capital
Solely responsible for all debts
Long hours
Taxes wavered- double taxation e.g. taxes taken on foreign investment and then again on transferring earnings home

13. Partnership Owned and run by business partners
Share both profits and losses of the business
Unlimited liability
Discuss and list some advantages / disadvantages of being in a partnership
Dividend tax- payments made to shareholders

14. Partnerships Advantages Debts are shared Work load shared
Double the capital can be invested
Ideas can be discussed
Disadvantages
Compromises may need to be made
Profits are shared
One partner may wish to sell up

15. Company Can be owned by a number of investors / shareholders
Profits are divided between all individuals depending on what % of the business they own
Limited liability
Discuss and list some advantages / disadvantages of being in a company
Limited liability: investors/ shareholders are not personally liable for company losses other than what they have invested. If the company has no profits to allocate then company shares will be worth zero.

16. Company Advantages Limited liability Easier to raise capital
Wider range of knowledge/ expertise
Disadvantages
Profits are shared between a number of people
Conflicts can occur

17. Franchises Independent owner operates under a trademark
The franchisor takes a % of gross profit
Franchisor supplies things like advertising, training, etc
Owner still ‘owns’ the business e.g. stock, premises, etc
Discuss and list some advantages/ disadvantages of being a franchisee
Gross profit= sales minus all costs directly related to those sales
Net profit= total revenue minus all expenses

18. Franchises Advantages Alternative way of owning a business
Quick to start
Guidance with expansion
Support with training, advertising, etc.
Reputation of trademark already in place
Disadvantages
No guarantee business will succeed
No real control over the business
May not be allowed to source less expensive alternative products
Conflict between franchisor / franchisee

19. Enterprise Sectors
Primary
"Take" - this involves taking resources from the land or the sea e.g. farming
Manufacturing
"Make" - e.g. pet toys
Service
"Serve" - providing a service to others e.g. groomers
Quaternary
Information and office based industry e.g. making computer software
Discuss these four sectors and list as many animal enterprises that you can think of
Quaternary- differing to manufacturing- e.g. making a product for a manufactured product- usually intangible such as software, data and stats
Lecture 01 M McNeil

20. Task
For the business / organisation that you have completed your commercial experience investigate the following:
The role of the business within its specific industry and enterprise sector
What type of enterprise (e.g. sole trader, company, etc.
Location (and how this impacts on the business)
Brief history (how it was initially set up and developed)
Be prepared to discuss this next lesson.
(HINT: Doing this will aid you with your next assignment!)

21. Reading
The article has a veterinary context but the overview of the pros and cons of different business options is relevant to SMEs in general
Openshaw, N. (2011) Legal considerations for limited companies. In Practice 33: