A practice firm is a simulated business that is set up and run by students as part of their study program with support from an educator (trainer/lecturer/facilitator) and staff from a real business. Practice firms conduct business with other practice firms in a simulated market economy on a local, national or international basis.
The products and services traded in this simulated global world are virtual (they never arrive!); similarly the money and the financial and regulatory institutions are fictitious. However, the business decisions, documentation and activity match up to the expectations and best practices of a real world business.”
Australian Network of Practice Firms
Practice firms claim to provide a safe and secure learning environment, tailored to suit vocational outcomes and leading to the development of skills that make the students highly employable. They’ve been used extensively in secondary and vocational education with 150 Australian firms and some 4000 international firms in operation at any given time. Each of these 'practice firms' or ‘simulated businesses’ or 'virtual enterprises' or 'training companies' follows real-world business practices and trades within a virtual economy.
Do they work? The existence of more than 4000 practice firms world-wide is testimony in itself. Surface investigation suggests that practice firms do live up to their claims in most cases. However, as is often the case, the success of practice firms as a delivery strategy depends largely on the behind-the-scenes work done by the teacher/facilitator.
Practice firms have several primary groups of stakeholders.
- The students themselves
- The teaching staff
- The real business mentoring the students.
- The Australian Network of Practice Firms (ANPF).
For a practice firm to be successful, all four groups need to be committed. The students need to undertake their role in the firm as if it were real. Practice firms aren’t a “game”. They’re serious business despite the fact that all transactions and interactions are virtual.
The teaching staff need to learn how to “teach” using a practice firm as the learning vehicle. If nothing else, this requires a comprehensive understanding of holistic and integrated assessment. It also requires acceptance that students are capable of constructing their own learning if the teacher is prepared to relinquish control and take on more of a mentoring role.
Mentoring is also the role of the real business associated with the practice firm. A practice firm often resembles the business on which it models itself, for example in its form, organisation and functions. Having a relationship with a real business seems to be one of the keys to success. Students learn to work with their business partner, who mentors and coaches them in how that industry operates. In fact, employees in the real business often become pseudo-teachers and many report they learn as much as the students from the experience.
The Australian Network of Practice Firms (ANPF) provides support as well as a coordinating role between practice firms.
Some of the specific benefits of practice firms are that:
- practice firms trade only within practice firm networks rather than in the real world so there’s no problems with real money
- practice firms are coached and mentored by real businesses so there’s a strong sense of reality
- students take full responsibility for their business and its outcomes - they are recruited, inducted, move through the firm as employees, work and eventually leave the business
- action learning underpins all activities in the firm which means both students and teachers take on different roles than they would in a traditional classroom.
Clearly, practice firms aren’t a stand-alone learning strategy. They work best when preceded by learning about the basic concepts of an organisation – structures, purposes and how they interact with each other. By having tutorial sessions (or something similar) in parallel with the practice firm operations, teachers can ensure that all students can fully participate without fear of making mistakes.
Participation in a practice firm gives students unique insights into how a real business operates. They develop skills in decision making, problem solving, working effectively in a team, prioritising, accountability and daily work routines.
Some of the major competencies that can be developed are as follows.
they take their bearings from real-life companies who act as their sponsors and provide them with important data and information.
they are usually equipped with modern office equipment,
computers and telecommunication.
they are mostly managed according to modern market,
service-minded, and democratic principles.
If they work together on an international level. This can done in
the framework of either the Australian Network of Practice Firms (ANPF) and/or the European-wide network of Practice Firms
(European - European Practical Enterprises Network) in which they can do business in German, English, French, Spanish etc.
How to get started
Beginning a practice firm is almost exactly the same as starting any business. The only real difference is that if the business “fails” no-one is really financially hurt.
- Ring the Australian Network of Practice Firms (ANPF). They’re the most helpful people you could ever come across and will tell you everything you need to know.
- Think about the type of firm you want to be. Accountant, plant nursery, real estate agent, travel agent, recruitment firm, lawyer, grocery store, stationer, dairy farm… the possibilities are endless. However, it is good to run your ideas by ANPF so they can give advice on how likely it is your products will be sought after by others in the network. After all, there’s no point setting yourself up as a travel agent if there’s already ten in the network, or being a manufacturer of garden hoses if no-one is likely to want to buy them.
- Complete a ‘feasibility study’ given to you by NAPF. This is basically the background research to help you determine whether or not a practice firm is the right vehicle for your students to achieve their outcomes and if they’ll be adequately resourced and supported. The feasibility study is in the form of a simple checklist but has the advantage of getting both students and teachers thinking about exactly what they’re trying to achieve.
- Once the feasibility study has been received by ANPF, they’ll provide guidance through the set-up stage. This period includes registering the business, applying for a tax file number, APFB (the practice firm equivalent of an ABN), setting up an operational account, getting a cheque book and online account, and all the other things that every business needs to do. Fortunately, this is outlined in the teacher manual and student guide so you don’t need to be an expert right from day one. ANPF will even help you determine your starting capital, whether to be a sole trader or a multi-national organisation, and a range of other decisions that your students may not have even thought of.
- The set-up stage also involves finding a mentoring organisation. Ideally this is a company doing the same type of business as your practice firm, however this is not essential. The most important thing is that the mentoring organisation is willing to provide advice and guidance for the students so they’re not relying on the teacher as the sole source of information.
- Once the practice firm is in place, it needs to be proactive in terms of marketing its products to the other 130 firms in the Australian Network and/or the 4000 firms worldwide. A big hint at this stage is that being an active buyer of products and services helps encourage other firms to recognise you and consider purchasing your own products and services. You can make as many or as few transactions as you wish however, failure to interact with other firms in the network will end up with a result much the same as if a real business neither bought nor sold anything.
- Internal transactions are also important. That includes hiring, paying and firing employees; having meetings to make business decisions; maintaining company records and accounts; etc.
- The balance of time spent on internal and external activities will depend on the purpose of the practice firm. If the learning is about administration of an organisation, it’s likely that more time will be spent on internal activities. On the other hand if the learning is about how firms operate in a market place, it’s likely that more time will be spent on external activities and interactions.
The most useful advice you need is this… Contact ANPF, talk to them and give your students and teachers time (a couple of months is ideal) to research and set up their firm. Then… go for it!
[links current as at 30/07/04]
Australian Network of Practice Firms
EUROPEN – World Wide Practice Firms Network