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Why do people start businesses?
- Seize opportunity
- Personal accomplishment
- Be own boss
- Lots of $
- Use experience
- Make a living
- Frustrated with previous job
- Create job for themselves
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Why don’t people start businesses?
Lack of funds Time consuming Risk Uncertainty/ insecurity Lack of capital, initiative, knowledge, skills
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What are three advantages of business ownership?
Own boss Use skills and interest with job they enjoy Very rewarding
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What are three disadvantages of business ownership?
Risky Time consuming Lots of stress
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How do entrepreneurs contribute to economic growth?
Creates jobs Economic development New products/ services
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Approximately how many businesses survive 5 years?
51%
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Why do businesses fail?
- Poor cashflow management
- Over borrowing
- Poor market research
- No communication
- Lack of financial planning
- Failure to innovate
- Poor inventory management
- Poor debt management
- No adequate performance monitoring
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What are the components of a successful venture?
Entrepreneur Organization Strategy Opportunities Resources Business plan
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Approximately how many businesses are there in Canada?
2.3 million
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Approximately what % of businesses are “Small”?
98%
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Approximately how many businesses start each year?
130,000
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What is the most critical element of success in any business?
Entrepreneur
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What are some of the desirable attributes, characteristics or skills an entrepreneur should possess to be successful?
- Determined/motivated
- passion
- commitment
- self reliance
- team builder
- responsible
- need to achievereliable
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What are the 3 elements of Entrepreneurial DNA?
- Skills: communication,
- problem solving, creativity,
- management, decision making
- Attitudes and Behaviours Knowledge: the market, the business, the business process
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What does Social Entrepreneurship mean?
Someone who recognizes aa social problem and uses entrepreneurial principles to organize and manage a venture the make a social change.must be socially responsible, being sustainable, giving back to the community supporting events, giving donations
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Why is being ethical so important for a business owner?
- Don’t want to hurt your business.
- Whatever owner of business says they’re going to do, they should follow up on
- 1. Is it lega l2. Is it gairdoes it make you feel good about yourself
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Why is being social responsible so important for a business?
Benefits society and the business
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Where Do Entrepreneurs Get the Ideas for their Businesses?
- Their brain/ inspiration
- Something they have seen before
- Improvementsmarket gapsprior business experiencebusiness associates
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Where could you “search for ideas”?
Previous employmenthobbiescasual observationdeliberate search
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What are two creative techniques you can use to generate business ideas?
Mind mappingbrainstorming
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What is a key function of the right side of the brain?
Right: holistic thought, intuition, creativity, art and musicleft: analytic thought, logic, language, science and math
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Does every idea represent a business opportunity?
No, may not be profitable or have significant demand
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How would you define a business opportunity?
Ask Q’s. profitability, provide way of life, salary, employ others.
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What are the two main purposes of a business plan?
- management
- financing business
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What are 3 advantages of preparing a business plan?
- -identify obstacles
- -facts= more credible= less risk
- -greater confidence
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What does a business plan contain?
Finances marketing operational
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What are two common mistakes in preparing a business plan?
- Poor research
- inaccurate financial projections
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What are the 3 entry paths to business ownership?
- a. Buy existing business
- b. Purchase a franchise
- c. Start a business
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What are 2 advantages and disadvantages of buying a business rather than purchasing a franchise or starting one of your own?
- advantages:
- · Reduce risk
- · Proven location
- · Acquired at good price
- · Financing
- Disadvantages
- · Old facilities
- · Poor location
- · Less freedom to change business
- · Inventory may be dead stock
- · Human, financial, physical problems
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What are 3 factors to consider when purchasing a business?
- a. where do we find one to buy
- b. how do we evaluate it
- What’s the best price to pay?
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When purchasing a business what are two methods of determining the price to pay?
- balance sheet method
- earnings based methods
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What are 2 advantages and disadvantages of purchasing a franchise rather than buying a business or starting one of your own?
- advantages ·
- Well-known name ·
- Reduced risk of failure ·
- Special financing and credits ·
- Assistance in location and employee training, advertising,& bookkeeping Disadvantages ·
- Frequent inspection ·
- Report regularly ·
- Mark up costs ·
- Expensive
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What are 3 factors to consider when purchasing a franchise?
- History of operation,
- Franchise agreement details,
- Franchise fees
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What is an advantage and disadvantage of starting your own business rather than buying a business or purchasing a franchise?
- Advantages ·
- Freedom of choice, name,
- location,
- resources,
- structure,
- positioning ·
- Potentially lowest cost approach ·
- Easier to start
- Disadvantages
- Higher risk of failure ·
- Difficult to get financing ·
- Challenges: locate resources,
- brand image, customer base
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What are 3 legal forms for establishing a business?
- sole proprietorship
- partnership- general and limited
- corporation- public and private
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What is an advantage and disadvantage of organizing your business as a sole-proprietor?
- adv. Simple and inexpensive to start
- disadv. Unlimited liability
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What is an advantage and disadvantage of organizing your business as a partnership?
- adv. Potential for growth
- disadv. Divided authority
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What is an advantage and disadvantage of organizing your business as a corporation?
- adv. Tax advantages
- disadv. Cost
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Identify 6 factors to consider when starting a business of your own.
- name, positioning strategy
- legal requirements and risk assessment business plan
- projecting cash flow
- self assessment
- market assessment
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We generally have to assess all business opportunities or ideas from 3 perspectives. They are:
- Personal feasibility
- technical feasibility
- Commercial feasibility
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How do we measure the commercial viability of an opportunity?
- How much profitone-time start up expensesongoing operating expenses$ needed to start business
- determine revenue and sales for business
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What is the formula for profitability?
Revenue-expenses=profit
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What is the formula for effective decisions?
80% information, 20% intuition
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What is the difference between ongoing expenses and start-up expenses?
Ongoing- costs that are to be paid frequently ex. Rent
Start up –costs paid before the business is opened. Usually only have to pay once
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What does a Sources and Uses of Funds statement contain? What financial statement does it form the basis of?
Start up costs Sourcesequity forms basis of assets?
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What are two types of financing?
Debt equity
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What are the advantages and disadvantages of debt financing?
- Adv. – don’t give up share of business, term of debt is limited, interest is tax deductible
- Disadv.- difficult to get for risky project, if “demand” loan- can be called by lender at any time, lenders want restrictions, too much debt= burden
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What are the advantages and disadvantages of equity financing?
- Adv. – may be only option for high risk ventures, used to fund larger projects, investor contributes expertise, contacts and money
- Disadv.- give up ownership, danger of incompatibility between investors, difficult to terminate relationships
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What are 3 criteria used by lenders?
- Applicant management ability
- experience in industry
- credit history
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What are the 5 C’s of Credit?
- Conditions
- character
- capacity to pay
- collateral
- capital
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What is the primary reason that businesses fail?
Poor management
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What are the 4 key functions of every manager?
Planningorganizingcontrolling leading
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What is the difference between “efficiency and effectiveness”?
- Efficiency- doing things right,
- restricted to present state
- effectiveness- doing the right things,
- involves long term
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What are the four resources that every manager must manage?
- Physical
- human
- financial
- information
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What are the 3 key roles of every manager?
- Interpersonal
- informational
- decisional
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What are 3 key skills that every manager should possess?
Conceptual- analyze and diagnose situationhuman- understand, lead, altertechnical- job specific knowledge
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What are the 2 elements that most managerial theories are based on?
- Task: focus on getting work done
- people: focus on well being of human resources
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What is the difference between Theory X and Theory Y assumptions?
- Theory x- little ambition
- dislike work
- avoid responsibility
- theory y- self directed
- enjoy work
- accept responsibility
Theory X has greater results.
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What are the 3 Leadership Styles?
- Autocratic
- participative
- free rein
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What is the concept behind the “Situational Leadership Model”?
Adapt leadership style given the willingness of the employee for the assigned task
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