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chpt 3


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird

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Chapter 3
Small business
Approximately 380 businesses are started in Canada every day
Ways to measure a business- number of people, company’s sale revenue, size of
investment, ownership structure (#RIO)
-industry in charge of small business reports small business statistics through
business register ( which tracks businesses and labour force survey (tracks
individuals
to be a business- 1 employee, 30000 R or be incorporated
less than 100 for good production business and less than 50 for service producing
business
labour force survey – info from individuals to make estimates of unemployment.
Employment levels
-self employed Individuals- if they are owners of business either incorportated or
unincorporated or work for themselves but no business ( eg musician or if they
work without pay in family business)
industry Canada- 2.2 million business establishments and 2.5 employed ( can have
overlap)
(PSED) panel study entrepreneurial dynamics
ERC entrepreneurship research consortium
unincorporated -no employees are no businesses in register
only who reported establishing a operating business had incorporated their firm.
Small business- owner managed with less than 100 employees
Ways to determine if it is new firm- incorporated sold goods/services, when it was
formed
( IST)- incoporated sold stuff and time it was formed) has to be under 12 months, be
either sole proprietorship, partnership coporation etc and sell stuff)
New venture- recently formed commercial organization that provides goods/services for
sale
Entrepreneurship- process of identifying an opportunity in market place and accessing
resources to capitalize on that opportunity .
Entrepreneurs- people who recognize and seize opportunities - ken woods john galiardi
for high quality beer)
Small businesses are mostly independently owned and therefore create environment to
need creativity. Entrepreneurs doesn’t just have to be in small or new firms but also old
ones public sector, non profit organizations
- intrapreneurs- those who exhibit entrepreneurial characteristics in a old or large firm
eg swifter procter and gamble-
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Difference between entre and intrapreneur= t don’t need to gather resources as employer
provides them
-starting business means dealing with uncertainty and possibility of failure
role of small and new businesses in Canadian economy
=98% of canadas business are small less than 100 employees
Both Canada and us – 97% is small business 2 is medium 1 is large
Majority of small businesses (half) have less than 5 employees
Private sector- part of economy made up of companies and organization not owned or
ctrled by gvt. ( 10 000 )
Half of employees wrk for small 16 work for medium and 35% of ppl work for big
-small businesses account for two thirds of employment in four industries(COFH)
( non institutional construction other services and food/accommodation
-small business contribute to 25% of total GDP
new firms not only source of job creation but also for majority of new products and
services
-most growth occurred in services producing sectors eg biotechnology high
techonology doubling)
# of businesses grew by 9300 each year and 8800 are by small medium sized enterprises
- women are playing big role over 800 000 woman entrepreneurs in Canada and
increasing by 3% each year.
Much more increase of female entrepreneurs compared to men
Majority female owned SMES had revenue of 72 billion and account for 8% of all
revenues and employed over 900000 contract employees
- gov’t excludes businesses without employees and businesses would count as new even
if its been operating for several years without employees. Will only be considered in
statistic canada’s business register when it hires employees
- though large business can be over contribution of small businesses,
All together SMES outperform large businesses in terms of contribution / employment
New business- lead way for innovation/ new technology
-entrepreneurial process is like journey – entrepreneur needs to identify business
opportunity and the resources to capitalize on it. Social economical political factors will
influence
Key elements- entrepreneur opportunity and resources
These 3 must be well matched if not the opportunity will fail but if well matched it can
become operational
Venture’s next phase of development (growth stability decline or demise) (up down same
gone)
Entrepreneur- must exemplify many types of characteristics- behavioural (eg high energy
level) personality ( independence) and skills- problem solving. Some say some are born
natural entrepreneurs but it is rather what a person does more than what a person is
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2 main things that entrepreneurs need to do- identify opportunity and access resources
Identifying an opportunity involves- generating new ideas, screening ideas and then
developing the opportunity)
Idea generation- seeing what others do not new ways. Must make profit and be attractive
to other potential venture ideas.
Ideas come from mostly work as the entrepreneur should be familiar with the
enviornemnt ( eg customers suppliers competitors, market place needs)
Can come from hobby and ten ideas can come unexpectedly eg on vacation u try new
food that will be in demand in Canada)
Screening- weeding out bad ideas to focus on the good ones
Good ideas should- create or add value to customers ( eg solve a problem or meet a need)
Competitive advantage that can be sustained- must maintain that competitive advantage
(eg sally fox couldn’t maintain the financial advanatage as in other places they didn’t
have to treat and dispose toxic waste)
Idea is marketable and financially viable- product also must make a profit and the
entrepreneur should understand who the customers are how the product will satisfy a
customers needs better than competitors and what kind of competitors the product will
face
-entrepreneur should prepare a sales forecast- estimate of how much of a product or
service will be purchased by prospective customers over a specific period. ( typically 1
year) ( total sales revenue) – it is what determines the financial viability of venture and
sources to start it
Financial forecast consists of start up costs, cash budget income statement and balance
sheet.
Cash budget- forecasts cash receipts and cashs disbursements
Income statement- if profit or loss
Balance sheet- assets and liabilities any profits that business retains
These projections will decide whether to move on with idea and if so what amount is
needed and type of financing is needed to finance business
Low exit costs- easy to close down, if it wont make profit for a number of years, its exit
costs are high . if profit is quick then exit costs will be lower
Developing the opportunity
-though a business might have already developed the concept and entry strategy to enter
market they will change and have to develop new markets, competitive advantages once
market is understood
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