BUS 201 Chapter Notes - Chapter 4: Sole Proprietorship, Canada Wide Media, Dedication 2

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BUS 201 – Ch. 4
LO 1 – Explain the meaning & interrelationship of the terms small business,
new venture creation and entrepreneurship.
- small business = independently owned & managed business that does not
dominate market (generally less than 100 ppl)
 must have at least 1 paid employee/annual sales revenues of $30000+/be
incorporated
 goods-producing business considered small if fewer than 100 employees
 service-producing business small if fewer than 50 employees
- self-employed = working owners of a business that is
incorporated/unincorporated
- nascent entrepreneurs = ppl who are trying to start a business from scratch
- new venture = recently formed commercial org that provides goods and/or
services for sale
- entrepreneurship = process of identifying an opportunity in marketplace &
accessing the resources needed to capitalize on it
- entrepreneurs = ppl who recognize & seize opportunities
- intrapreneurs = ppl who create sth new w/in an existing large firm/org
LO 2 – Describe the role of small and new businesses in the Canadian
economy.
- private-sector = part of economy that is made up of companies & orgs that are not
owned or controlled by gov
- 98.1% of all business in Canada are small
- mompreneurs = women who run businesses from their homes
LO 3 – Explain the entrepreneurial process and describe its 3 key elements.
- entrepreneurial process influenced by social, econ, political, technological factors
- 3 key elements in entrepreneurial process: entrepreneur, opportunity, resources
 entrepreneur: personal charac important, can be behavioural/personality
traits/skills but more important is what the person does
 identify opportunities: majority of ideas originate from events relating to
work or everyday life, need to screen/weed out ideas (idea creates/adds
value for customer, provides competitive advantage that can be sustained,
marketable & financially viable, low exit costs)
 dvlping opportunity: need vision of what is to be achieved but equally
important to incorporate new info & be on lookout for unanticipated ops
(introduce totally new prod/service, customization of standard
prod/franchise)
 accessing resources: financial resources (debt & equity) & etc
 sources of equity: personal savings, love money, private investors (i.e.
angel investors), venture capitalists (like vultures)
 sources of debt: financial institutions (banks), suppliers (trade credit)
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- sales forecast = estimate of how much of a prod/service will be purchased by
prospective customers over specific period
- franchise = arrangement that gives franchisees right to sell prod of franchiser
- business plan = doc where entrepreneur summarizes business strategy for
proposed new venture and how strategy will be implemented
 cover page, executive summary, table of contents, company descrip,
prod/service descrip, marketing, operating plan, management, financial plan,
supporting details/appendix
- bootstrapping = doing more with less
- collateral = assets that borrower uses to secure a loan/other credit
- incubators = facilities that support small businesses during their early growth
phase by providing basic services, office space, legal advice, etc
- “fit” b/t elements in entrepreneurial process: entrepreneur-opportunity,
opportunity-resources, entrepreneur-resources
LO 4 – Describe 3 alternative strategies for becoming a business owner –
starting from scratch, buying an existing business and buying a franchise.
- starting from scratch = new venture/firm
- buying existing business increases chances of success but uncertainty about exact
financial shape/poor reputation/location poor/difficult to determine appropriate
purchase price
 take over family business: fam can prove financial & management
resources, employee loyalty high, disagreements over which fam members
assume control, expectations problematic
- buying franchise can be used to expand company
 franchising agreement = outlines duties & responsibilities of each party
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