Small Business: an independent business with fewer than 100 employees and
revenues less than $2 million, not dominant in its market.
Government agencies offer benefits to help small businesses compete with
Small businesses account for more than 2/3 of employment in five Canadian
o Non-institutional health care
o Accommodation and food
o Other services
25% of small businesses operate in Canadian goods-producing industries;
the other 75% operate in service industries.
Small firms provide customized services which set them apart from large
Home-based Business: firms operated from the residence of the business
Small businesses account for:
o 24% of the nation’s GDP.
o $83 billion (20%) of Canada’s total value of exports.
Small businesses offer tons of new jobs every year. (50%+ of all new jobs are
created by companies with fewer than 100 employees.
New industries can be created when:
o Small businesses shift their focus to provide needed services to a
larger corporate community.
o Small businesses shift their focus to meet consumer interests and
o Both the business world and consumers see a need for change.
Small businesses are constantly developing new and improved goods and
The most common difficulties for a small firm are:
o Management Inexperience
Managers may not have the right people skills, much
knowledge of finance, be able to track inventory or sales, be
poor at judging their competition, or may simply not have
enough time to do everything that needs to be done.
o Inadequate Financing
Most small businesses – even those with minimal start-up costs
– sometimes don’t turn a profit for months or even years.
o Government Regulation
In a recent year, small- and medium-sized businesses in five
sectors spent $1.17 billion filling out forms to meet 11 key government information requirements, such as filing income
tax forms and paying federal and provincial sales taxes.
Business plan: a formal document that details a company’s goals, the
methods it will use to achieve these goals, and the standards it will use to
measure its achievements. (usually needed to obtain financing)
A typical business plan includes:
o An executive summary – W5H.
o An introduction – concept, purpose and objectives of the business.
o Separate financial and marketing sections – target market, marketing
plan, and detailed financial forecasts of the need for funds and when
the firm is expected to break even.
o Résumés of principals.
The business plan must address:
o The company’s mission and the vision of its founders.
o An outline of why the company is unique.
o The customers.
o The competition.
o Financial evaluation of the industry and market conditions.
o Assessment of the risks.
Business Development Bank of Canada (BDC): a government agency that
assists, counsels, and protects the interests of small businesses in Canada.
The BDC offers individual counselling, courses, conferences, workshops, and
a wide range of publications, all aimed to improve owner-managers’
The Small Business Administration (SBA) is the American equivalent.
Canada Small Business Financing Program (CSBFP): a program that
encourages financial institutions to make their financing available to small
businesses by guaranteeing payment of 85% of a loan if it isn’t paid back.
Business Incubator: a local program designed to provide low-cost, shared
business facilities to small start-up companies (i.e. portions of an abandoned
The Canadian Association of Business Incubation (CABI) is a national
association of member organizations.
There are 83 operating business incubators whose clients have raised more
than $93 million in revenue and created full- and part-time jobs for more
than 13,000 people.
Venture Capital: money invested in a business by another business or a
group of individuals in return for an ownership share. (DD)
Canadian VC investment in 2010 was $1.1 billion despite a slow economy.
Women start their own companies sometimes in the hopes of finding a better
balance between family and work.
About 1/3 of all self-employed people in Canada are women.
Franchising: a contract-based business arrangement between a
manufacturer or other supplier, and a dealer, such as a restaurant operator
or retailer. Contract spells out how the dealer will market the supplier’s product.
The franchise industry has more than $100 billion in sales each year.
Canada has approx. 76,000 individual franchise businesses.
Avg. franchise fee is $23,000 and the avg. franchisee investment is $160,000.
Franchisee: the individual or business firm purchasing a franchise.
Franchisor: the firm whose products are sold to customers by the franchisee.
Benefits of franchising:
o A franchised business can move to new locations around the world.
o Franchisors provide a support to franchisees (i.e. financing, business
training, helping obtain a location etc.)
o Franchisor has already set up a loyal following of customers (most
o Combines the freedom of business ownership with the support of a
Downsides to franchising:
o If a franchisee fails, the failure reflects on the franchisor’s brand and
the bottom line.
o If the franchise is mismanaged by the franchisor, it could negatively
affect the franchisee
o The franchisor loses control over every aspect of the business.
o The franchisee has many cash expenses (i.e. initial investment,
franchising fees, supplies etc.)
o If a customer has a bad experience at one location, it will deter them
from returning back to the franchise no matter where it is.
The Better Business Bureau, Industry Canada, the U.S. Federal Trade
Commission, and the Canadian Franchise Association can all help a potential
franchisee in making the correct choice of a franchisor.
Most businesses are organized as one of three legal structures:
o Sole Proprietorship
A business ownership in which the sole proprietor’s status as
an individual is not legally separate from his/her status as a