RSM Revision Dec.docx

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Department
Rotman Commerce
Course
RSM100Y1
Professor
John Oesch
Semester
Fall

Description
Chapter 5: Forms of Business Ownership 5.1 Small Businesses Small business: an independent business with fewer than 100 employees and revenue  less than 2 million. Among Canadian small business, 25% are good­producing and 75% are service. Industries small businesses play important roles: 1. Non­institutional health care 2. Construction 3. Accommodation and food 4. Forestry 5. Others 5.2 Contributions of Small Businesses to the Economy Small businesses generate 29% of GDP, medium 14%, large 62% ­ Creating new jobs ­ Creating new industries (provide needed service to large corporations, change  in consumer preferences, sees a need for change) ­ Innovation 5.3 Why Small Businesses fail 1. Management shortcomings 2. Inadequate financing 3. Government regulation 5.4 The Business Plan o A formal document that details a firm’s goals, methods and standards. Five main sections of a business plan: 1. Executive Summary 2. Introduction 3. Financial Section 4. Marketing Section 5. Resumes of principles 5.5 Assistance for small businesses: 1. Business Development Bank of Canada (BDC) BDC: a governmental agency that assists, counsels, and protests the interests  of small businesses in Canada. 2. Canada Small Business Financing Program (CSBFP) Typical federal and provincial government assistance. When banks loans to  small businesses and is not paid back, the government will guarantee payment  for as much as 85% of the loan. 3. Business incubator A local program designed to provide low­cost, shared business facilities to  small, start­up businesses. 4. Private investors (Venture Capital) 5. Small Business Opportunities for women One half of the SMEs in Canada have at least one female owner 5.6 Franchising Franchising: a contract­based business arrangement between a parent company  and a dealer, such as restaurant or a retailer. • Canada­ second largest franchising industry in the world, just after the US. • More than 100 billion in sales each year. Advantages Disadvantages  Lower risks  Failure of either franchisee or   Quick start­up franchisor can reflect and have   Existing brand recognition impact to another  Existing customers  The franchisor loses control over   Opportunities for expansion (for  every aspect of the business  Restrict agreement franchisors) Franchisees and franchisors must work together to maintain their good brand  recognition. 5.7 Legal Structures Sole proprietorships [most common, oldest, simplest]: A business ownership,  which the sole proprietor’s status as an individual does not separate from its status as  the business owner. Partnerships: An association of two or more people who operate a business as co­ workers under agreements. Corporation: A legal organization whose assets and liabilities are separate from the  assets and liabilities of the owner. Not for profit corporations: organizations whose goals are not pursuing a profit (Canada has about 160,000 not­for­profit; exempt from paying tax) 5.8 Public and Collective Ownership of Businesses Public ownership: a government unit or agency owns and operates an organization.  Public ownership results when private sectors are unwilling to invest due to high risks  or not profitable. Ex. TTC Collective (Co­operative) Ownership: The owners work together to operate all or part  of the activities in their firm or industry. Found mostly in agricultural businesses. Co­ operatives allow small firms to pool their resources, share equipments and expertise,  and help each other through difficult times. i.e. groups of customers can col
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