Chapter 4 Flashcards
Define a small business
Owner-managed business with below 100 employees; unincorporated businesses with only an owner are sometimes not included in this group
Define a new venture
Recently formed organization, opened within a year, selling goods or services
Define entrepreneurship
Process of identifying, capitalizing on a marketplace opportunity
Define intrapreneurs
Create something new within existing large organization
What is the role of small businesses in Canada?
They are the main source of job creation; they are the leaders in innovation and tech; 98% of all employers in Canada are small
How have women entrepreneurs increased in the economy?
Approx. half of all new businesses are started by women; rise of “mompreneurs”
What are the steps of the Entrepreneurial Process?
- Entrepreneur 2.Identify Opportunities + Accessing resources 4. New Venture Startup 5. Growth Stabliity Decline Demise
Define identifying opportunities
Generate ideas, screen ideas - does it add or create value? does it provide a competitive advantage? is it marketable and financially viable? does it have low exit costs? - develop opportunity (Business plan)
Define a business plan (10)
Cover page; executive summary; table of contents; company description; product or service description; marketing; operating plan; management; financial plan; supporting details/appendix
Define accessing ressources
Bootstrapping (doing more with less, preferably external ressources); fianancial ressources (debt, equity); other ressources - Business Dev. Bank of Canada (BDC), incubators, Internet, crowdfunding
Equity vs Debt
Equity: personal savings, love money, venture capitalists, private investors (angels)
Debt: financial institutions, suppliers
What are the 3 types of fits?
Entrepeur opportunity: is it possible?
Opportunity ressources: can required ressources be acquired?
Entrepreneur ressources: capacity to meet requirements?
What are 3 ways of starting a small business?
Buying an already existing business; taking over a family business; buying a franchise
Pros of buying an existing business (5)
Established clientele; ease of financing; experienced employees; established lines of credit and supply; less risky than starting from scratchw
What are the cons of buying an existing business? (4)
Uncertainty about financial health; location may be poor; pricing strategy may need to be revisited; may have a poor reputation
What are challenges with a family-owned business?
Ongoing management: which family members have control, what is the price to be paid, what are family members rights to a job?
Succession: how is successor selected, when, how is he trained?
What are benefits of franchising for the franchiser?(6)
Attain rapid growth, share advertising cost, increased investment money, development of a motivated sales team, increased revenue, no need to deal with local business issues
What are franchising benefits for the franchisee?(9)
Expert advice, training provided, lower failure rates, well-developed brand, keep most profits, help with external financing, access to management expertise, economies of sale in buying supplies, no need to build business from scratch
What are common reasons for success?
Hard work, drive, and dedication; market demand for product or service; managerial competence; luck
What are common reasons for failure?
Managerial incompetence; neglect; weak control systems; insufficient capital
What are 4 forms of business organization?
Sole proprietorship; partnership; corporation; cooperative
What are the advantages of a sole proprietorship?(4)
Freedom; simplicity; low start-up costs; tax benefits
What are the disadvantages of sole proprietorships?
Unlimited liability; lack of continuity; difficult to raise money; reliance on one indiv.
Define a partnership
Two+ people agree to combine financial, managerial, technical abilities to run business; often used by professionals
What are the types of partnership
General and limited partners
What are the advantages of partnership? (4)
Larger talent pool, larger money pool, ease of formation, tax benefits
What are the disadvantages of partnership? (4)
Unlimited liability, lack of continuity, ownership transfer is difficult, potential conflict
Define a corporation
Seperate legal entity from owners, property rights and obligations, indefinite lifespan
Define a public corporation
Shared widely held and available for sale to general public; IPOs (inital public offering)
Define a private corporation
Shares held by a few shareholders (not widely available)
Define a board of directors
Governing body responsible for shareholder interests, in charge of appointing management, setting policies, and making major decisions
Define a shareholder
Investors owning shares of a company, may share in profits through dividends
Define a CEO
Chief executive officer, responsable for firms overall performance
What are the advantages of a corporation?
Limited liability, continuity, professional management, easier to raise money
What are the disadvantages of a corporation?
Start-up costs, double taxation, regulations, stockholder revolts
Define a cooperative
Organization formed to benefit owners through reduced prices and distributions of surpluses
What are the advantages of a cooperative?
Limited liability, owner continuity, one vote per member (equal), income taxed only at indiv. member level
What are the disadvantages of a cooperative?
No incentive to invest, members simply benefit from usage
