chapter seven small business and...
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Copyright 2003 McGraw-Hill Ryerson Limited 1
Chapter SevenChapter Seven
Small Business and Small Business and EntrepreneurshipEntrepreneurship
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Small Business: a Major Player in Small Business: a Major Player in the Economythe Economy
SMALL BUSINESSthe driving force in economiesmany new ideasmany new productscreates most of the jobs
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Canadian businesses
by number of
employees Fig 7.1
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The Entrepreneurial ChallengeThe Entrepreneurial Challenge
Thousands of new businesses are started every monthThousands of businesses fail every monthWhat drives these entrepreneurs?
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Why?Why?
New idea, process or productIndependenceChallengeFamily patternProfitJob insecurity or joblessnessImmigrants
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Why do People Start their Own Why do People Start their Own Businesses? Survey says….Businesses? Survey says….
To use my skill/abilitiesTo gain control over my life
To build for the familyLike the challengeTo live how/where I likeGain respect/recognitionEarn lots of money
60%56%
52%49%
32%20%18%
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What does it take to succeed as What does it take to succeed as an Entrepreneur?an Entrepreneur?
Self-directionDeterminationHigh energy levelRisk orientationVisionQuick learner
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Women EntrepreneursWomen EntrepreneursFinancial need -- i.e. child supportLack of promotion opportunitiesWomen returning to the workforceFeminism
Family and personal responsibilityPublic awareness of women in businessPart-time occupationsHigh Success rate - women are more cautious and women take advice more readily
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Other Entrepreneurs & the FutureOther Entrepreneurs & the Future
Intrapreneurs -entrepreneurs in large companies Entrepreneurs of the Future - they will need more education
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Guide to Guide to SuccessfulSuccessfulIntrapreneuringIntrapreneuring
Focus on resultsand teamwork.
Reward innovation
and risk taking.
Be tolerant and learn from
mistakes.
Remain flexible and change oriented.
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What is a Small Business?What is a Small Business?Independently ownedIndependently operatedNot dominant in its fieldSmall number of employeesSmall sales level
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What is a Small Business?What is a Small Business?
It is dynamicIt is a feeder of large companiesIt creates most of the new jobs
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Small Business DiversificationSmall Business Diversification
ServiceRetailConstructionWholesaleManufacturing
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Starting a Small BusinessStarting a Small Business
WaysWays StepsStepsStart your own companyBuy an existing businessBuy a franchise unit
Gather informationGet professional legal and accounting advicePrepare a business plan
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Greatest Sources of Stress in Greatest Sources of Stress in Starting a Business? Survey Starting a Business? Survey
says...says...Company finances
The need to succeed
Time commitments
Personal relationships
Other factors
50%
23%
10%
9%
8%
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Funding a Small BusinessFunding a Small BusinessThe major reason that small businesses fail is a lack
of skill at obtaining, managing and using moneytoo little capitaltoo much capital but carelessborrowing without repayment plantoo much business with not enough capitalBorrow from a Commercial BankUse the Business Development Bank/Venture Capitalist
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Questions Bankers Want Questions Bankers Want Answered? Survey says...Answered? Survey says...
How big a loan do you want?1.What will you do with the money?2.How will this loan help the company?3.When will you pay the loan back?4.How will you repay the loan?5.What if your plans don’t work out?6.
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Why Bankers Turn Down Loans? Why Bankers Turn Down Loans? Survey says...Survey says...
1. Poor economy or lack of familiarity with the business, its owners, or the industry
2. Unwillingness of the owner to guarantee the loan personally
3. Insufficient collateral4. Inadequate business plan or preparation
by the owner(s)5. Insufficient equity commitment from the
owner(s)6. Past personal credit problems
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Operating a Small BusinessOperating a Small Business
Learn from others -study them, talk to themGet some experience -work in a small business (most of us do at one time or another)
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Road to Small Road to Small Business SuccessBusiness Success
Business Plan
Sufficient Funding
Seek Advice & Assistance
Know Customer
Manage Resources & Employees
Maintain Records & Controls
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Hours Worked per Week the Hours Worked per Week the First Year in Business? Survey First Year in Business? Survey
says...says...
1 - 39 hours 8%
40 - 49 15%
50 - 59 hours 23%
60 - 69 hours 28%
70 - 79 hours 13%
80 hours or more 12%
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Time Off Small Business Owners Time Off Small Business Owners Take Each Year, Survey says...Take Each Year, Survey says...
18 %1 week
25%2 weeks
15%3 weeks
13%4 weeks7%
5 weeksor more
22%No vacation
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HomeHome--Based Businesses…This Based Businesses…This sector is sector is BOOMING!BOOMING!
1. The total number of full and part-time home-based businesses hit 25.3 million in 1994
2. Home businesses have a 95% survival rate for the first year and a 85% survival rate over a three year period
3. A home-based business starts every 10 seconds
4. Over 40% of all North Americans will be working out of their home in 2000
5. Home-based business salaries are 2-3 times higher than the national average
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International Aspects of International Aspects of EntrepreneurshipEntrepreneurship
Small business is expanding it’s international presenceSome are exportingLicensingJoint-venturesGovernment programsThe Internet