Textbook Notes (280,000)
CA (170,000)
UTSG (10,000)
RSM100Y1 (400)
Chapter 1

A summary of chapter 1


Department
Rotman Commerce
Course Code
RSM100Y1
Professor
John Oesch
Chapter
1

Page:
of 7
一.Small Business, New Venture Creation,
and Entrepreneurship
1.Small business: An owner-managed business with fewer than 100 employees.
2.The New Venture/Firm: A recently formed commercial organization that provides
goods and/or services for sale.
3.Entrepreneurship: The process of identifying an opportunity in the marketplace and
accessing the resources needed to capitalize on that opportunity.
Entrepreneur: A business man who accepts both risks and opportunities involved in creating and
operating a new business venture.
三.The Entrepreneurial Process
3 key elements——the entrepreneur, the opportunity, and resources
After start-up, the next phase of venture will result in : growth, stability(staying the same),
decline, or demise(ceasing to exist)
1.The Entrepreneur—heart of the entrepreneurial
Characteristic——见图 4.2
2.Identify Opportunities
Generating ideas for new/improved products/process/servicesThen
Screening those ideas so that one with best opportunityThen
Develop the opportunity
(1)Idea Generation
Generating ideas involves abandoning traditional assumptions about how things work and ought
to be seeing what others do
Most new ventures is not from search for viable business ideas but from events related to works
and everyday life. Half from insight or skills acquired from previous job.
(2)ScreeningKey part of entrepreneurial process
Characteristics of good ideas:
Create or add value for the customer. (Solve problem or meet need in new/different way!)
Provide a competitive advantage that can be sustained 维持
Marketable and financially viable.(whether enough potential customers & whether sales will
lead to profits)
Understanding for customers: who,? need what? How to satisfy?
Understanding for competitors who provide similar stuffs or benefit target customers
Sales forecast: An estimate of how much of a product or service will be purchased buy the
prospective customers for a specific period of time, typically one year.
Sales forecast forms the foundation for determining the financial viability and needed resources.
Other than sales forecast, financial viability need preparing financial forecast: a 2 to 3 years
projection of a venture’s future financial position and performance.
Financial forecast consist of an estimate of start-up costs, a cash budget, an income
statement, and a balance sheet.
Cash budget forecasts the cash receipts and cash disbursements of the business; the income
statement shows the profit or loss; the balance sheet shows the assets\the liabilities/the owners’
equity
With low exit cost: if a venture can shut down without a significant loss of time, money, or
reputation.
Exit cost High=no profit for a number of years, unable to reasonably abandoned in the short term
(3)Developing the opportunity
New venture’s three main entry strategies:
Introduce a totally new product or service
Introduce a product or service which compete with existing ones but add a new twist(新奇的手
(或花样);窍门;诀窍)
Franchise: An arrangement in which a buyer (franchisee) purchases the right to sell the product
or service of the seller
Business plan: A document that describes the entrepreneurs proposed business venture, explains
why it is an opportunity, and outlines its marketing plan, its operational and financial details, and
its managers’ skills and abilities. table4.3
Less need for research/analysis/plan when market conditions are changing rapidly
the product is highly innovative cause it creates need itself.
Planning doesn’t need to be completed before action.
(4)Accessing Resources
Bootstrapping: Financing techniques whereby entrepreneurs make do with as few resources as
possible and use other people’s resources wherever they can. Can also refer to the acquisition of
other types of resources, such as people, space, equipment, or materials that are loaned or
provided free by customers or suppliers.
(5)Financial Resources
2 types: debtequity
Debt financing: money that is borrowed. Borrower is obliged to repay the loan and the interest.
E,g. bankstrust companiesco-operativesfinance companiesequipment companiescredit
unions
government agencies
supplier(给货)
Debt increases the potential for higher return when
running well
Equity financing: money that the entrepreneur invests in a business in return for an ownership
interest.
E.g. personal savings(用自己钱)love money(亲朋生意伙伴的投资)venture capitalist(angel
P119)private investorsEquity reduces risk by giving up control
Collateral 抵押品: items (assets) owned by the business or by the individual that the borrower
use to secure a loan or other credit
(6)Other resources
利用人资share ownership, 时要:和share 多少at what cost,
Friends teamed sometimes have trouble deciding when to quit
Whether a team is necessary depend on: The size and scope of the venture
Personal competencies
Team form in 2 ways: one person has an idea(or wants to start a business), and then several
associates join the team over the first few years of venture’s operation an entire team is formed
at the outset based on such factors as a shared idea, a friendship or an experience
Ideal team consists of people with skills covering the key success areas for the business, and it is
common that a craftsperson and a salesperson 2 people formed an initial team.
3. Assessing the “Fit” Between Elements in the Entrepreneurial
Process
(1)The Entrepreneur-Opportunity Fit
Whether opportunity is something he or she can do & wants to do.
A realistic self-assessment
Ventures of limited personal interest or no fitted skills should be eliminated.
It may demand skills a single entrepreneur lacks——seek a team or training
(2)The Opportunity-Resources Fit
Whether the resources needed to capitalize on opportunity can be acquired?
If resources needed change, not necessary to abandon but to 调整或替代物
(3)The Entrepreneur-Resources Fit
Whether the entrepreneur can meet resources requirement
四.After the start-up
4 main organizing options
1.Start-up a Small Business
2 additional ways go into business: buy an already-existing one, buy a franchise
buy an already-existing business
Better odds of success cuz proved it attract customers, and set up relationship with
lenders/suppliers/stakeholders
Problems: poor reputation, poor location, difficult to determine purchasing price
Taking over a family business
Positive= often good reputation; financial and management resources
from sacrifice of family members; high employee loyalty; interested unified family
management and shareholder group
Negative= the price of interest if someone sold; disagreement over which family
member take control; some think they have right to a job, promotion and title because
they are family members; appropriate successor; future plan
Buying a Franchise 加盟店
Franchise=43% retail sales