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Welcome to BUSI 1110!

Instructor: Russ Heritage

Week 4

Entrepreneurship, Small Business, and New Venture Creation

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Today’s Agenda

Welcome

Questions from last time?

Review

Lecture – Conducting Business Ethically and Responsibly

Your Questions

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Some tips for the Written Assignments

Make sure to be complete in your answer

Use examples to demonstrate your understanding

Look carefully at the marking rubric to make sure you don’t miss marks!

All assignments require some research and proper citation in APA format.

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Review from last class

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Ethics in the Workplace (LO 3-1) (1 of 7)

What Is Ethical Behaviour?

Ethics

standards or moral values that dictate what is right and wrong

culturally based

formed upon society’s expectations

vary by person, and by situation

Everyone develops his/her own “code of ethics”

Review

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Learning Objective: 3-1

Page(s): 42

Notes

This introduction to ethics provides some basic definitions and stresses that what constitutes ethical behaviour is to a great extent open to discussion.

Activities

Discuss how students have developed their own ideas of what is right and wrong. Do they believe ethics can be taught?

Ethics in the Workplace (LO 3-1) (2 of 7)

Influences on Ethical Behaviour

Review

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Learning Objective: 3-1

Page(s): 42-43

Notes

The discussion in the text demonstrates the key determinants of individual ethics. Care must be taken to put the lesson in the context of the situation facing the individual making ethical decisions.

Activities

Discuss how students have developed their own ideas of what is right and wrong. Do they believe ethics can be taught?

Corporate Social Responsibility (LO 3-2)

Corporate Social Responsibility

the idea that a business should balance its commitments to individuals and groups that are directly affected by its activities

Fair-trade Movement

a movement designed to help workers in developing countries receive fair pay for their work

Review

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Learning Objective: 3-2

Page(s): 46-47

Social Obligation

Social Responsiveness

Social Responsibility

Increasing Commitment

Review

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Areas of Social Responsibility (LO 3-3) (1 of 8)

Responsibility Toward the Environment

Responsibility Toward Customers

Responsibility Toward Employees

Responsibility Toward Investors

Review

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Learning Objective: 3-3

Page(s): 47-54

Ethics in the Workplace (LO 3-1) (6 of 7)

Written Codes of Ethics

Increase public confidence in a firm

Help stem the tide of government regulation

Improve internal operations by providing consistent standards of both ethical and legal conduct

Help managers respond to problems as a result of unethical or illegal behaviour

Review

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Learning Objective: 3-1

Page(s): 45

Implementing Social Responsibility Programs (LO 3-4) (3 of 4)

Step 1: Top Management Support

develop a policy statement outlining their commitment to ethical behaviour

Step 2: Strategic Planning

top managers develop a plan of the level of support

percentage of sales revenues to go to social causes

promise to train chronically unemployed people

Step 3: Appoint a Director

executive-level administrator is appointed to oversee the program

this may be a part-time work commitment on the part of existing top managers

Review

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Learning Objective: 3-4

Page(s): 55-56

Your Questions

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-What is the important role of the entrepreneur to the Canadian Economy?

-How important is the small business sector in Canada to the economy?

-Does the Government play a role in encouraging entrepreneurs?

-Why do some entrepreneurs succeed, while others fail?

Some thought starters

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Business Essentials

Ninth Canadian Edition

Chapter 4

Entrepreneurship, Small Business, and New Venture Creation

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Learning Objectives (1 of 2)

Explain the meaning and interrelationship of the terms small business, new venture creation, and entrepreneurship.

Describe the role of small and new businesses in the Canadian economy.

Describe some key characteristics of entrepreneurial personalities and explain the entrepreneurial process and describe its key elements.

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These learning objectives are based upon those at the beginning of the chapter. For a review of learning objectives, see the summary at the end of the chapter, as well as the list of key terms.

Learning Objectives (2 of 2)

Describe three alternative strategies for becoming a business owner: starting a business, buying an existing business and buying a franchise.

Identify four key reasons for success in small businesses and four key reasons for failure.

Describe four forms of legal organization for a business and discuss the advantages and disadvantages of each.

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Small Business, New Venture Creation, and Entrepreneurship (LO 4-1) (1 of 2)

Small Business

owner-managed business with fewer than 100 employees

definitions vary; some statistics do not include unincorporated businesses with one owner and no employees

New Venture

recently formed organization, opened within the last 12 months, that sells goods or services

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Learning Objective: 4-1

Page (s): 63

Small Business, New Venture Creation, and Entrepreneurship (LO 4-1) (2 of 2)

Entrepreneurship

process of identifying and capitalizing on a marketplace opportunity

Entrepreneur

person who recognizes and seizes opportunities

Intrapreneurs

create something new within an existing large organization

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Learning Objective: 4-1

Page (s): 65

Table 4.1

Small and New Businesses in the Canadian Economy (LO 4-2) (1 of 2)

Role of Small Business

98% of all employer businesses in Canada are small (fewer than 100 employees)

main source of job creation

leaders in innovation and new technology

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Learning Objective: 4-2

Page (s): 63-64

Note

“New business” excludes businesses without employees. May have been operated by owner alone for many years prior to hiring employees.

Figure 4.1

Small and New Businesses in the Canadian Economy (LO 4-2) (2 of 2)

Increasing Role of Female Entrepreneurs

women now account for approximately half of all new businesses

rise of mompreneurs

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Learning Objective: 4-2

Page (s): 66-67

Note

“New business” excludes businesses without employees. May have been operated by owner alone for many years prior to hiring employees.

The Entrepreneurial Process (LO 4-3) (1 of 6)

The Entrepreneurial Process in a New Venture

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The Entrepreneurial Process (LO 4-3) (2 of 6)

Identifying Opportunities

Generating ideas

Screening ideas

Idea adds or creates value

Idea provides a competitive advantage

Idea is marketable and financially viable

Idea has low exit costs

Developing the opportunity

Business Plan

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Learning Objective: 4-3

Page (s): 67-69

The Entrepreneurial Process (LO 4-3) (3 of 6)

Business Plan

Cover Page

Executive Summary

Table of Contents

Company Description

Product or Service Description

Marketing

Operating Plan

Management

Financial Plan

Supporting Details/Appendix

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Learning Objective: 4-3

Page (s): 70

The Entrepreneurial Process (LO 4-3) (4 of 6)

Accessing Resources

Bootstrapping

doing more with less

preferably external resources

Financial Resources

debt

equity

Other resources

Business Development Bank of Canada (BDC)

incubators

the Internet

crowdfunding

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Learning Objective: 4-3

Page (s): 70-71

Notes

Sometimes entrepreneurs share ownership to gain access to resources

Resources may come from partners, employees, customers, suppliers, professionals, consultants, government agencies, lenders, shareholders, venture capitalists

Necessity of a team depends on Size and scope of venture and personal competencies

The Entrepreneurial Process (LO 4-3) (5 of 6)

Equity

Personal Savings

Love Money

Private Investors (Angels)

Venture Capitalists

Debt

Financial Institutions

Suppliers

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Learning Objective: 4-3

-Page (s): 70-71

Notes

Sometimes entrepreneurs share ownership to gain access to resources

Resources may come from partners, employees, customers, suppliers, professionals, consultants, government agencies, lenders, shareholders, venture capitalists

Necessity of a team depends on Size and scope of venture and personal competencies

The Entrepreneurial Process (LO 4-3) (6 of 6)

Assessing the “Fit”

Entrepreneur–Opportunity Fit

is it possible?

Opportunity–Resources Fit

can required resources be acquired?

Entrepreneur–Resources Fit

capacity to meet requirements?

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Learning Objective: 4-3

Page (s): 73-74

Notes

This slide refers back to the Entrepreneurial Process diagram. One can only go forward if there is a fit between the 3 elements.

Alternative Approaches (LO 4-4) (1 of 3)

Starting Up a Small Business

Buying an already existing business

Taking over a family business

Buying a franchise

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Learning Objective: 4-4

Page (s): 74-76

Alternative Approaches (LO 4-4) (2 of 3)

Buying an Existing Business

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Learning Objective: 4-4

Page (s): 74-76

Alternative Approaches (LO 4-4) (3 of 3)

Family-Owned Business Challenges

Ongoing Management

which family members have control?

price to be paid?

family members rights to a job?

Succession

successor selection?

succession timing?

successor training?

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Learning Objective 4-4

Page (s): 74-76

Group Breakout Activity:

Please break into groups of 4 and discuss the following.

What are the advantages and disadvantages of owning a franchise?

We will do a round table debrief in 10 minutes

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After the Start-Up (LO 4-4) (1 of 2)

Franchising Benefits (for the Franchiser)

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

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Learning Objective: 4-5

Page (s): 74-76

Table 4.4: first column

After the Start-Up (LO 4-4) (2 of 2)

Franchising Benefits (for the Franchisee)

Expert advice

Training provided

Lower failure rates

Well-developed brand

Keep most of the profits

Help with external financing

Access to management expertise

Economies of scale in buying supplies

No need to build a business from scratch

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Learning Objective: 4-5

Page (s): 74-76

Table 4.4: second column

Success and Failure in Small Business (LO 4-5) (1 of 2)

Reasons for Success

Hard work, drive, and dedication

Market demand for product or service

Managerial competence

Luck

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Learning Objective: 4-5

Page (s): 76-77

Success and Failure in Small Business (LO 4-5) (2 of 2)

Reasons for Failure

Managerial Incompetence

Neglect

Weak Control Systems

Insufficient Capital

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Learning Objective: 4-5

Page (s): 76-77

Forms of Business Organizations (LO 4-6) (1 of 11)

Sole Proprietorship

Partnership

Corporation

Co-operative

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Learning Objective: 4-6

Page (s): 77-80

Forms of Business Organizations (LO 4-6) (2 of 11)

Sole Proprietorships

Advantages

freedom

simplicity

low start-up costs

tax benefits

Disadvantages

unlimited liability

lack of continuity

difficult to raise money

reliance on one individual

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Learning Objective: 4-6

Page (s): 77

Forms of Business Organizations (LO 4-6) (3 of 11)

Partnership

two or more people agree to combine their financial, managerial, and technical abilities to run a business

frequently used by professionals

Two basic types

General Partners

Limited Partners

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Learning Objective: 4-6

Page (s): 77-78

Forms of Business Organizations (LO 4-6) (4 of 11)

Partnerships

Advantages

larger talent pool

larger money pool

ease of formation

tax benefits

Disadvantages

unlimited liability

lack of continuity

ownership transfer is difficult

potential conflict

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Learning Objective: 4-6

Page (s): 77-78

Forms of Business Organizations (LO 4-6) (5 of 11)

Corporations

corporations have the following rights and characteristics

separate legal entity from its owners

property rights and obligations

indefinite lifespan

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Learning Objective: 4-6

Page (s): 78-80

Forms of Business Organizations (LO 4-6) (6 of 11)

Public Corporation

shares are widely held and available for sale to the general public

initial public offering (IPO): the sale of shares for the first time to the general investing public

Private Corporation

shares held by a few shareholders (not widely available)

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Learning Objective: 4-6

Page (s): 78-80

Forms of Business Organizations (LO 4-6) (7 of 11)

Board of Directors

governing body; responsible for shareholder interests

appoint management, set policy, make major decisions

Shareholders

investors who buy shares of ownership in a company

may share in profits through dividends

Chief Executive Officer (CEO)

person responsible for the firms overall performance

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Learning Objective: 4-6

Page (s): 78-80

Forms of Business Organizations (LO 4-6) (8 of 11)

Corporations

Advantages

limited liability

continuity

professional management

easier to raise money

Disadvantages

start-up costs

double taxation

regulations

stockholder revolts

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Learning Objective: 4-6

Page (s): 78-80

Forms of Business Organizations (LO 4-6) (9 of 11)

Co-operatives

organization formed to benefit its owners through reduced prices and distribution of surpluses

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Learning Objective: 4-6

Page (s): 80-81

Forms of Business Organizations (LO 4-6) (10 of 11)

Co-operatives

Advantages

limited liability

owner continuity

one vote per member; equal voice regardless of size

income taxed only at the individual member level

Disadvantages

no incentive to invest

members simply benefit from usage

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Learning Objective: 4-6

Page (s): 80-81

Forms of Business Organizations (LO 4-6) (11 of 11)

Characteristic	Sole Proprietorship	Partnership	Corporation	Co-operative
Protection against liability for bad debts	Low	Low	High	High
Ease of formation	High	High	Medium	Medium
Permanence	Low	Low	High	High
Ease of ownership transfer	Low	Low	High	High
Ease of raising money	Low	Medium	High	High
Freedom from regulation	High	High	Low	Medium
Tax advantages	High	High	Low	High

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Learning Objective: 4-6

Page (s): 80

Your Questions

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Quick-Check Questions (1 of 5)

____________ are people that create something new within the context of a large organization.

A) Venture Capitalists

B) Angels

C) Intrapreneurs

D) Nascent Investors

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Quick-Check Answer (1 of 5)

____________ are people that create something new within the context of a large organization.

A) Venture Capitalists

B) Angels

C) Intrapreneurs

D) Nascent Investors

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Quick-Check Questions (2 of 5)

The entrepreneurial process is like a journey which is influenced by social, economic, political, and technological factors. The three key elements in the process are:

A) The product, the promotions and the place or location of the venture

B) The entrepreneur, the size of the market and the scale of the business

C) The market, the capital investment and the growth potential

D) The entrepreneur, the opportunity, and the resources

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Quick-Check Answer (2 of 5)

The entrepreneurial process is like a journey which is influenced by social, economic, political, and technological factors. The three key elements in the process are:

A) The product, the promotions and the place or location of the venture

B) The entrepreneur, the size of the market and the scale of the business

C) The market, the capital investment and the growth potential

D) The entrepreneur, the opportunity, and the resources

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Quick-Check Questions (3 of 5)

The first section of a business plan is the:

A) Company Description

B) Market analysis

C) Executive Summary

D) Operating Plan

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Quick-Check Answer (3 of 5)

The first section of a business plan is the:

A) Company Description

B) Market analysis

C) Executive Summary

D) Operating Plan

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Quick-Check Questions (4 of 5)

_________have voting rights and receive a vote for each share that they own. They are considered owners of the company although the extent of ownership depends on the number of shares they possess.

A) Preferred Capitalists

B) Bondholders

C) Common stockholders

D) Derivative titleholders

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Quick-Check Answer (4 of 5)

_________have voting rights and receive a vote for each share that they own. They are considered owners of the company although the extent of ownership depends on the number of shares they possess.

A) Preferred Capitalists

B) Bondholders

C) Common stockholders

D) Derivative titleholders

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Quick-Check Questions (5 of 5)

A ___________ is an organization that is owned and controlled by the people who use it - producers, consumers and workers with similar needs who pool their resources for mutual benefit.

A) private corporation

B) joint venture

C) co-operative

D) public corporation

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Quick-Check Answer (5 of 5)

A ___________ is an organization that is owned and controlled by the people who use it - producers, consumers and workers with similar needs who pool their resources for mutual benefit.

A) private corporation

B) joint venture

C) co-operative

D) public corporation

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Your Questions

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For next class:

Read Chapter

Complete quiz

Complete Written Assignment #2

Note: all due dates are on Moodle

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