BUS106 Entrepreneurship and Starting a Small Business

1. Week 6, Chapter 6
Entrepreneurship & Starting a Small Business

3. Learning Objectives
Explain why people are willing to become entrepreneurs, and describe
the attributes of successful entrepreneurs.
Discuss the importance of small business to the Canadian economy.
Summarize the major causes of small-business failure.
List ways to learn about how small businesses operate.
Analyze what it takes to start and run a small business.
Outline the advantages and disadvantages that small businesses have in
entering global markets.

4. Entrepreneurship: accepting the challenge of starting and running a
business.
The word entrepreneur originates from
the French word entreprendre, which
means “to undertake.”
In a business context, it means to start
a business.

5. Entrepreneurship differs from small business in four ways:
Amount of
wealth
creation
Speed of
wealth
creation
Risk Innovation

6. Why People Take the Entrepreneurial Challenge
New Idea, Process, or Product.
Some entrepreneurs are driven by a firm
belief, perhaps even an obsession, that they
can produce a better product, or a current
product at a lower cost, than anybody else.
Independence.
Many entrepreneurs simply do not enjoy
working for someone else.

7. Why People Take the Entrepreneurial Challenge
Challenge.
Many people thrive on overcoming
challenges.
Family Pattern.
Some people grow up in families who
have started their own businesses
Profit
Immigrants

8. What Does It Take to Be an Entrepreneur?
Self-directed.
• You should be a self-
starter, with a lot of
confidence in yourself.
Determined.
• You have to believe in
your idea even when
no one else does.

9. What Does It Take to Be an Entrepreneur?
• Action-Oriented
• Highly Energetic
• Tolerant of
Uncertainty
• Able to Learn Quickly
• Making errors is
inevitable. What is
important is what
you learn from
them.
Attributes:

10. Figure 6.1
Advice for Potential Entrepreneurs

11. Why Women Leave Jobs in Big Companies to Start a Business
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
B
etter B
enefits
M
ore
Fam
ily
Tim
e
R
ecognition
Less
Politics
Partners/C
olleagues
Influence
Strategy
M
ore
M
oney
R
isk-Taking
Source: FSB, March 2001

12. Entrepreneurial Teams - a group of experienced people from
different areas of business who join together to form a managerial
team with the skills needed to develop, make, and market a new
product.

13. Micropreneurs and Home-Based Businesses
The smallest of small businesses
are called micro-enterprises,
most often defined as having
fewer than five employees.
Many micropreneurs are owners
of home-based businesses.
Many home-based businesses
are owned by people who are
trying to combine career and
family.

14. Reasons for the growth of home-based businesses
Computer
Technology
Corporate
Downsizing
Change in
Social
Attitudes

15. Why People Start Their Own Businesses
0 10 20 30 40 50 60
Use My Abilities
Control My Life
Build For Family
Like The Challenge
Live Where/How I Like
Source: BFIB/VISA Card Primer

16. Home-based Businesses: Challenges
Getting New Customers
Managing Time
Keeping Work and Family
Tasks Separate
Abiding by City Ordinances
(Rules)
Managing risk

17. Most Common Types of
Home-Based Businesses
Personal
Svcs.
14%
Bus.
Services
27%
Bldg. Trades
31%
Financial &
Real Estate
5%
Sales &
Distribution
10%
Arts/Design
Creative
13%
Source: Independent Insurance Agents of America

18. Entrepreneurship Within Firms
Intrapreneurs
• Creative people who work as entrepreneurs within corporations.
• The idea is to use a company’s existing resources—human,
financial, and physical—to launch new products and generate
new profits.

20. Incubators
Entrepreneurs and new
start-ups can also find
assistance from incubators.
provide hands-on
management assistance,
education, information,
technical and vital business
support services,
networking resources,
financial advice, as well as
advice on where to go to
seek financial assistance.

21. Starting a Small Business
• Definition: business establishment
• Has at least one paid employee
• annual sales revenue of $30,000, or is incorporated
• has filed a federal corporate income tax return at least once
in the previous three years.

22. Importance of Small Businesses
• Nearly all small businesses are Canadian-owned and -
managed.
• This is in contrast to large businesses, of which many are
foreign-owned and -managed.
• Small business thus plays a major role in helping to
maintain the Canadian identity and Canadian economic
independence.

23. Figure 6.3
Number of Business Establishments by Sector and Firm Size (Number of
Employees)

24. Small-Business Success and Failure
Figure 6.4

25. Small-Business Success and Failure
Figure 6.5

26. Ways to get into your first business venture:
1. Start your own
company.
2. Buy an existing
business.
3. Buy a franchise unit
(see Chapter 5).
4. Inherit/take over a
family business.
5. Get Some
Experience
6. Many small-business
owners got the idea for
their businesses from
their prior jobs.

27. Managing a Small Business - the functions of business in a small-
business setting
planning your business
financing your business
knowing your customers
(marketing)
managing your employees
(human resource development)
keeping records (accounting).

28. Business Plan - A detailed written statement that describes the
nature of the business, the target market, the advantages the
business will have in relation to competition, and the resources and
qualifications of the owner(s).

29. Sample Outline of a Business Plan
Cover Letter
Executive Summary
Company Background
Management Team
Financial Plan
Capital Required
Marketing Plan
Location Analysis
Manufacturing Plan
Appendix
PLAN

30. Getting Money to Fund a Small Business
Figure 6.7

31. Getting Money to Fund a Small Business
Angel Investors - private individuals who invest their own money
in potentially hot new companies before they go public.
Angel investors usually target their support (generally $20,000 to
$500,000) to pre-start-up and early-stage companies.

32. Capital Sources of Successful Entrepreneurs
0%
20%
40%
60%
80%
100%
Venture
Capital
Family Bank
Loan
Credit
Cards
Personal
Funds
By Company Age
< 3 Years
6+ YearsSOURCE: FSB, March 2001

33. Knowing Your Customers
Market
People with unsatisfied wants and
needs who have both the resources
and the willingness to buy.
One of the greatest advantages
that small businesses have over
larger ones is the ability to know
their customers better and to adapt
quickly to their ever-changing
needs.

34. Managing Employees
Hiring, training, and motivating employees are critical.
It is not easy to find good, qualified help when you offer less
money and fewer benefits.

35. Small Business & International Prospects
Positives
• World Market
• Absorb Excess Inventory
• Soften U.S. Downturns
• Extend Product Life
Negatives
• Financing Difficult
• How to Get Started?
• Lack of Cultural
Understanding
• Paperwork

36. International Small Business
Advantages
• Deal With
Individuals
• Faster Shipping
• Variety of Suppliers
• Professional
Service
• Canadian Trade
Commissioner Service
• www.infoexport.gc.ca
• Team Canada Guide
• www.exportsource.gc.ca
Information

37. Chapter Summary
Why people are willing to become entrepreneurs
• New idea, independence…
The attributes of successful entrepreneurs.
• Self-directed, action oriented….
Small business and the Canadian economy.
• 2.6 million workers in the Canadian economy were self-employed.
Summarize the major causes of small-business failure.
• Plunging in without first testing the waters on a small scale.
• Underpricing or overpricing goods or services.
• Underestimating how much time it will take to build a market.
Ways to learn about how small businesses operate.
• Analyze what it takes to start and run a small business.
• Planning
• Money….
Outline the advantages and disadvantages that small businesses have in entering global markets.
• small companies usually can begin shipping much faster
• small companies provide a wide variety of suppliers

39. 39
Homework