ADM 1300 Chapter 4: Entrepreneurship, Small Business and New Venture Creation

small business

an independent owner-managed business with fewer than 100 employees

new venture

A recently formed commercial organization that provides goods and/or services for sale.

Entrepreneurship

The process of identifying an opportunity in the marketplace and accessing the resources needed to capitalize on it

Entrepreneur

a person who accepts the risks and opportunities involved in creating and operating a new business venture

Index of Economic Freedom

determines the extent of governmental intervention in a country

goal of independence

independence from working for someone else coupled with a reasonable degree of financial security

Goal of growth and expansion

transforming the venture into a large business

Intrapreneur

someone who works inside an existing organization who sees an opportunity for a product or service and mobilizes the organization's resources to try to realize it

new ventures

main source of job creation and responsible for most new products and services

idea generation

abandoning traditional assumptions about how things work and seeing what others do not

Screening

the first filter in the product development process, which eliminates ideas that are inconsistent with the organization's new-product strategy or are obviously inappropriate for some other reason

gig economy

a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.

3 types of entry strategies

totally new product, customization of an existing product, franchising

business plan

a formal written document that describes the nature of a business and how it will operate

Bootstrapping

using low-cost or free techniques to minimize your cost of doing business

collateral

something pledged as security for repayment of a loan, to be forfeited in the event of a default.

trade credit

the practice of buying goods and services now and paying for them later

Personal Savings

Money that has been set aside and not spent by individuals and households.

love money

investments from friends, relatives, and business associates

Angel Investors

individuals who invest in start-up companies with high growth potential in exchange for a share of ownership

venture capitalists

Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses.

business development bank of Canada

bank that provides small and medium sized businesses with flexible financing, affordable consulting services and venture capital

incubators（incubator）

centers that offer new businesses low-cost offices with basic business services

Crowdfunding

raising money for a project or venture by obtaining many small amounts of money from many people

Entrepreneur-Opportunity Fit

realistic self-assessment is needed to know if a venture should be pursued

Opportunity-Resources Fit

Determining whether the resources needed to capitalize on the opportunity can be acquired.

Entrepreneur-Resources Fit

Entrepreneur needs to assess whether they have the capacity to meet the resource requirements.

debt

no giving up control to outsiders

financial institutions

main providers of debt financing

trade credit

agreement between supplier and buyer to bill the entrepreneur later

Buying an existing business

business is established and has a clear picture of what to expect

Taking Over the Family Business

exclusive management resources and high employee loyalty

buying a franchise

existing business that you buy the rights to open in a new location

franchising agreement

Stipulates the duties and responsibilities of the franchisee and the franchiser.

market demand

careful analysis of market conditions will help owners succeed

managerial competence

solid understanding of how to manage a business is required

managerial inexperience

overestimation of skills

neglect

not devoting enough time to the business

Weak control systems

efficient control system is needed in order to be alerted to issues

insufficient capital

overly optimistic about how quickly they'll start earning profits

Sole Proprietorship

business owned and typically operated by one person who is responsible for all of its debts

partnership

business with two or more owners who share in the operation of the firm and in financial responsibility for the firm's debts

general partner

partner who is actively involved in managing the firm and has unlimited liability

limited partners

partner who generally does not participate actively in the business and whose liability is limited to the amount invested in the partnership

corporation

business considered by law to be a legal entity separate from its owner with many of the legal rights and privileges of a person

shareholders

investors who buy shares of ownership in the form of stock

voting by proxy

granting voting authority to someone who will attend the meeting

common stock

shares whose owners usually have last claim on the corporation's assets but who have voting rights in the firm

board of directors

group of individuals elected by a firm's shareholders and charged with overseeing, and taking legal responsibility for the firm's actions

inside directors

employees of the company, they are top managers

outside directors

non-employees of the firm

corporate officers

top managers hired by the board to run the corporation on a day-to-day basis

public corporation

business whose shares of stock are widely held and available for sale to the general public

private corporation

business whose stock is held by only a few people and isn't typically available for sale

Initial Public Offering (IPO)

selling shares of stock in a company for the first time to general investing public

private equity firms

companies that buy publicly traded companies and makes them private

income trust structure

structure allowing companies to avoid paying corporate income tax if they distribute all or most of their earnings to investors

Federal Incorporation

used if a company is going to operate in more than one province

provincial incorporation

company can operate in only one province

cooperative

organization that is formed to benefit its owners in the form of reduced prices or the distribution of surpluses at the end of the year