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Chapter 9

MGM102 Textbook Chapter 9- Entrepreneurship and Starting a Small Business.docx

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Dave Swanston

Chapter 9- Entrepreneurship and Starting a Small Business Entrepreneurship and Small Business • Entrepreneurship- Accepting the challenge of starting and running a business • Two extremes of entrepreneurship:  A person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population  Anyone who wants to work for himself/herself is considered an entrepreneur • Entrepreneurial ventures differ from small businesses in the following four ways: 1. Amount of Wealth Creation- Rather than simply generating an income stream that replaces traditional employment, entrepreneur venture creates substantial wealth 2. Speed of Wealth Creation- While successful small business can general several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid 3. Risk- Risk is high, otherwise with the incentive of sure profits, many people would pursue entrepreneurship, making business ventures impossibly competitive 4. Innovation- Innovation in new products, production methods, new markets, and new forms of organization gives the venture the competitive advantage that results in wealth creation Well Known Canadian Entrepreneurs  • View pages 232 and 233 for a full list • These stories are very much the same: one entrepreneur had a good idea, started a business, and now employs thousands of people and helps the country prosper Why People Take the Entrepreneurial  Challenge • Some reasons include unexpected structural unemployment, sudden inheritance that allows them to try something different, change in health that forces a career path adjustment, change in family responsibility, disliking a supervisor, etc; Other reasons include:  New Idea, Process, or Product- Driven by a firm believe that they can produce a better product or a current product at a lower cost, than anyone else  Independence- Do not enjoy working for someone else; like doing things their own way without someone standing over them  Challenge- The excitement and challenge of doing something new/different; many people thrive on overcoming challenges  Family pattern- Growing up in an atmosphere in which family members have started their own business, perhaps going back several generations  Profit- Benefit from ideas and dedication and be rewarded for the money and risk and hard work when running a business; even after substantial profits have been gained, some enjoy the challenge of overcoming the daily problems that arise  Immigrants- Some immigrants lack education, no Canadian job experience, and weak language skills, making it difficult for them to find employment; they have the drive and desire to succeed, and if they can obtain capital, they can start their own business What does it take to be an Entrepreneur? • Some important entrepreneurial attributes:  Self Directed- self starter with lot of confidence; comfortable and self disciplined  Determined- Drive you need to see you through all the obstacles and difficulties you will encounter; keep going when others would give up  Action Oriented- Desire to realize, actualize, and build your dream  Highly Energetic- Must be emotionally, mentally, and physically able to work long/hard  Tolerant of Uncertainty- Must make decisions that involve varying degrees of risk  Able to Learn Quickly - Quick to learn lessons make from mistakes; adapt and change direction as required instead of letting price stand in the way of admitting a mistake • Courage is required to challenge the status quo, see an opportunity, and do something about it • Most entrepreneurs don’t get their ideas from some flash of inspiration; the source of innovation comes from searching and questioning • Entrepreneurs don’t always look for what customers need but also for what they don’t need Women Entrepreneurs  • Small and Medium Sized Enterprises (SMEs)- Refers to all businesses with fewer than 500 employees; women owners of SMEs tend to operate in the wholesale, retail, and professional services industry • Reasons for the significant emergence of female entrepreneurs:  Financial Need- Support the family budget by starting a business because the average real income of Canadian employees has dropped  Lack of Promotion Opportunities- Slow pace in women entering positions in higher management that are dominated by men  Women Returning to the Workforce- After raising a family, women find that their skills are outdated and they face age discrimination  Family and Personal Responsibility- Development of affordable personal computers and other modern technology has made it possible for women to start home based business  Public Awareness of Women in Business- As publicity highlights the growing numbers of women starting a business, the idea catches on and gives other the confidence to try  Part Time Occupations- Women with particular talent are encouraged to develop their hobby/skills on a part time basis to see how far they can go with it  Higher Rate of Success for Women- Better success rate than men because women: o Feel less pressured than men to achieve quick results o Are more cautious so they make fewer mistakes o Accept advice more readily than men, who may have a macho imagine of having to know it all Entrepreneurial Teams • Entrepreneurial Teams- Group of experienced people from different areas of business who join together to form a managerial team with skills needed to develop, make, & market new product • Team > Individual entrepreneur because team members can combine creative skills with production and marketing skills right from the start and having a team ensures more co=operation and coordination among functions • Example: Apple Computers consisted of three entrepreneurs; While Steve Jobs was the charismatic visionary, Steve Wozniack invented the first PC model and Mike Markkula offered the business expertise and access to venture capital Micropreneurs and Home Based Businesses • Mico-Enterprise- A small business defined as having fewer than 5 employees • Micropreneurs- Small business owners with fewer than 5 employees who are willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle • Reasons for the growth of home based businesses:  Computer Technology- Has levelled the competitive playing field, allowing home based businesses to look and act as big as their corporate competitors  Corporate Downsizing- Downsizing has made workers aware that there is no such thing as job security; work of the downsized employees still need to be done and corporations are outsourcing much of the work to smaller companies  Change in Social Attitudes- Are now asked “how-to-do-it” advice instead of “when are you going to get a real job” • Challenges of home based businesses:  Getting New Customers- Difficult because you don’t have signs or a storefront  Managing Time-Takes self discipline to use time wisely  Keeping Work and Family Tasks Separate- Keep distractions to a minimum; self discipline to keep work from trickling out of the home office into the family room  Abiding by City Ordinances- Government ordinances restrict the types of businesses that are allowed in certain parts of the community and how much traffic a home based business can attract to the neighbourhood  Managing Risk- Should review homeowner’s insurance policy, since not all policies cover business related claims Web­Based Businesses • Small businesses compete with other small businesses as well as large Web-based bricks and mortar businesses • Web-based businesses can sometimes be a shortcut to failure • Bad news: hundreds of high flying dot-coms crashed after promising to revolutionize the way we shop and Good news: learn from someone else’s failure and spare yourself some pain Entrepreneurship within Firms • Intrapreneurs- Creative people who work as entrepreneurs within corporations; idea is to use company’s existing resources to launch new products and generate new profits • Example: At 3M, Art Fry created Post-it Notes Encouraging Entrepreneurship: What  Government Can Do • The different levels of government provide many services to help entrepreneurs and small businesses to succeed • Example: Canada Business is a federal government information service for entrepreneurs that serves as a single point of access for federal and provincial government services, programs, and regulatory requirements for business • Incubators- Centres that 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  Goal of an incubator is also to produce confident, successful graduates who will run a productive business in the future Starting a Small Business Small VS. Big Business • Business Establishment- Has at least one paid employee, annual sales revenue of $30,000 or is incorporated and has filed a federal corporate income tax return at least once in
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