1. PowerPoint Presentations for Small Business Management: Launching and Growing New Ventures, Fifth Canadian Edition
Adapted by
Cheryl Dowell
Algonquin College

2. Copyright © 2013 by Nelson Education Limited
CHAPTER 1
Entrepreneurs
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3. Copyright © 2013 by Nelson Education Limited
LOOKING AHEAD
After studying this chapter, you should be able to:
1. Discuss the availability of entrepreneurial opportunities and give examples of successful businesses started by entrepreneurs.
Explain the nature of entrepreneurship and how it is related to small business.
Define small business and identify the importance of small business.
Identify rewards and drawbacks of entrepreneurial careers.
Describe the various types of entrepreneurs and entrepreneurial ventures.
Discuss several factors related to readiness for entrepreneurship and getting started in an entrepreneurial career.
Describe some characteristics of successful entrepreneurs.
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4. ENTREPRENEURIAL OPPORTUNITY
Economically attractive and timely opportunity that creates value
True opportunity exists only for entrepreneur who has:
interest, resources, and capabilities required to succeed
In 2010, 2.7 million Canadians were self-employed and according to a report published by the BDC, indicators show that the level of entrepreneurial activity in Canada has increased. Approximately 10 % of the Canadian population currently owns a business and, looking to the future, 11.2 % of Canadians intend to start a business at some point in their lives
LO 1
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ENTREPRENEURSHIP
AND SMALL BUSINESS
Entrepreneurs:
active owner-managers
second-generation operators of family-owned firms
franchisees
owner managers who have bought out the founders of existing firms
Small business managers:
receive specified compensation
do not assume ownership risks
LO 2
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6. WHAT IS A SMALL BUSINESS?
Criteria
Financing supplied by one person or small group
Localized business operations (except marketing)
Business’ size small relative to larger competitors
Fewer than 100 employees
LO 3
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7. WHAT IS A SMALL BUSINESS?
According to Statistics Canada, in 2009:
1,114,915 small businesses in Canada
2.7 million self-employed workers
98 % have fewer than 100 employees
contribute about 42 % to Canada’s GDP
employ 48 % of total labour force in private sector
46 % have female ownership
87 % of Canadian exporters and make up 21 % of Canada’s total value of exports
75 % operate in service industries
25 % in goods-producing industries
According to Statistics Canada, a “small business” is a firm that has fewer than 100 employees
LO 3
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8. THE MOTIVATORS OF ENTREPRENEURSHIP
The financial return of any business must compensate its owner for investing his or her personal time (a salary equivalent) and personal savings (an interest and/or dividend equivalent) before any true profits are realized.
Entrepreneurs expect a return that will not only compensate them for the time and money they invest but also reward them well for the risks and initiative they take in operating their own businesses.
Freedom to operate independently is another reward of entrepreneurship.
A study conducted by the Canadian Federation of Independent Business in 2007 determined the desire for making their own decisions as the primary motivator for Canadians starting their own business. Other motivators, in descending order of importance were, it fit their lifestyle, they wanted to better use their skills, they saw it as a path to financial freedom, they had a great business idea, and they could not find a suitable job.
Like these entrepreneurs, many of us have a strong desire to make our own decisions, take risks, and reap the rewards. Being one’s own boss seems an attractive ideal.
LO 4
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9. KEY SMALL BUSINESS STATISTICS
EXHIBIT 1.1
About one-quarter of all business establishments produce goods, whereas the remainder provide services. Small firms (those with fewer than 100 employees) make up 98 % of goods-producing employer businesses and 98 % of all service-producing employer businesses
LO 4
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10. DRAWBACKS OF ENTREPRENEURSHIP
For more than 57 per cent of respondents, a typical work week is more than 45 hours long (see figure below). In fact, about one fifth of respondents say they usually work more than 60 hours per week. Twenty-six % of business owners work 35 hours or less. Respondents from Atlantic Canada are most likely to work less than
35 hours while those from the Prairies are the most likely to work more than 60 hours per week.
Starting and operating one’s own business typically demands hard work, long hours, and much emotional energy.
Entrepreneurs experience the unpleasantness of personal stress as well as the need to invest much of their own time and labour.
The possibility of business failure is a constant threat to entrepreneurs. There is no guarantee of success or even of a bailout for a failing owner.
6,729 business bankruptcies and proposals reported in Canada in 2009 clearly indicate that the possibility of failure is very real. However, the number of business insolvencies per 1,000 in Canada dropped from a high of 8.1 in 1998 to 2.9 in 2009.
LO 4
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11. CAUSES OF BUSINESS FAILURE
32 % inadequate research and development
23 % lacked competitive advantage
14 % due to uncontrolled costs
13 % due to poorly developed marketing strategies
10 % poor market timing
8 % succumbed to competitor activities
LO 4
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12. VARIETIES OF ENTREPRENEURSHIP
Founder (“Pure” Entrepreneur)
brings a new firm into existence
General Manager (“Second Stage” Entrepreneur)
directs the continuing operations of established firms
Franchisee
power is limited by the contractual relationship with a franchising organization
LO 5
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13. HIGH POTENTIAL VENTURES VS. SMALL FIRMS AND MICRO BUSINESS
High-Potential Venture (Gazelle)
has great prospects for growth
Attractive Small Firm
provides substantial profits to its owner
Micro Business (Lifestyle)
provides minimal profits to its owner
LO 5
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14. CHARACTERISTICS OF ARTISAN ENTREPRENEURS
Technical skills and little business knowledge
Paternalistic approach
Reluctance to delegate
Narrow view of strategy
Personal sales effort
Short planning horizon
Simple record keeping
LO 5
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15. CHARACTERISTICS OF OPPORTUNISTIC ENTREPRENEURS
Business skills and technical knowledge
Scientific approach to problems
Willing to delegate
Broad view of strategy
Diversified marketing approach
Longer planning horizon
Sophisticated accounting and financial control
LO 5
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16. ENTREPRENEURIAL TEAMS
Two or more who work together as entrepreneurs
Helpful to:
Secure a broad range of managerial talents
Enhance profits
Useful in:
High technology businesses
Attractive small firms
High potential ventures
LO 5
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17. GETTING STARTED IN ENTREPRENEURSHIP
FOUR ROUTES TO ENTREPRENEURSHIP
1. Starting a new business
2. Entering a family business
3. Opening a franchised business
4. Buying an existing business
LO 6
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18. AGE, GENDER, AND ENTREPRENEURIAL OPPORTUNITY
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19. REFUGEES AS ENTREPRENEURS
becomes an entrepreneur to escape an undesirable situation
Foreign refugee
leaves his or her native country and becomes an entrepreneur in the new country
Corporate refugee
leaves big business to go into business for themselves
Some people, at various ages, “back into” entrepreneurship in a move to escape an undesirable situation.
Many of these refugees are motivated more by entrepreneurial rewards than by an escapist mind-set.
It is often a mixture of positive and negative considerations that provides the motivation.
LO 6
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PRECIPITATING EVENTS
An event, such as losing a job, that moves an individual to become an entrepreneur
job termination
job dissatisfaction
unexpected opportunity
LO 6
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21. CHARACTERISTICS OF SUCCESSFUL ENTREPRENEURS
Internal Locus of Control:
entrepreneurs tend to hold themselves accountable for their own successes or failures
External Locus of Control:
non-entrepreneurs tend to believe that external circumstances, luck or fate impact upon their worlds
LO 7
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22. ENTREPRENEURIAL CHARACTERISTICS
Commitment and determination
Leadership
Opportunity obsession
Tolerance of risk, ambiguity and uncertainty
Creativity, self-reliance and adaptability
Motivation to excel
LO 7
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