Chapter 4

Question 1

Define a small business

Answer 1

Owner-managed business with below 100 employees; unincorporated businesses with only an owner are sometimes not included in this group

Question 2

Define a new venture

Answer 2

Recently formed organization, opened within a year, selling goods or services

Question 3

Define entrepreneurship

Answer 3

Process of identifying, capitalizing on a marketplace opportunity

Question 4

Define intrapreneurs

Answer 4

Create something new within existing large organization

Question 5

What is the role of small businesses in Canada?

Answer 5

They are the main source of job creation; they are the leaders in innovation and tech; 98% of all employers in Canada are small

Question 6

How have women entrepreneurs increased in the economy?

Answer 6

Approx. half of all new businesses are started by women; rise of “mompreneurs”

Question 7

What are the steps of the Entrepreneurial Process?

Answer 7

1. Entrepreneur 2.Identify Opportunities + Accessing resources 4. New Venture Startup 5. Growth Stabliity Decline Demise

Question 8

Define identifying opportunities

Answer 8

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)

Question 9

Define a business plan (10)

Answer 9

Cover page; executive summary; table of contents; company description; product or service description; marketing; operating plan; management; financial plan; supporting details/appendix

Question 10

Define accessing ressources

Answer 10

Bootstrapping (doing more with less, preferably external ressources); fianancial ressources (debt, equity); other ressources - Business Dev. Bank of Canada (BDC), incubators, Internet, crowdfunding

Question 11

Equity vs Debt

Answer 11

Equity: personal savings, love money, venture capitalists, private investors (angels)
Debt: financial institutions, suppliers

Question 12

What are the 3 types of fits?

Answer 12

Entrepeur opportunity: is it possible?
Opportunity ressources: can required ressources be acquired?
Entrepreneur ressources: capacity to meet requirements?

Question 13

What are 3 ways of starting a small business?

Answer 13

Buying an already existing business; taking over a family business; buying a franchise

Question 14

Pros of buying an existing business (5)

Answer 14

Established clientele; ease of financing; experienced employees; established lines of credit and supply; less risky than starting from scratchw

Question 15

What are the cons of buying an existing business? (4)

Answer 15

Uncertainty about financial health; location may be poor; pricing strategy may need to be revisited; may have a poor reputation

Question 16

What are challenges with a family-owned business?

Answer 16

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?

Question 17

What are benefits of franchising for the franchiser?(6)

Answer 17

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

Question 18

What are franchising benefits for the franchisee?(9)

Answer 18

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

Question 19

What are common reasons for success?

Answer 19

Hard work, drive, and dedication; market demand for product or service; managerial competence; luck

Question 20

What are common reasons for failure?

Answer 20

Managerial incompetence; neglect; weak control systems; insufficient capital

Question 21

What are 4 forms of business organization?

Answer 21

Sole proprietorship; partnership; corporation; cooperative

Question 22

What are the advantages of a sole proprietorship?(4)

Answer 22

Freedom; simplicity; low start-up costs; tax benefits

Question 23

What are the disadvantages of sole proprietorships?

Answer 23

Unlimited liability; lack of continuity; difficult to raise money; reliance on one indiv.

Question 24

Define a partnership

Answer 24

Two+ people agree to combine financial, managerial, technical abilities to run business; often used by professionals

Question 25

What are the types of partnership

Answer 25

General and limited partners

Question 26

What are the advantages of partnership? (4)

Answer 26

Larger talent pool, larger money pool, ease of formation, tax benefits

Question 27

What are the disadvantages of partnership? (4)

Answer 27

Unlimited liability, lack of continuity, ownership transfer is difficult, potential conflict

Question 28

Define a corporation

Answer 28

Seperate legal entity from owners, property rights and obligations, indefinite lifespan

Question 29

Define a public corporation

Answer 29

Shared widely held and available for sale to general public; IPOs (inital public offering)

Question 30

Define a private corporation

Answer 30

Shares held by a few shareholders (not widely available)

Question 31

Define a board of directors

Answer 31

Governing body responsible for shareholder interests, in charge of appointing management, setting policies, and making major decisions

Question 32

Define a shareholder

Answer 32

Investors owning shares of a company, may share in profits through dividends

Question 33

Define a CEO

Answer 33

Chief executive officer, responsable for firms overall performance

Question 34

What are the advantages of a corporation?

Answer 34

Limited liability, continuity, professional management, easier to raise money

Question 35

What are the disadvantages of a corporation?

Answer 35

Start-up costs, double taxation, regulations, stockholder revolts

Question 36

Define a cooperative

Answer 36

Organization formed to benefit owners through reduced prices and distributions of surpluses

Question 37

What are the advantages of a cooperative?

Answer 37

Limited liability, owner continuity, one vote per member (equal), income taxed only at indiv. member level

Question 38

What are the disadvantages of a cooperative?

Answer 38

No incentive to invest, members simply benefit from usage