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Bus106 wk6 ch6 entrepreneurship


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BUS106 Entrepreneurship and Starting a Small Business

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Bus106 wk6 ch6 entrepreneurship

  1. 1. Week 6, Chapter 6 Entrepreneurship & Starting a Small Business
  2. 2. 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.
  3. 3. 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.
  4. 4. Entrepreneurship differs from small business in four ways: Amount of wealth creation Speed of wealth creation Risk Innovation
  5. 5. 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.
  6. 6. 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
  7. 7. 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.
  8. 8. 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:
  9. 9. Figure 6.1 Advice for Potential Entrepreneurs
  10. 10. 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
  11. 11. 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.
  12. 12. 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.
  13. 13. Reasons for the growth of home-based businesses Computer Technology Corporate Downsizing Change in Social Attitudes
  14. 14. 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
  15. 15. Home-based Businesses: Challenges Getting New Customers Managing Time Keeping Work and Family Tasks Separate Abiding by City Ordinances (Rules) Managing risk
  16. 16. 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
  17. 17. 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.
  18. 18. 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.
  19. 19. 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.
  20. 20. 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.
  21. 21. Figure 6.3 Number of Business Establishments by Sector and Firm Size (Number of Employees)
  22. 22. Small-Business Success and Failure Figure 6.4
  23. 23. Small-Business Success and Failure Figure 6.5
  24. 24. 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.
  25. 25. 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).
  26. 26. 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).
  27. 27. 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
  28. 28. Getting Money to Fund a Small Business Figure 6.7
  29. 29. 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.
  30. 30. 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
  31. 31. 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.
  32. 32. 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.
  33. 33. 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
  34. 34. International Small Business Advantages • Deal With Individuals • Faster Shipping • Variety of Suppliers • Professional Service • Canadian Trade Commissioner Service • • Team Canada Guide • Information
  35. 35. 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
  36. 36. 39 Homework