Chapter 3- Understanding Entrepreneurship, Small Business, and New Venture
The Links among Small Business, New Venture Creation, and Entrepreneurship
Small Business an owner managed business with less than 100 employees.
Might be include the number of people the business employs, the company’s sales
revenue, the size of investment required or the type of ownership structure the
Industry Canada is the main federal government agency responsible for small
business. The government relies on two distinct sources of information both from
stats Canada: - Business register (tracks businesses) - Labour Force Survey
To be included in the register a business must have:
- at least one paid employee
- annual sales revenues of $30 000 or more
- or be incorporated
a good producing business in the register is considered small if it has fewer than 100
employees, while a service producing business is considered small if it has fewer than
Labour Force Survey uses information from individuals to make estimates of
employment and unemployment levels.
Individuals are classified self employed if they are working owners of a business
that is either incorporated or unincorporated, if they work for themselves but do
not have a business (ex. Musicians) or if they work without pay in a family business.
Unincorporated business operated by a self employed person (with no employees)
would not be counted as the 2.2 million businesses in the register.
This is important because the majority of businesses in Canada have no employees
(just the owner) nor are they incorporated.
New venture/Firm a recently formed commercial organization that provides goods
and/or services for sale. A new business is considered operating in last 12 months, if
it adopts any of the manin organizational forms (proprietorship, partnership,
corporation, or co-operative) and if it sells goods or services.
Entrepreneurship process of identifying an opportunity in the marketplace and
assessing the resources needed to capitalize on it.
Entrepreneurs are people who recognize and seize opportunities.
Intrapreneurs people who exhibit entrepreneurial characteristics and create
something new within an existing large firm or organization. Ex. Procter & gamble-
by having divisions that focus on creating new products for specific markets such as
Swiffer then Swiffer Dusters and Wetjet. Entrepreneurs vs. Intrapreneurs- intrapreneurs don’t have to concern themselves
with getting the resources needed to bring the new product to market since their
employer provides the resources.
Private Sectors the part of the economy made up of companies and organizations
that are not owned or controlled by the government
GDP (gross domestic product) market value of all final goods and services produced
within a country in a given period of time. While GDP figures are not available by
firm size, Industry Canada uses approximation to how much small business’s
contribute to Canada’s GDP, about 25%- less than the sector’s contribution to
Growth in firms in services-producing sector, with the number of firms in high-
knowledge industries such as high technology and biotechnology nearly doubling.
SMEs- amall and medium sized enterprises
In government stats on new ventures, excludes businesses without employees
(unincorporated business operated by a self employed person with no employees
would not be included in Stats Canada’s Business Register. So a business could be
running for years but not be accounted for.
The Entrepreneurial Process
3 Key Process Elements- the entrepreneur, the opportunity, and the resources- and
how they interact. After start up, next phase of development will result in one of the
following outcomes: growth, stability (staying the same), decline, or demise (ceasing
Identify an opportunity and access resources.
Familiarity with the product or service, and the customers, suppliers, and
competitors. He or she is aware of marketplace needs, can relate those needs to
personal capabilities and can determine whether he or she is capable of producing
products or services that can fill the void.
Ideas come about from work experience, personal interest/hobby, and chance
Weeding out the dead end venture ideas. Characteristics that are for greater
opportunity: -the idea creates or adds value for the customer
-the idea provides a competitive advantage that can be sustained
a competitive advantage exists when potential customers see the product or
service as better than that of competitors. It involves maintaining it in the
face of competitors’ actions or changes in the industry. If you don’t have an
competitive advantage or developed a comp. adv. that’s sustainable, it’s the
two fatal flaws.
-the idea is marketable and financially viable
determine whether sales will lead to profit. Who can best satisfy their needs.
After learning about the competition and customers, the entrepreneur must
prepare a sales forecast. Sales forecast is an estimate of how much of a
product or service will be purchased by the prospective customers for a
specific period of time- typically one year. Total sales revenue is estimated by
multiplying the units expected to be sold by the selling price. This is the
foundation for determining financial viability of the venture and the
resources needed to start it.
Determining financial viability involves preparing financial forecasts, which
are 2-3 year projections of venture’s future financial position and
performance. They consi