Chapter 4 Notes v2.docx

5 Pages
Unlock Document

Business Administration
BUS 100
Kim Milnes

Thomas Davies Business 100 Chapter 4 – Entrepreneurship, Small Business, and New Venture Creation Small Business 1) “Small” can be defined through # employees, sales revenue, investment required, or ownership 2) Small businesses info collected by Business Register (tracks businesses), and Labour Force Survey (tracks individuals)…..both run by StatsCan a) Business Register = 1+ paid employee, >$30,000 revenue, or incorporated  Goods is small if <100 employees  Service is small if <50 employees b) Labour Force Survey collects unemployment, if self-employed, etc. 3) Nascent entrepreneurs = people trying to start business from scratch 4) Small business = independently owned/managed, does not dominate market, <100 employees 5) The New Venture/Firm a) New = operational within last 12 months b) New venture = recently formed commercial organization providing goods/services for sale 6) Entrepreneurship = process of identifying opportunity in market, and accessing resources to capitalize on it a) People start businesses to control their destiny, chance > secure job b) Entrepreneur = business person who accepts risks and opportunities for new business c) Countries ranked by Heritage Foundation on economic freedom (Canada 7 ) d) Intrapreneurs = people who create something new in existing large firm/organization  One impt. difference is that these don‟t worry about having resources The Role of Small and New Businesses in the Canadian Economy 1) Small Businesses a) 97.8% of businesses are “small” (<100 people) b) Often lead the way for innovation/new tech c) 10.9 million private sector employees, with distribution varied by industry d) Both easier and harder to „go green‟ 2) New Ventures a) New firms main source of job creation (>100k formed in 2007) and new prods/services b) 2006-2006 130k new ventures per year (about same # as those that close) c) Women are becoming more common entrepreneurs (some are “mompreneurs”) The Entrepreneurial Process 1) Three key elements: the entrepreneur, the opportunity, the process a) Entrepreneur: needs to take initiative, be independent, good problem solver  However, what someone does > what someone is  1) Identify opportunity  2) Access resources  3) new venture  4) growth, stability, decline, demise 2) Identifying Opportunities a) Idea generation 1 Thomas Davies Business 100  Think „outside the box‟ no „blocking‟ of ideas  Most come from events relating to work/regular life (also from hobbies,, or chance) b) Screening  The idea creates/adds value for the customer (1) Ex. FoxFibre (naturally grown in many colours – no dyeing)  The idea provides a competitive advantage that can be sustained (1) All other things equal, more able to sustain advantage while markets are in flux  The idea is marketable and financially viable (1) Need enough customers, and sales must lead to profits (2) Must prepare sales forecast = estimate of how much of product/service will be purchased by customer over period (3) Need: start-up costs, cash budget, income statement, balance sheet  Idea has low exit costs (1) If profits take long time, high exit cost….vice versa c) Developing the Opportunity  Recognize the original vision, but must adapt to new market info etc.  Entry through: 1) Totally new product/service 2) Product/service to directly compete with existing 3) Franchise (arrangement that give franchisees [buyers] right to sell product)  When capital costs high, much research needed, business plan for investors… (or if complex, analysts needed) (1) Business plan = comprehensive review of business strategy for proposed venture, and how strategy will be implemented  Opportunity, marketing plan, operational/financial details, managers‟ skills/abilities 3) Accessing Resources a) Financial Resources  Bootstrapping = doing more with less (not getting resources, of using others‟)  Debt and equity main types of financing (1) Debt is preferred, as equity required giving up control (2) Loan required collateral (assets used to secure a loan, that may be seized if loan isn‟t repaid) (3) Equity may require loss of control, or gifts:  Personal savings  Love money  Private investors (“angels” or money-for-ownership %)  Venture capitalists (require 35-50% return to be considered…very rare) (4) Debt financing:  Financial Institutions (established small business is common, but hard to new venture…..banks are anti-high risk. Interests rate high)  Suppliers (trade credit…supplied given, agreement to pay when sold) (5) Other options: require advance payment from customer, lease equipment, share space, subcontract manufacturing b) Other Resources  Federal/provincial gov‟ts have assistance programs (1) Business Development Bank of Canada (BDC) 2 Thomas Davies Business 100  Provides financing, venture capital, consulting strategies (2) Incubators
More Less

Related notes for BUS 100

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.