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CA (160,000)
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MGTA01H3 (600)
Chapter

A+ Notes: MGTA03 Ch 3-5


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird

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approx. 380 new businesses each day, 2.5 millions business in Canada
small business – owner-managed, >100 employees
to be incl. in Business Register, must have 1+ paid employee, annual sales rev >$30 000 or incorporated
considered small if >100 employees (goods-producing) or >50 employees (service)
Labour Force Survey – self-employed = working owner of un/incorporated bus., work for self but no bus. or no pay in
family bus.
majority of bus. in Canada has no employees (just owner) & not incorporated
new venture – recently formed (12 mths) commercial org’n providing G/S
1) when it was formed 2) when incorporated 3) sale of G/S
entrepreneurship – process of id. opp. and accessing resources to capitalize on it
entrepreneur – person who recognize and seize opp., organize resources to provide G/S
intrapreneur – exhibit entrepreneurial charact. within large org’n, don’t have to worry about getting resources
private sector – not controlled by gov’t
SMEs = small/ medium sized enterprises outperform large firms (esp. in contribution to employment)
most growth of # bus. in service and high-knowledge industries
women increasingly prominent role as entrepreneurs
Entrepreneurial process – 3 key elements: entrepreneur, opportunity, resources
The Entrepreneur: high need for achievement, internal locus of control, risk tolerance, self-confident
3 Needs Motivation Theory (McClelland): N-Pow, N-Aff, N-Ach
Locus of control: extent in which ppl believe they can control events (external vs internal)
Risk tolerance: uncertainty of outcome from new/complex/unknown situation
kids of entrepreneurs, immigrants, entrepreneurs are older than employees, avg. students, women
Identifying Opportunities:
1) idea generation (from work/experience, hobbies, chance)
2) screening
create/add value to customer
sustainable competitive adv
marketable (understand consumer needs & competitor’s products)
financially viable sales forecast & financial forecast (start-up costs, cash budget, I/S, B/S)
low exit costs
3) developing opportunity (might need to make adjustments)
entry strategies (3): new product, improve existing, franchise (franchisee buys right to sell G/S of
franchiser)
need careful research and analysis, business plan (except when rapid changes or highly innovative)
Assessing Resources
Financial – debt (from fin. institutions, suppliers – trade credit, gov’t) or
- equity – personal savings, love $, private investors (angels), venture capitalists (investments pools)
other resources – team? (dep. on size/scope of bus., personal abilities)
Ways to Start Small Business
1) buy existing business (or family) already est. relationships, reputation
family: $ from family, goodwill, loyalty (BUT: who controls?, price if selling, entitlement, successor)
2) franchise (initial payment, royalty fees, ad. fees)
3) new business
Success: hard work, drive, dedication; demand for G/S; mgmt skills; luck
Failure : poor mgmt skills; neglect; weak control systems; insufficient $
Sole Proprietorship: freedom, easy to form, tax benefits (can deduct losses), ownership/mgmt is clear
BUT: unlimited liab, lack of continuity, limited resources (skills & $)
Partnership: more skills & $, easy to start, more credibility
BUT: unlimited liab, joint & several liab, lack of continuity, hard transfer of ownership, disagreement
general vs. limited (limited prts have no part in day-to-day mgmt)
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