Copyright © 2011 by Nelson Education Ltd. 1 Chapter 7: SMALL BUSINESS AND ENTREPRENEURSHIP Economic Rocket Fuel

Copyright © 2011 by Nelson Education Ltd. 2 LOOKING AHEAD Why do individuals start businesses? What is the mindset and what are the characteristics of an entrepreneur? What are the opportunities and threats for small businesses? What are options for starting a new business? Where can entrepreneurs get assistance and find tools for success? What are funding sources for small businesses? What contribution does small business make to the economy? LO1 Explain the key reasons to launch a small business LO2 Describe the typical entrepreneurial mindset and characteristics LO3 Analyze the opportunities and threats that small businesses face LO4 Discuss ways to become a new business owner and tools to facilitate success LO5 Discuss funding options for small business LO6 Explain the size, scope, and economic contributions of small business

Copyright © 2011 by Nelson Education Ltd. 3 LAUNCHING NEW VENTURES: WHAT’S IN IT FOR ME? Greater Financial Success Independence Flexibility Challenge Survival Approximately 2.6 million Canadians are self- employed. Another million work for firms with four or fewer employees. L01

Copyright © 2011 by Nelson Education Ltd. 4 ENTREPRENEURS Entrepreneurs – People who risk their time, money, and other resources to start and manage a business. L01

Copyright © 2011 by Nelson Education Ltd. 5 THE ENTREPRENEUR: A DISTINCTIVE PROFILE L02

Copyright © 2011 by Nelson Education Ltd. 6 OPPORTUNITIES FOR SMALL BUSINESS Opportunities: –Market Niches –Personal Customer Service –Lower Overhead Costs –Technology L03

Copyright © 2011 by Nelson Education Ltd. 7 THREATS FOR SMALL BUSINESS Threats: –High Risk of Failure –Lack of Knowledge and Experience –Too Little Money –Bigger Regulatory Burden L03

Copyright © 2011 by Nelson Education Ltd. 8 SMALL BUSINESS FAILURE L03

Copyright © 2011 by Nelson Education Ltd. 9 FAILING WITH STYLE Walt Disney was fired from an ad agency for a “singular lack of drawing ability.” Ray Kroc, McDonald’s founder, failed at real estate, he didn’t discover the McDonald brothers’ hamburger stand until he was 52 years old. Steve Jobs, founder of Apple computer, was dumped by his board of directors, but returned a decade later to launch the iMac and the iPod. Your failure may be your first step to the next big thing. L03

Copyright © 2011 by Nelson Education Ltd. 10 LAUNCH OPTIONS Starting from scratch Buying an established business Buying a franchise L04

Copyright © 2011 by Nelson Education Ltd. 11 STARTING A BUSINESS FROM SCRATCH Key Pros:Key Cons: It’s all you : Your concept, your decisions, your structure. You don’t have to deal with the prior owner’s bad decisions. It’s all you. That’s a lot of pressure. It can be hard to get credit. Logistics can be challenging It takes time, money, and sheer sweat to build a customer base. L04

Copyright © 2011 by Nelson Education Ltd. 12 BUYING AN ESTABLISHED BUSINESS Key Pros:Key Cons: The concept, organizational structure, and operating practices are in place. Relationships are established. Obtaining financing is less challenging. Working with someone else’s idea may not be fun. You may inherit old mistakes. L04

Copyright © 2011 by Nelson Education Ltd. 13 BUYING A FRANCHISE Key Pros:Key Cons: Partnering with established brand Possibility of assistance with management and financing Low failure rate Less opportunity for creativity Tied to national brand’s mistakes Purchase price and on- going royalties can be steep L04

Copyright © 2011 by Nelson Education Ltd. 14 TOOLS FOR BUSINESS SUCCESS Gain Experience Learn from Others Educate Yourself Access Resources (e.g., Canada Business) Develop a Business Plan L04

Copyright © 2011 by Nelson Education Ltd. 15 BUSINESS PLANS: THE ROADMAP Executive Summary Description of Business Competitive and Industry Research Marketing Strategies Operating Procedures Personnel Financial Projections L04

Copyright © 2011 by Nelson Education Ltd. 16 FINDING THE MONEY: FUNDING OPTIONS Personal Resources Loans Angel Investors Venture Capital L05

Copyright © 2011 by Nelson Education Ltd. 17 SMALL BUSINESS AND THE ECONOMY: AN OUTSIZED IMPACT Creating New Jobs Fueling Innovation Creating Opportunities for Women L06

Copyright © 2011 by Nelson Education Ltd. 18 ECONOMIC IMPACT Just 9.8% of the world’s entrepreneurs expect to create almost 75% of the jobs generated by new business ventures in the next five years. Source: Global Entrepreneurship Monitor, special report, L06

Copyright © 2011 by Nelson Education Ltd. 19 SOMETIMES LESS IS MORE Eric Truran, founder of a small New England manufacturing firm and retail store, eventually closed his retail store to focus strictly on online and telephone sales. –His income dropped by about 50%, but his free time more than quadrupled. –He went from working 80 to 90 hours a week to working 15 to 20 hours a week. –He uses his free time to pursue other passions, such as playing guitar with his two bands. L06

Copyright © 2011 by Nelson Education Ltd. 20 THE ENTREPRENEURIAL SPIRIT Intrapreneurs - are innovative workers who focus on launching new products and generating new profit streams for the company that employs them. L06

Copyright © 2011 by Nelson Education Ltd. 21 THE ENTREPRENEURIAL SPIRIT Minipreneurs – individuals launching super small scale enterprises. Include microbusiness, freelancers, side businesses, weekend entrepreneurs, hobbypreneurs, Web-driven entrepreneurs, free agents and more.. L06

Copyright © 2011 by Nelson Education Ltd. 22 THE ENTREPRENEURIAL SPIRIT Mompreneurs – mothers who start home-based businesses, often motivated by the wish or need to remain home with their children. Sometimes these businesses become successful enough to employ other family members. L06

Copyright © 2011 by Nelson Education Ltd. 23 ENTREPRENEURSHIP, A WORLD OF DIFFERENCE Entrepreneurship has an economic impact in countries around the world Three key factors drive entrepreneurship globally: –Economic Welfare and Opportunity Costs –Cultural Environment and Population Demographics –Institutional Characteristics and the Political Environment L06

Copyright © 2011 by Nelson Education Ltd. 24 ENTREPRENEURSHIP AROUND THE WORLD L06

Copyright © 2011 by Nelson Education Ltd. 25 LOOKING BACK 25 Why do individuals start businesses? What is the mindset and what are the characteristics of an entrepreneur? What are the opportunities and threats for small businesses? What are options for starting a new business? Where can entrepreneurs get assistance and find tools for success? What are funding sources for small businesses? What contribution does small business make to the economy? LO1 Explain the key reasons to launch a small business LO2 Describe the typical entrepreneurial mindset and characteristics LO3 Analyze the opportunities and threats that small businesses face LO4 Discuss ways to become a new business owner and tools to facilitate success LO5 Discuss funding options for small business LO6 Explain the size, scope, and economic contributions of small business