Management Chapter 6: Entrepreneurship and New Ventures PDF

Management Fifth Canadian Edition John R. Schermerhorn, Bachrach, Jr. Barry Wright Chapter 6 Entrepreneurship and New Ventures This slide deck contains animations. Please disable animations if they ca...

Management Fifth Canadian Edition John R. Schermerhorn, Bachrach, Jr. Barry Wright Chapter 6 Entrepreneurship and New Ventures This slide deck contains animations. Please disable animations if they cause issues with your device. Copyright ©2021 John Wiley & Sons Canada, Ltd. Learning Objectives 6.1 Define entrepreneurship and identify characteristics of entrepreneurs. 6.2 Describe how small businesses get started and the common problems they face. 6.3 Explain how entrepreneurs plan, legally structure, and fund new business ventures. Copyright ©2021 John Wiley & Sons 2 Canada, Ltd. The Nature of Entrepreneurship (1 of 5) Entrepreneurship Strategic thinking and risk-taking behaviour that result in new opportunities Classic entrepreneur Pursues opportunities others fail to recognize or view as problems or threats Copyright ©2021 John Wiley & Sons 3 Canada, Ltd. The Nature of Entrepreneurship (2 of 5) Serial entrepreneur Starts and runs businesses and nonprofits over and over again First-mover advantage First to spot or exploit a niche or enter a new market Copyright ©2021 John Wiley & Sons 4 Canada, Ltd. The Nature of Entrepreneurship (3 of 5) Personality traits and characteristics of entrepreneurs Copyright ©2021 John Wiley & Sons 5 Canada, Ltd. The Nature of Entrepreneurship (4 of 5) Women and minority entrepreneurs are growing in numbers Necessity-based entrepreneurship Starting a business because of few or no other employment or career options Copyright ©2021 John Wiley & Sons 6 Canada, Ltd. The Nature of Entrepreneurship (5 of 5) Social entrepreneurship Unique form of ethical entrepreneurship that seeks novel ways to solve pressing social problems Social entrepreneurs o Take risks to help meet needs not being effectively served by government and the private sector, such as poverty, illiteracy, illness, homelessness Copyright ©2021 John Wiley & Sons 7 Canada, Ltd. Entrepreneurship and Small Business (1 of 8) Small business statistics Provided about 70.5% of private-sector workforce in 2015 Accounted for 27% of total R and D expenditure in 2013 Represented an average 30% of GDP for their respective provinces. A small business has 5 - 100 employees Copyright ©2021 John Wiley & Sons 8 Canada, Ltd. Entrepreneurship and Small Business (2 of 8) Starting a small business Franchise o One business owner sells to another the right to operate the same business in another location Business model o Plan for making a profit by generating revenues that are greater than costs Copyright ©2021 John Wiley & Sons 9 Canada, Ltd. Entrepreneurship and Small Business (3 of 8) Starting a small business Startup o New and temporary venture that is trying to establish a profitable business model Lean startups o Use open source software and free web services to contain costs while staying small and keeping operations simple Copyright ©2021 John Wiley & Sons 10 Canada, Ltd. Entrepreneurship and Small Business (4 of 8) Why small businesses fail Industry Canada reports that: o Over 85% of new businesses survive the first year o Some 70% survive the first two years o Only 51% survive the first five years That is a 49% failure rate in the first five years Copyright ©2021 John Wiley & Sons 11 Canada, Ltd. Entrepreneurship and Small Business (5 of 8) Why small businesses fail Reasons why small businesses fail o Lack of experience o Lack of commitment o Lack of strategy and strategic leadership o Ethical failure o Lack of expertise o Growing too fast o Poor financial control o Insufficient financing Copyright ©2021 John Wiley & Sons 12 Canada, Ltd. Entrepreneurship and Small Business (6 of 8) Eight reasons why many businesses fail Copyright ©2021 John Wiley & Sons 13 Canada, Ltd. Entrepreneurship and Small Business (7 of 8) Family-owned small businesses Account for 80% of private firms in Canada Provide 60% of the nation’s GDP Feuds result when family members disagree over how the business is run Possible succession problems o Who will run the business when the current head leaves? o Succession plan outlines leadership transition and financial matters Copyright ©2021 John Wiley & Sons 14 Canada, Ltd. Entrepreneurship and Small Business (8 of 8) Small business development Business incubator o Offers space, shared administrative services, special equipment, and management advice to get small businesses started Business Development Program (BDP) o Offers guidance to entrepreneurs and small business owners on how to set up and manage business operations o This service is provided by the Government of Canada Copyright ©2021 John Wiley & Sons 15 Canada, Ltd. New Venture Creation (1 of 11) Stages in the life cycle of an entrepreneurial firm Copyright ©2021 John Wiley & Sons 16 Canada, Ltd. New Venture Creation (2 of 11) Business plan Describes the details needed to obtain start-up financing and operate a new business Banks want to see a well-developed business plan before lending money Copyright ©2021 John Wiley & Sons 17 Canada, Ltd. New Venture Creation (3 of 11) Sample Business Plan Outline: Executive summary Industry analysis Company description Products and services description Market description Marketing strategy Copyright ©2021 John Wiley & Sons 18 Canada, Ltd. New Venture Creation (4 of 11) Sample Business Plan Outline: Operations description Staffing description Financial projection Capital needs Milestones Copyright ©2021 John Wiley & Sons 19 Canada, Ltd. New Venture Creation (5 of 11) Forms of ownership Sole Proprietorship o An individual or married couple pursuing business for a profit. This does not involve incorporation. o It is simple to start, run, and terminate. o It’s the most common form of small business ownership in Canada. Copyright ©2021 John Wiley & Sons 20 Canada, Ltd. New Venture Creation (6 of 11) Forms of ownership Partnership o Two or more people agree to contribute resources to start and operate a business together o It’s usually supported by a written partnership agreement o There are three common forms of partnership arrangements Copyright ©2021 John Wiley & Sons 21 Canada, Ltd. New Venture Creation (7 of 11) Forms of partnership arrangements: General Partnership The owners share management responsibilities Limited Partnership General partner(s) manage the business Limited partners do not participate in day-to-day management Limited partners share profits, but losses are limited to their investment in the business Limited Liability Partnership Limits the liability of one partner for the negligence of another Copyright ©2021 John Wiley & Sons 22 Canada, Ltd. New Venture Creation (8 of 11) Forms of ownership Corporation o A legal entity that exists separately from its owners o Incorporated by an Act of provincial or federal government Benefit Corporation (B Corp) o Corporate form for businesses whose stated goals are to combine making a profit with benefiting society and the environment o This ownership type typically adopts the goals of social entrepreneurship and social Copyright ©2021 John Wiley & Sons Canada, Ltd. 23 New Venture Creation (9 of 11) Forms of ownership Limited Liability Corporation (LLC) o A combination of sole proprietorship, partnership, and corporation Protects owners’ assets from claims made against the company Treated as a proprietorship or partnership for tax purposes Copyright ©2021 John Wiley & Sons 24 Canada, Ltd. New Venture Creation (10 of 11) Financing Debt Financing o Involves borrowing money from another person, a bank, or a financial institution Equity Financing o Involves exchanging ownership shares for outside investment monies Venture Capitalists o Involves making large investments in new ventures in return for an equity stake in the business Copyright ©2021 John Wiley & Sons 25 Canada, Ltd. New Venture Creation (11 of 11) Financing Angel Investor o A wealthy individual willing to invest in return for equity in a new venture Crowdfunding o Entrepreneurs starting new ventures go online to get startup financing from a “crowd” of investors Copyright ©2021 John Wiley & Sons 26 Canada, Ltd. Copyright Copyright © 2021 John Wiley & Sons Canada, Ltd. All rights reserved. Reproductions or translations of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein. Copyright ©2021 John Wiley & Sons 27 Canada, Ltd.