Entrepreneurship and Starting a Small Business

Learning Objectives

  • Explain why people are willing to become entrepreneurs, and describe the attributes of successful entrepreneurs.
  • Discuss the importance of small business to the Canadian economy.
  • Summarize the ways to learn how small businesses operate.
  • Analyze what it takes to start and run a small business.
  • Outline the advantages and disadvantages that small businesses have in entering global markets.

Overview of Entrepreneurship in Canada

  • Statistics
    • 2.9 million people in Canada are self-employed.
    • Increasing trend among young people to consider starting a small business post-graduation.
    • Educational institutions are adapting by offering more entrepreneurship courses.

Definition and Context of Entrepreneurship

  • Entrepreneurship
    • Defined as the acceptance of the challenge of starting and running a business.
    • The term originates from the French word "entreprendre," which means "to undertake."

Differences Between Entrepreneurship and Small Business

  • Distinction

    • Common misconception: entrepreneurship and small business are interchangeable.
    • Four Key Differences:
    1. Amount of Wealth Creation: Entrepreneurs intend to create greater wealth.
    2. Speed of Wealth Creation: Entrepreneurship focuses on rapid wealth generation.
    3. Risk: Entrepreneurs often face higher risks.
    4. Innovation: Entrepreneurial ventures tend to be more innovative.

  • Clarification

    • Most businesses start small, but the intent to grow distinguishes entrepreneurial ventures from small businesses.

Notable Canadian Entrepreneurs

  • Examples of Successful Entrepreneurs
    • Wallace and Harrison McCain
    • The Billes Brothers (Canadian Tire)
    • Ablan Leon (Leon’s Furniture)
    • Jean Coutu and Louis Michaud
    • J.W. Sobey
    • Christine Magee (Sleep Country Canada)

Reasons for Taking the Entrepreneurial Challenge

  • New Ideas:
    • Driven by the desire to offer better products or lower-cost solutions.
  • Profit Motive:
    • Financial gain is a strong motivator.
  • Personal Challenge:
    • Many thrive on overcoming difficulties.
  • Influence of Family Background:
    • Growing up in an entrepreneurial environment encourages business ownership.
  • Desire for Independence:
    • Many prefer to be their own bosses rather than working for others.

Attributes of Successful Entrepreneurs

  • Core Attributes:
    • Self-Directed: Must be confident and self-motivated.
    • Self-Nurturing: Ability to maintain enthusiasm for ideas amidst doubts.
    • Action-Oriented: Proactive approach towards processes.
    • Highly Energetic: Persistence in efforts is essential.
    • Tolerance of Uncertainty: Comfort with risk and ambiguity.
    • Quick Learner: Essential to learn from mistakes rapidly.

Turning Passions into Opportunities

  • Entrepreneurial Insight:
    • Opportunities can arise from examining personal passions or problems to identify marketable solutions.
  • Questions to Explore:
    • What do I want but cannot find?
    • What product or service would improve my life?
    • What irritates me that could be alleviated?

Women Entrepreneurs in Canada

  • Statistics and Impact:

    • 950,000 self-employed women in Canada represent approximately 36% of total self-employed individuals.
    • Women predominantly operate small and medium-sized enterprises (SMEs).
    • Earnings disparity: Women entrepreneurs earn 58% less than their male counterparts, with a potential to generate an additional $88.2 billion if parity was achieved.

  • Impact of E-Commerce:

    • Revenue gap reduces to 44% for online businesses; women using e-commerce report 75% higher revenues than those not engaged online.

  • Trends in Online Entrepreneurship:

    • 50% of new online businesses in Canada are women-owned; 83% of online female entrepreneurs are under 55.

  • Challenges Faced:

    • Access to capital remains a significant barrier, with 2 out of 3 female SMBs acknowledging greater obstacles than male counterparts.

Factors Contributing to the Emergence of Female Entrepreneurs

  • Driving Forces:
    • Financial need, limited promotion opportunities, women's return to workforce, familial responsibilities, increased awareness of women in business, part-time work arrangements, and higher success rates for women.

Entrepreneurial Teams and Corporate Entrepreneurship

  • Entrepreneurial Teams:

    • Groups of skilled individuals uniting to develop and market new products.

  • Intrapreneurs:

    • Employees who act as entrepreneurs within corporations, leveraging company resources for new product development.

Micropreneurs and Home-Based Businesses

  • Definition:

    • Micro-enterprises are defined as companies with fewer than five employees, often associated with home-based businesses.

  • Motivations:

    • Many micro-entrepreneurs aim to achieve a balance between career and family.

Factors Influencing Growth of Home-Based Businesses

  • Drivers for Growth:
    • Advances in computer technology, corporate downsizing, changing social attitudes.

Online Business Landscape

  • Scope and Competition:
    • Diversity of products sold online creates competition between small businesses and larger entities.

Home-Based Business Challenges

  • Key Issues:
    • Attracting new customers, managing time effectively, maintaining work-life balance, adhering to local regulations, and managing risk.

Potential Home-Based Businesses

  • Business Ideas:
    • Home renovation services, pet products/services, catering, cleaning, wedding planning, e-commerce, in-home beauty services, sewing/alteration services, business/life coaching.

Support for Entrepreneurs

  • Incubators:

    • Provide resources such as management assistance, education, networking, and financial advice for new start-ups.

  • Government Support for Indigenous Businesses:

    • Indigenous businesses contribute $31 billion to Canada's GDP, projected to grow to $90 billion by 2025.
    • Approximately 50,000 Indigenous businesses exist, with 99% being SMEs.
    • Budget 2021 proposed a $42 million investment to expand the Aboriginal Entrepreneurship Program.

Starting a Small Business

  • Definition:
    • A business establishment that has at least one paid employee, generates $30,000 in annual sales revenue, or has filed a corporate tax return within the last three years.

Importance of Small Business

  • Role in Canadian Economy:
    • Predominantly Canadian-owned and managed, contrasting with large businesses which are often foreign-owned.
    • Small businesses are crucial for preserving Canadian identity and economic autonomy.

Reasons Small Businesses Fail

  • Common Causes:
    • Insufficient market testing, incorrect pricing strategies, underestimating time to establish a market, inadequate start-up capital, unplanned excessive borrowing, failure to account for setbacks, and poor record-keeping.

Paths to Starting a Business

  • Methods of Entry:
    • Starting a new company, purchasing an existing business, acquiring a franchise, or inheriting a family business.

Experience and Management in Small Business

  • Planning Essentials:

    • Developing a business plan encompasses defining the business, identifying the target market, outlining competitive advantages, and detailing resources and qualifications.

  • Components of a Business Plan:

    • Cover Letter, Executive Summary, Company Background, Management Team, Financial Plan, Capital Required, Marketing Plan, Location Analysis, Manufacturing Plan, Appendix.

Financing a Small Business

  • Funding Sources:

    • Supplier credit, personal savings, credit cards, retained earnings, business credit cards, personal lines of credit, leasing, loans from friends/relatives, government agencies, angel investments.

  • Angel Investors Defined:

    • Individuals who invest personal funds into new companies before they go public, often targeting early-stage enterprises with investments ranging from $20,000 to $500,000.

  • Crowdfunding Explained:

    • Raising capital through collective small contributions from the public via online platforms such as Kickstarter and Indiegogo.

Knowing Your Customers

  • Market Definition:
    • Comprised of individuals with unmet needs or wants, equipped with the ability and willingness to purchase.
    • Small businesses possess the advantage of understanding their customers more closely than larger competitors.

Employee Management in Small Business

  • Challenges:
    • Finding and retaining qualified employees can be difficult due to limited resources and compensation.
    • The gig economy characterized by temporary jobs further complicates employee management.

Global Expansion of Small Businesses

  • Advantages and Disadvantages:

    • Enhancements to market reach and revenue potential, balanced by cultural misunderstandings and bureaucratic challenges.

  • Key Considerations:

    • Benefits include access to world markets, handling excess inventory, offsetting economic downturns, and prolonging product life. Drawbacks include financing issues, complexity of international regulations, and cultural differences.

Summary of Key Themes

  • Entrepreneurial Drives:
    • Motivators include the pursuit of new ideas, profit maximization, personal independence, and familial influences.
  • Entrepreneurial Attributes:
    • Successful entrepreneurs exhibit a range of traits such as being self-directed and action-oriented.
  • Discovering Business Opportunities:
    • Entrepreneurs find inspiration in both personal problems and passions.
  • Women in Entrepreneurship:
    • Female entrepreneurs face unique challenges yet contribute significantly to the economy.
  • Managing Small Businesses:
    • Essential management practices include comprehensive planning, financing, customer awareness, and employee management.