Ch07 Entrepreneurship Revised For ADMN1016

CHAPTER 7
Entrepreneurship
and Starting a
Small Business
Prepared by Michael Wade, Seneca College
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 1
Learning Objectives
LO1 Explain why people are willing to become
entrepreneurs, and describe the attributes of successful
entrepreneurs.
LO2 Discuss the importance of small business to the
Canadian economy.
LO3 Summarize ways to learn how small businesses
operate.
LO4 Analyze what it takes to start and run a small
business.
LO5 Outline the advantages and disadvantages that
small businesses have in entering global markets.
The Age of the Entrepreneur
• Entrepreneurship: accepting the challenge of starting

and running a business.
• Small business and entrepreneurship differ in the
following ways:
o Amount of wealth creation
o Speed of wealth creation
o Risk
o Innovation
LO1 Why People Take the
Entrepreneurial Challenge
• New idea, process, or product
• Independence
• Challenge
• Family pattern
• Profit
• Immigrants
What Does It Take to
Be an Entrepreneur?
• Self-directed
• Self-nurturing
• Action-oriented
• Highly energetic
• Tolerant of uncertainty
• Able to learn quickly
Turning Your Passions and
Problems into Opportunities
• A business idea is a good business opportunity if:
o It fills customers’ needs.
o You have the skills and resources to start a business.
o You can sell the product or service at a price customers
are willing and able to pay-and still make a profit.
o You can get your product or service to customers before
your window of opportunity closes or before competitors
with similar solutions beat you to the marketplace.
o You can keep the business going.
Do you have what it takes to be
an entrepreneur?
Complete the following self-
assessment
• https://www.bdc.ca/en/
articles-tools/
entrepreneur-toolkit/
business-assessments/
pages/self-assessment-
test-your-entrepreneurial-
potential.aspx
Female Entrepreneurs
• Small and medium-sized enterprises (SMEs)
o Refers to all businesses with fewer than 500 employees
• Reasons why females become entrepreneurs:
o Financial need
o Lack of promotion opportunities
o Women returning to the workforce
o Family and personal responsibility
o Public awareness of women in business
o Part-time occupations
o Higher rate of success for women
Micropreneurs and
Home-Based Businesses
• Micro-enterprise: a small business defined as having
one to four employees.
• Micropreneurs: Small-business owners with fewer than
five employees, who are willing to accept the risk of
starting and managing the type of business that remains
small, lets them do the kind of work they want to do, and
offers them a balanced lifestyle.
Reasons for Home-Based
Businesses
• Computer technology
• Corporate downsizing
• Change in social attitudes
• Challenges include:
o getting new customers
o managing time
o keeping work and family tasks separate
o abiding by city ordinances
o managing risk
Potential Home-Based
Businesses
1. Home Renovation Services
2. Pet Products and Services
3. Catering Services
4. Cleaning Services
5. Fall Prevention Products - Sales and Service
6. Wedding Planner Services
7. Ecommerce
8. In-Home Beauty Services
9. Sewing and Alteration Services
10. Business/Life Coach Services
Source: Susan Ward, “The Best Home Business Opportunities,” The Balance, July 20, 2017, https://www.thebalance.com/top-home-business-
opportunities-2948561.
Entrepreneurship Within Firms
• Intrapreneurs are: creative people who work as

entrepreneurs within corporations.
• The idea is to use the company’s existing resources-
human, financial, and physical–to launch new products
and generate new profits.
Encouraging Entrepreneurship:
What Government Can Do
• Business incubators: centres that provide space,
services, advice, and support to assist new and growing
businesses to become established and successful.
• Goals of incubators are;
o Produce successful companies
o Create jobs
o Retain businesses in a community
o Building or accelerating growth in a local industry
o Diversifying local economies
LO 2 Getting Started in
Small Business
• A business establishment must meet the following
criteria: it must have one paid employee, it must have
annual sales revenue of $30,000, and it must be
incorporated and have filed a federal corporate income
tax return at least once in the previous three years.
• A small business is: a business that is independently
owned and operated, is not dominant in its field, and
meets certain standards of size in terms of employees or
annual revenues.
• Small businesses are often able to provide better
customer service and respond to customer needs faster
than larger organizations.
Number of Business Locations
by Sector and Firm Size
Approximately 98 percent of Canadian employers businesses are considered small businesses by
Industry Canada.
NO. OF BUSINESS LOCATIONS
Percentage of Goods-
Employer Producing Services-Producing
Businesses Total Sector Sector
Small businesses (1–
97.9 1,143,630 245,540 898,090
99 employees)
Medium-sized
businesses (100–499 1.8 21,415 5,342 16,073
employees)
Large businesses
0.3 2,933 569 2,364
(500 + employees)
Total 100.0 1,167,978 251,451 916,527
Source: Statistics Canada, “Number of Employer Businesses by Sector and Firm Size (number of employees), December 2015,” Industry
Canada, 2, June 2016, https://www.ic.gc.ca/eic/site/061.nsf/vwapj/KSBS-PSRPE_June-Juin_2016_eng-V2.pdf/$file/KSBS-PSRPE_June-
Juin_2016_eng-V2.pdf.
Small Business Statistics
• 97.9 percent of businesses in Canada have fewer than
100 employees.
• Small businesses created little over 1.1 million jobs, on
average, between 2005 and 2015.
• Small businesses employed approximately 8.2 million
individuals in Canada, or 70.5 percent of the total private
labour work force.
• Small business contributed 30 percent to Canada’s gross
domestic product.
• SME exports $106 billion worth of goods
• About 16 percent of small businesses were owned by
females, 20 percent were owned by both males and
females in equal partnerships.
Causes of Small-Business Failure
Plunging in without first testing the waters on a
Buying too much on credit.
small scale.
Underpricing or overpricing goods or services. Extending credit too freely.
Underestimating how much time it will take to
Expanding credit too rapidly.
build a market.
Failing to keep complete, accurate records so
Starting with too little capital. that the owners drift into trouble without realizing
it.
Starting with too much capital and being careless Carrying habits of personal extravagance into the
in its use. business.
Going into business with little or no experience
and without first learning something about the Not understanding business cycles.
industry or market.
Borrowing money without planning just how and Forgetting about taxes, insurance, and other
when to pay it back. costs of doing business.
Mistaking the freedom of being in business for
Attempting to do too much business with too little
oneself for the liberty to work or not, according to
capital.
whim.
Not allowing for setbacks and unexpected
expenses.
Causes of Small-Business Success
A large business sells a franchise operation to
The customer requires a lot of personal local buyers. (Don’t forget franchising as an
attention, as in a beauty parlour. excellent way to enter the world of small
business.)
The product is not easily made by mass-
production techniques (e.g., custom-tailored The owner pays attention to new competitors.
clothes or custom auto-body work).
Sales are not large enough to appeal to a large The business is in a growth industry (e.g.,
firm (e.g., a novelty shop). computer services or web design).
LO3 Learning About
Small-Business Operations
There are several ways to get into your first business
venture:
1. Learn from others.
2. Get some experience.
3. Buy an existing business.
4. Buy a franchise.
5. Inherit/ take over a family business
LO4 Managing a Small Business
To be successful as a small business owner, the following
functions are important to explore:
1. Planning your business (business plan).
2. Financing your business (finance)
3. Knowing your customers (marketing).
4. Managing your employees (human resource
development).
5. Keeping records (accounting).
Managing a Small Business cont’d.
• Business Plan: a detailed written statement that describes the
nature of the business, the target market, the advantages the
business will have in relation to competition, and the resources and
qualifications of the owner.
• Angel investors: Private individuals who invest their own money in
potentially hot new companies before they go public.
• Venture capitalists: Individuals or companies that invest in new
businesses in exchange for partial ownership of those businesses.
• Crowdfunding: raising funds through the collection of small
contributions from the general public (known as the crowd)using the
Internet and social media.
• Market: people with unsatisfied needs and wants who have both the
resources and the willingness to buy.
Chapter Summary
LO1 Entrepreneurs are motivated by challenge, family
pattern, profit, or may be immigrants.
LO2 Small business generates between 25 and 41
percent Canada’s GDP and employs 69.7 percent of
Canada’s private labour force.
LO3 You can learn about small business by working for
someone else, buying an existing business, buying a
franchise or inheriting/taking over a family business.
Chapter Summary, cont’d.
LO4 To run a small business you need to plan, finance,
keep records, get to know your customers, and manage
employees.
LO5 From a global perspective, small business can usually
ship faster, provide a wider selection of suppliers, and
provide more personal service.
– Some of the challenges are: difficult to get
financing, lack of knowledge on how to get started,
lack of understanding of cultural differences in
foreign markets, and copious bureaucratic red tape.

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CHAPTER 7

Prepared by Michael Wade, Seneca College

• Entrepreneurship: accepting the challenge of starting

• Intrapreneurs are: creative people who work as

NO. OF BUSINESS LOCATIONS

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