Chapter 5: Creating Business, The Importance of Entrepreneurship

Entrepreneur

People with vision, drive, and
creativity who are willing to
take the risk of starting and
managing a new business to
make a profit or to challenge
the scope and direction of an
existing company.

Types of Entrepreneurs

• Classic Entrepreneur

• Multipreneur

• Intrepreneur

Classic

Accept the risks that come with starting their own companies based on innovative ideas.

Multipreneur

Start a series of companies.

Intrepreneurs

Apply their entrepreneurial spirit within large corporation rather than starting companies of their own.

Entrepreneurial Characteristics

• Creative

• Optimistic

• Drive

• Tolerance for risk - you will fail

• Time management

• Ability to multitask - problems

• Adaptability

Why Entrepreneurship

• Be your own boss

• Creates job opportunities

• Creative control - ideas up to you

• Solves problems and needs

• Builds wealth (for yourself)

• Promotes competition - offers consumers more options

• Supports communities - local, not big business, support events and sports teams, etc.

Factors Contributing to Entrepreneurship

• Culture of Entrepreneurship

  • Ideas of entrepreneurship is respected and supported

  • Organizations promote small business in their communities

  • Gov organizations (e.g., StartUP Canada, Canada.ca, and Canada Business Network) provide info, advice, and funding to start-ups

• Advances in Technology

  • Innovation advances made tech more accessible and affordable to small businesses

• Downsizing and Outsourcing

  • Laid-off employees realize they have entrepreneurial spirit and skills

  • Large companies that outsource fuel the growth of small businesses that serve them

Entrepreneurial Opportunities

1. Customer needs and wants are changing - trends

2. Technology - new markets, creates efficiencies,

3. Changes - demographic, economic, social, political

Options for Starting a Business

• Can have a business 100% online - website; mostly retail

• Physical store front/Brick and mortar - retail, services (oil change, etc.) or double (shampoo product and haircut service), restaurants,

• Mobile businesses - food trucks, mobile oil change, mobile pet grooming

• Franchising - owning business without having to come up with your own idea

• Gov. owned - schools

• Home based business - “creatives”, daycare/childcare

• Side hustle - Uber, Skip, Etsy

• Technology start-ups - apps for business or home, cyber security services

Checklist for Starting a Business

• Identify your reasons 

• Self-analysis - can’t handle losses then probably shouldn’t, recognize your strengths and weaknesses

• Personal skills and experience

• Finding a niche 

• Market analysis - needs, location, saturation, gaps

• Planning your start-up

• Finances

Getting Started

• Idea, product, service, opportunity

• Determine your business ownership structure (last lecture)

• Develop the business plan

The Importance of a Business Plan

Show yourself if this business can succeed or not.

Business Plan

Written document that describes the opportunity, goals, and plans for a buisness

Purposes of a Business Plan

• Communication tool - informs of potential to make a profit

• Management tool - helps to track, monitor, and evaluate progress

• Planning tool – Guides a businessperson through the various phases of business

Questions a Business Plan Should Answer:

• What exactly is the nature and mission of the new venture?

• Why is this new business a good idea?

• What are the goals and milestones for the business?

• How much will the new business cost?

Business Model

Explains how the business will make money.

Components of a Business Plan

• Title Page

• Table of Contents

• Vision & Mission Statement

• Company Overview - Background & Analysis, Product/Service Plan

• Human Resources Plan

• Marketing/Operations Plan - sending by mail, giving through service

• Financial/Accounting Plan - expected profit, costs

• Appendices - Supporting Docs - marketing plan, financials,

• Bibliography - if you cited anything

• Meeting Log and Summative Statement - meeting dates, attendance, etc.

Getting Started

• Talk to other entrepreneurs

  • Successful/unsuccessful - advice

• Get experience

  • Learn on someone else’s money - work at a salon first and get experience while they pay you

  • Be aware of the ethical implications here

• Take over a successful business

  • Work with an entrepreneur

  • Succession planning - exit plan (like selling) for the owner when retire

  • Valuation:

Valuation

Process of determining the value or projected worth of the company:

• Inventory

• Sales

• Assets

• Goodwill / your face - how the public perceives you, email list, followers

Importance of Small Businesses

• Most small businesses in Canada are Canadian owned.

• Almost 2.5 million self-employed people in Canada.

• Accounts for approximately 98% of all employers.

• Employs 48% of the private labour force.

• Contributes to job creation and generates many new products/ideas.

• Approximately 47% of all new jobs are created by small businesses.

Advantages of Small Business

• React more quickly to the changing market forces

• Develop and market ideas faster, with fewer financial resources and fewer people

• Efficient operations keep costs down

• Serve specialized markets

• Offer a higher level of personal service

Disadvantages of Small Businesses

• Difficulties in obtaining adequate financing

• Limited managerial skills may impact growth

• Expensive to comply with regulations

• Requires a major commitment by owner

• High failure rate

Financing a Business

Two Forms of Financing

1. Debt: Borrowed funds that must be repaid with interest over a stated period.

2. Equity: Funds raised through the sale of shares in the business.

Types of Investors

• Angel Investors

• Venture Capital

• Crowdfunding

Angel Investors

Private individual investors or groups of experienced investors who provide early- stage financing for start up businesses in exchange for ownership.

Typically for some ownership.

Sometimes family and friends.

Venture Captial

Money invested in high growth companies that have significant potential. Often receive an ownership interest and a voice in management 

Crowdfunding

Inviting people to contribute to a business or project, via online platform (e.g., Kickstarter, Indiegogo)

• Instead of ownership of the company, contributors receive a reward depending on level of contributions

Franchies

A form of business based on a business arrangement between a franchisor, which supplies the product concept and the franchisee, who sells the goods or services of the franchisor in a certain geographic area.

Advantages of a Franchise

• Be you own boss

• Increased ability for the franchisor to expand

• Recognized name, product and operating concept

• Management and training assistance

• Financial assistance

Disadvantages of a Franchise

• Loss of control

• Cost of franchising

• Restricted operating freedom

• Overwhelming time commitment

Causes of Business Closures

• Economic factors: COVID

• Financial causes: dip in the economic = less disposable money to spend

• Lack of experience

• Personal Reasons: move, retire

Coping with Challenges

• Consultants

• Hire and retain employees

• Go global with exports

Challenges

1. Employee Issues

2. Market Changes

3. Economic Changes

4. Nurturing a continuous flow of ideas

The Future of Entrepreneurship and Small Businesses

• Changing demographics create entrepreneurial diversity

• Growth of “Web-drive entrepreneurs.”

• Economic times – motivation to go it alone.

• Government recognition and investment

• Intense market competition

• New technologies and create opportunities