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MGM102H5 (217)

Entrepreneurship reading

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Dave Swanston

CHAPTER 7 Entrepreneurship and Starting a Small Business ENTREPRENEURSHIP AND SMALL BUSINESS Entrepreneurship is accepting the challenge of starting and running a business. The word entrepreneur originates from the French word, entreprendre, which means “to undertake.” In a business context, it means to start a business. An entrepreneur is a person of very high aptitude (ability) who pioneers change, possessing characteristics found in only a very small fraction of the population. On the other extreme of definitions, anyone who wants to work for himself or 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, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars of profit 2. Speed of Wealth Creation. While a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid. For example, this may occur within five years. 3. Risk. The risk of an entrepreneurial venture must be high. Otherwise, with the incentive of sure profits, many people would pursue the idea of entrepreneurship, making business ventures impossibly competitive. 4. Innovation. Entrepreneurship often involves substantial innovation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation. Innovation may be in new products, new production methods, new markets, and new forms of organizations. Well-Known Canadian Entrepreneurs3 Entrepreneurs have played a major role in developing the Canadian economy. - Jim Pattison is the third largest private company in Canada. Focusing on the automotive, media, packaging, food sales and distribution, magazine distribution, entertainment, export, and financial industries. - In 1922, two brothers, John W. and Alfred J. Billes, with a combined savings of $1,800, bought Hamilton Tire and Garage Ltd. Tire Corporation, Limited, is engaged in retail (which includes PartSource and Mark’s Work Wearhouse), financial services, and petroleum - Ablan Leon began his career selling clothing from a suitcase door-to-door. Today, Leon’s Furniture Limited is Canada’s largest retailer of home furnishings. - In1969, Jean Coutu (founder of The Jean Coutu Group) and his associate at the time, Louis Michaud, opened a discount pharmacy in Montreal. They offered a large array of products, high-quality professional services, and longer store-opening hours. Today, The Jean Coutu Group is a leading pharmacy franchisor in Canada with 353 stores in Quebec, Ontario, and New Brunswick. - In1907, J.W. Sobey started a meat delivery business in Stellart on, Nova Scotia. With a horse-drawn meat cart, he purchased and collected livestock from local farmers for resale. - Kenneth Colin Irving opened Bouctouche, New Brunswick’s first garage and service station in 1924. Today, Irving Oil is a regional energy processing, transporting, and marketing company. It sells a range of finished energy products including gasoline, diesel, home heating fuel, jet fuel, and complementary products. WHY PEOPLE TAKE THE ENTREPRENEURIAL CHALLENGE There are many triggers to why people become entrepreneurial and some reasons may include -unexpected structural unemployment, - a sudden inheritance that allows them to try something different, - a change in health that forces a career path adjustment, -a change in family responsibility that sparks a search to increase income, or - even disliking a supervisor so much that being self-employed is an attractive option. Other reasons why people become entrepreneurial: • -New Idea, Process, or Product. o People believe they can produce a better product, or a current product at a lower cost, than anybody else. o Perhaps they have gotten hold of a new widget or have conceived of an improvement that they are convinced has a large potential market. o Example: Travel CUTS (Canadian Universities Travel Service) started. In 1969, Canadian students established a national travel bureau to provide travel opportunities for students • Independence o they do not enjoy working for someone else. o bring with them their managerial expertise and their enthusiasm. • Challenge o of doing something new or difficult and overcoming these • Family Pattern o Some people grow up in an atmosphere in which family members have started their own businesses. This background may influence young people to think along the same lines. • Profit o natural for people to benefit monetarily from their ideas and dedication and to be rewarded for the money they risk and their hard work when they run a business. • Immigrants o Some immigrants who come to Canada lack education, no Canadian job experience and weak language skills, makes it difficult for them to find employment. However, they often have the drive and desire to succeed, and if they can obtain the capital, they can start their own business. o Example: immigrants who run convenience stores (called ́ anneurs in Quebec) What Does It Take to Be an Entrepreneur? • Self-directed o You should be a self-starter, o with a lot of confidence in yourself. o You do not hesitate to step into any situation. o You should be comfortable and self-disciplined, even though you are your own boss o You will be responsible for your success or possible failure. • Determined o drive you need to see you through all of the obstacles and difficulties you will encounter. o You have to believe in your idea even when no one else does, o be able to replenish your own enthusiasm. o have to keep going when others would give up. o often accompanies the high degree of self-confidence • Action-Oriented o More than idea a burning desire to realize, actualize, and build your dream. • Highly Energetic o It’s your own business and you must be emotionally, mentally, and physically able to work long and hard. • Tolerant of Uncertainty. o Successful entrepreneurs take only calculated risks (if they can help it). On a day-to-day basis, you must make decisions that involve varying degrees of risk. • Able to Learn Quickly o important is what you learn from mistakes. o Good entrepreneurs are quick to learn such lessons. o They adapt and change direction as required instead of letting pride stand in the way of admitting a mistake • While courage is not considered a skill, it is an important element of an entrepreneur. Courage is required to challenge the status quo, to see an opportunity, and then most importantly, to try to do something about it. Entrepreneurs are doers. They don’t just think and talk about an idea, they act on it! • Every time they travelled on business, they were expected to come back with at least one idea worth more than the cost of their trip. “That’s how most creativity happens,” says business author Dale Dauten. • Entrepreneurs don’t always look for what customers need—they look for what they don’t need as well • Women Entrepreneurs • since the late 1970s is the large number of women who have gone into business for themselves • Between 1996 and 2006 (the most recent data available), the number of self-employed women grew by 18 percent, compared with 14 percent growth in male self-employment. It was estimated that 47 percent of small and medium-sized enterprises (SMEs) have some degree of female ownership: • Women owners of SMEs tend to operate in the wholesale, retail, and professional services industry. • Studies have shown a variety of reasons for the significant emergence of female entrepreneurs o Financial Need.  A decline in average real incomes and unemployment fluctuations has forced many women to support the family budget by starting a business o Lack of Promotion Opportunities  Most positions in higher management are still dominated by men o Women Returning to the Workforce.  after raising a family their skills are outdated. They also encounter subtle age discrimination. These factors encourage many to try self-employment o Family and Personal Responsibility  The high rate of divorced women and single mothers in recent years has created a situation in which many women find themselves with children and little or no financial support. modern technology has made it possible for women to start home-based businesses o Public Awareness of Women in Business  the idea catches on and gives others the confidence to try. Often two or more women will team up to form a partnership. o Part-Time Occupations  Often women with some particular talent are encouraged to develop their hobby or skills on a part-time basis to see how far they can go with it. o Higher Rate of Success for Women.  Women feel less pressured than men to achieve quick results.  They are a little more cautious, so they make fewer mistakes.  They also accept advice more readily than men, who may have a macho image of having to know it all. Entrepreneurial Teams • An entrepreneurial team is a group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product • A team may be better than an individual entrepreneur because team members can combine creative skills with production and marketing skills right from the start. • Having a team also can ensure more co-operation and coordination among functions. Micropreneurs and Home-Based Businesses • The smallest of small businesses are called micro-enterprises, most often defined as having fewer than five employees. • While other entrepreneurs are committed to the quest for growth, micropreneurs (owners of micro-enterprises) know they can be happy even if their companies never appear on a list of top-ranked businesses. • Many micropreneurs are owners of home-based businesses. • Many home-based businesses are owned by people who are trying to combine career and family. • other reasons for the growth of home-based businesses include the following: o Computer Technology.  allowing home-based businesses to look and act as big as their corporate competitors. Broadband Internet connections, fax machines, and other technologies are so affordable that setting up a business takes a much smaller initial investment than it used to. o Corporate Downsizing.  Downsizing has made workers aware that there is no such thing as job security, leading some to venture out on their own. o Change in Social Attitudes. • In setting up a home-based business, you could expect the following major challenges: o Getting New Customers.  Getting the word out can be difficult because you don’t have signs or a storefront, especially if the business does not have a Web presence. o Managing Time.  save time by not commuting, but it takes self- discipline to use that time wisely. o Keeping Work and Family Tasks Separate  have to keep such distractions to a minimum. It is also difficult to leave your work at the office if the office is your home. Again, it takes self- discipline to keep work from trickling out of the home office and into the family room. o 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 o Managing Risk.  Home-based entrepreneurs should review their homeowner’s insurance policy, since not all policies cover business-related claims. Some even
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