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Canadian Entrepreneurship And Small Business Management, 9th Edition Solution Manual

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    PART ONE: THE DECISION TO START A SMALL BUSINESS CHAPTER 1: THE ROLE OF ENTREPRENEURSHIP AND SMALL BUSINESS IN CANADA CHAPTER OBJECTIVES 1. To discuss the evidence of the level of interest and activity in the small business sector. 2. To review common methods of defining small business and to explain why a definition is important. 3. To understand the current extent of entrepreneurship and small business in Canada. 4. To discuss the positive benefits a healthy small business sector can offer to society. 5. To explain the probable future environment for entrepreneurship and the small business community. CONCEPT CHECKS Why has there been an increase in entrepreneurial activity throughout the world in recent years? Many countries are turning to small business and private initiative to assist in their economic growth. What evidences are there that there is an entrepreneurial "revolution" occurring? The entrepreneurial revolution is evidenced by increases in: business establishments, employees in small businesses, government small business programs, college small business classes, and entrepreneurial activities of large companies. Why is it important to define small business? Although defining a small business is difficult, it is important to make for comparison, evaluation, and various lending and assistance programs. What are the criteria used to make this definition? Some of the common criteria in defining small are total revenue, number of employees, profitability and type of management structure. What is the extent of small businesses in Canada? Small business accounts for 98 % of all bu sinesses, 29% of gross sales, 26 % of gross domestic product and 56% of the labour force, 32% of business profits, 17. 5 % of all business assets, 25% of ex ports and 52% of net job creation. What two demographic groups have shown an increase in proprietorships in recent years in Canada? In recent years there has been an increase in small businesses established by seniors and women. What are the contributions small businesses can make to a society?

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    Small business promotes Canadian ownership and economic growth, provides jobs, innovations, high productivity, flexibility, and social contributions to a society. What are the positive and negative factors which may influence the small business community in the future? The climate for starting a small business in the future should improve; however there will continue to be competitive disadvantages which may negate this potential advantage. The factors which may influence this change include technology, consumer demographics and buying patterns, and the competitive aspects of markets. KEY TERMS AND CONCEPTS Entrepreneurial Revolution Small Business Current State of Small Business in Canada Contributions of Small Business Labour Intensity Productivity Flexibility Small Business and the Future ANSWERS TO INCIDENT QUESTIONS INCIDENT 1.1 - YOUNG CANADIAN SOCIAL ENTREPRENEURS 1. How would you define social entrepreneurship? Do you think there is a difference between social entrepreneurs and regular entrepreneurs? Why, or why not? Answer: Student Choice 2. Can an entrepreneur consider themselves social entrepreneurs if they retain all the profits from their business? Answer: Student Choice – however students may mention that businesses can provide society benefits and still make profits. Donating profits is not essential to being a social entrepreneur. 3. Either in groups or individually, list some ideas for a social enterprise. If time permits, discuss the marketing mix for the social enterprises, including the product or service you will sell, how you will promote the business, the price you will charge, and where the business will be located. Answer: Answer will vary on student work. I NCIDENT 1.2 CROWD - FUNDING HELPS A CANADIAN BUILD A SMARTWATCH 1. Do you think the Pebble watch will be a successful product? Why, or why not?

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    Answer: Student Choice – however students may mention the popularity of the product on crowd - funding sites, the desire/need for mobile devices and its low price. 2. Why do you think some traditional lenders did not want to lend money to Migicovsky? Answer: Student Choice – however students may mention the Pebble watch was just a concept, limited manufacturing experience and an unproven product. 3. Why do you think Migicovsky’s use of crowd - funding was so successful? Answer: Student Choice – however students may mention the product was unique and one in which their appears to be some demand. 4. What do you think are some of the advantages and disadvantages of crowd - funding? Answer: 5. Do you consider crowd - funders to be donors or investors? Why? Answer: Student Choice – however students should mention from the entrepreneurs perspective that it allows them to test market product ideas, provides additional sources of capital and can assist in pre - selling products. From a disadvantage side entrepreneurs have additional work to communicate with many people, it is fairly unregulated and some entrepreneurs and/or investors could act unethically. 6. Visit the Kickstarter website, and report back to the class some of the best ideas that are being pitched. What are the terms associated with the ideas? Would you personally donate or invest money using crowd - funding? Answer: Student Choice 7. Should the government create rules and regulations for crowd - funding? Why, or why not? What are some advantages and disadvantages of creating rules? Answer: Student Choice – however students may discuss rules will help regulate the industry but at the same time may curtail both investors and entrepreneurs from participating. INCIDENT 1.4 INNOVATION IN NEW BUSINESS - A SOCIAL MEDIA SUCCESS STORY 1. What are some of the advantages and disadvantages of using a product like HootSuite for your company? Answer: Student Choice – however students may discuss that HootSuite allows business owners to post to multiple social media sites from one location saving time and money. 2. Given that many consumers are becoming increasingly concerned about privacy rights, do you think HootSuite or companies that use its social media tracking tools could be subject to public backlash against monitoring social media use and activities?

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    Answer: Student Choice 3. If time permits, visit HootSuite’s website, and try out the free tools. Report back to the class if the tools worked as you expected. Prepare a summary of the features HootSuite can offer businesses. Answer: Student Choice ANSWERS TO DISCUSSION QUESTIONS 1. Why do you think entrepreneurial activity has increased? Do you think these trends will continue? Why or why not? Answer : Student Choice - however the following aspects should be covered - significant contribution to society as a result of a healthy small business sector. Examples such as employment, innovation, productivity, flexibility, competitiveness and social contributions should be included. 2. What excites or interests you about being an entrepreneur? What are your major concerns? Answer: Student Choice 3 . Under what conditions would the various definitions of small business be more appropriate? (i.e., the level of profit may be used by Revenue Canada to determine the small business tax rate.) Answer : The appropriate definition would depend on the use of the information. For example: To obtain counselling assistance form the CASE Program of the Business Development Bank of Canada, the number of employees would be used (75). To obtain funding under the Small Business Loans Act gross sales would be used $5 million). To receive the reduced "Small Business" tax rate from Revenue Canada net operating profit would be used ($300,000). 4 . What is meant by the statement “Small business is the backbone of the Canadian economic system"? Give evidence to support this statement. Answer : Several factors illustrate the impact of small business to our economy. 1. As indicated in the text, there is considerable evidence that those economies that provide the most encouragement for entrepreneurship and small business are those which have experienced the highest growth rates since the 1950's. 2. Small firms have accounted for most of the new jobs created. 3. Further evidence shows that 97% of businesses operated are small businesses and approximately 50% of gross domestic product is provided by small business.

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    4. A large portion of the inventions we enjoy today were provided by Canadian entrepreneurs. 5. Small businesses make approximately 32% of all business profits. 6. Approximately 29% of Canadian gross sales and 17.5% of exports are made by small business. 7. 20% of all business assets are owned by small businesses. 8. Small business is also more flexible and can respond more quickly to changes in the economy. 9. A much higher percentage of small businesses are Canadian owned than compared to large corporations. 10. Finally, small businesses seem to be more socially conscious than large companies and tend to operate with the community in mind. All of these factors contribute to the theory that small business is the backbone of our economy. 5 . The computer consulting business is becoming more and more fragmented. In data processing, for example, there are hardware versus software consultants, batch versus time sharing service bureaus, and mainframe versus microcomputer specialists. What effect does this type of industry fragmentation have on the small business community? Answer : Fragmentation of markets to better service consumer needs and wants is beneficial to the future of small business. A small specialized time sharing service bureau, for example, has some economic and service advantages over a large firm with large overhead that handles all types of computer services. On this premise the outlook for small business in the future is very promising as many industries are following a similar pattern as the data processing industry. ANSWERS TO APPLICATION QUESTIONS AND HANDS - ON ACTIVITIES 1. Form groups of two to three, and start a small business or mini - venture that will run for a period of four to six hours. The only rules are: a. The business has to be legal b. No lotteries c. Maximum investment of $1 d. Businesses must cease operations at day’s end. After completing the project, write a reflection stating what you did, whether you made a profit, and what you learned. you may also present this information to the class. Answer : Dependent on student choice.

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    2. Ask three small business owners about their projections for the future of small business. What problems and opportunities do they foresee? Answer : Will vary based on the entrepreneurs selected 3. Using Internet resources, find out how different Canadian organizations define social enterprise. After preparing a summary report on your findings, draft your own definition of the term. Answer : Student Choice 4. Write a short essay discussing your views on the future of small business given current trends in society and in your geographic area. Answer: Student Choice – however student's answers should be positive.

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    CHAPTER 2: THE SMALL BUSINESS DECISION CHAPTER OBJECTIVES 1. To discuss the advantages and disadvantages of small business ownership as a starting point in making the small business decision. 2. To review the personal and organizational attributes of a successful small business owner. 3. To explain the reasons some business es succeed and others fail. 4. To discuss entrepreneurial development in large business. 5. To identify the differences between an entrepreneur and a manager. CONCEPT CHECKS List the advantages and disadvantages of owning a small business? There are many advantages and disadvantages to owning a small business. Some of the most common advantages are: independence, more personal contact with people, skill development, potential financial rewards, challege, and enjoyment . The possible disadvantages include: risk, stress, need for many abilities, limited financial rewards, people conflicts, and time demands . What are the characteristics of successful small business owners? There are certain personality characteristics required to be a successful owner - manager. This list includes: achievement oriented, risk taker, independence, innovative, strong verbal and numerical skills, problem solving ability, strategic plann ing, and the ability to persevere. What are the characteristics of a successful business? A healthy small business generally has the following characteristics: a good owner manager rapport, more labour intensive, personal attention to daily operations by the owner, flexibility, and a market where demand is local. What are the major causes of business failure? The major causes of business failure are generally related to external shocks and/or management problems . Statistics Canada estimates that roughly 68 percent of businesses fail due to some type of external shock. These commonly include a downturn in the economy, changes in the economy such as interest and/or currency rates, new competition, loss of customers, loss of suppliers, new competition or substitute product, and/or change in laws or regulation s. Management problems usually revolve around issues such as starting a business without raising enough funds, inability to raise additional capital, failure to control costs, problems attracting or retaining employees, growing too quickly, and/or poorly planned expansion. Additionally, some entrepreneurs will also suffer from burnout associated with working too many hours .

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    What is the difference between an entrepreneur and a manager? Entrepreneurial skills such as inventiveness and creativity tend to be more valuable in starting and expanding a business. Managerial skills are more useful for maintaining and solidifying the already started business. KEY TERMS AND CONCEPTS Advantages of small business ownership Independence Skill development Disadvantages of small business ownership Risk Stress People conflicts Characteristics of successful small businesses Alertness to change Personality characteristics for a entrepreneur Achievement oriented Innovative Entrepreneur versus Manager ANSWERS TO INCIDENT QUESTIONS INCIDENT 2 - 1 MOMPRENEURS 1. Given the challenges associated with starting and running a business, do you think being a mompreneur allows for more work – life balance compared with traditional work or part - time employment? Answer: Student Choice – however students should mention a motivation for many mompreneurs was to start a business so they could be personally in charge of their own work schedule 2. What do you think are some of the advantages and disadvantages of being a mompreneur? Answer: Student Choice – however students should review the advantages and disadvantages discussed in the text. 3. What do you think are some business ideas that would allow work and life balance? Answer: Student Choice INCIDENT 2 - 2 TAKING THE PLUNGE

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    1. Asaria notes one of the disadvantages of being an employee is your work sometimes benefits the company, but the financial rewards may not flow back to you the employee. Based on this statement, what would you say was Asaria’s primary motive for starting a business? Answer: Student Choice – however most students will likely say financial rewards. 2. What are some of the reasons that Asaria’s business succeeded? Answer: Industry experience, there was a demand for the products/service, lack of competition, innovation in marketing, and ability to raise money. 3. Given how easy potential competitors can enter the marketplace and the increasing competition from American online retailers would you have invested money in Well.ca? Why or why not? Answer: Student Choice INCIDENT 2 - 5 YOUNG ENTREPRENEUR APPEARS TO POSSESS ALL THE KEYS TO SUCCESS 1. Review the keys to entrepreneurial success above. Does Satok possess most of these characteristics? Answer: Student Choice – however most students will cite altertness to change and the ability to obtain capital. 2. Do you think AppHero is a strong product? Will the company succeed? Why, or why not? Answer: Student Choice 3. Were you surprised that an 18 - year - old was able to raise $1.8 million for a business? What do you think are some of the challenges with trying to raise money while still in high school? Answer: Student Choice – however most students will note that young people lack experience, often have a hard time getting people to believe in them and lack their own money to invest in the business. 4. Mobile business offers entrepreneurs incredible opportunities. List and, if time permits, develop an explanation of some mobile - based businesses you may want to start. For example, for a similar project, an Acadia University student actually developed a beer appreciation app that he is now selling. Answer: Student Choice ANSWERS TO DISCUSSION QUESTIONS 1. What are the advantages and disadvantages of small business ownership?

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    Answer: There are many advantages and disadvantages to owning a small business. Some of the most common advantages are: independence, more personal contact with people, skill development, potential financial rewards, challege, and enjoyment. The possible disadvantages include: risk, stress, need for many abilities, limited financial rewards, people conflicts, and time demands. 2. Which of the characteristics of successful small business owners do you think is the most important? Why? Answer: The students could develop answers for a number of characteristics. Three characteristics stand out as important for any successful small business. The first characteristic is to stay close to the consumer. Businesses that are constantly monitoring the market have a good idea of what the consumer wants and needs. A second very important characteristic is the ability to attract and hold competent employees. A manager cannot do everything in the firm so he/she needs good employees to effectively carry out duties and deal with the client on an everyday basis. A third important characteristic of successful small businesses is to have very thorough operating details. These successful businesses have goals, reports, and constant evaluation and adjustments to follow a detailed business plan. 3. How do managerial skills differ from entrepreneurial skills? When would an entrepreneur's skills be more useful than a manager's? Why? Answer: The text outlines the difference between an entrepreneur and a manager. Entrepreneurial skills tend to be more valuable in starting and expanding a business. Managerial skills, on the other hand, are more useful for maintaining and solidifying an existing business. 4. Select a successful small business, and discuss the reasons for its success, drawing on the success characteristics outlined in the text. Answer: The answers will vary. 5. What are the most common reasons for small business failure? Answer: Students should note external shocks and management problems. ANSWERS TO APPLICATION QUESTIONS AND HANDS - ON ACTIVITIES 1. Investigate a local business that has recently failed. Using Internet sources and other research methods, identify why the business ceased to exist. Answer: The answers will vary. 2 . Complete the checklist in Figure 2 - 5 of this chapter. Do you possess the personality characteristics necessary for successful small business ownership? Answer: Dependent on student evaluation.

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    3 . Interview a local small business owner and determine what he or she feels are the advantages and disadvantages of small business ownership? Answer: Application question – dependent on Interview with the owner. 4 . Interview an entrepreneur and attempt to identify his or her entrepreneurial characteristics and leadership style. Answer: Student Choice. 5 . Select a successful small business and discuss the reasons for its success drawing upon the success characteristics outlined in the text (page 38 - 40). Answer: Applicant question - dependent on the small business chosen.

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    CHAPTER 3: EVALUATION OF A BUSINESS OPPORTUNITY CHAPTER OBJECTIVES 1. List the four stages of the entrepreneurial process. 2. Identify the various sources of ideas for new ventures. 3. Summarize the non - quantitative aspects of evaluating business opportunities. 4. Describe the methods by which an entrepreneur can enter a market with a product or service. 5. Recognize the ways that an entrepreneur can develop a strategic competitive advantage. 6. Discuss the types of information available to assist in the quantitative analysis of selecting a small business and illustrate how that information can be used. 7. Identify a systematic way to quantitatively assess an industry and evaluate the financial feasibility of a specific small business opportunity. CONCEPT CHECKS Describe the entrepreneurial process. The process of starting a new venture can be referred to as the entrepreneurial process. The process involves four specific stages that include (1) identifica tion and evaluation of an oppor tunity, (2) development of a business plan, (3) determination of the resources required, and (4) management of the business. While the stages proceed sequentially, no one stage is dealt with in isolation or completed before work on the next stage begins. Where do the major sources of ideas for starting a business come from? Most new ideas come from the entrepreneurs occupation, hobbies, obervations and deliberate searches such as focus groups and/or brainstorming. Describe the non - quantitative factors which should be considered in selection of a small business? Before deciding what small business to go into it is necessary to consider some non - quantitative factors such as goals, content of work, lifestyle, capabilities and experience. What is opportunity assessment and what steps are included in the process? Opportunity assessment is the process of determining if an idea can become a profitable business. It normally includes answering the following questions: 1. What product or service will the business provide? How will the business offer value to customers? 2. How will you enter the market? What will your competitive advantage be? 3. Who will the customers be? Why will they buy from you? 4. Assess the industry and environments your business will be operating in: What is the state of the economy? What are the economic trends? Who will your competitors be? What advantages and disadvantages do they have? What are the key success factors? 5. How will you market your product or service? What will your marketing mix look like? 6. Where will you get

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    your major supplies? What will your costs be? Will suppliers sell to a new firm? What terms are offered? 7. What will your start - up costs be? Where will you get the money? Project your income over the next three years? What are the three ways of entering a market? There are three ways of entering a market with a new product or service. The first is to offer a totally new product, the second method is to offer an existing product to a different market or industry and the third method is to offer a product or service similar to those which already exist in the same market. What are the two methods of collecting market information? In what situations would secondary data be most useful? Primary? There are two general types of information available to aid a potential small business owner in selecting a small business. The first and most inexpensive method is collecting secondary research on a potential market. There are many government documents and other sources that can provide valuable secondary data. When there is a lot of money at stake or no current secondary data the prospective small business owner can collect primary data to help determine the feasibility of his business. What are the 3 methods of collecting primary data? Which is most relevant to small business? Primary data is information that is collected through one's own research. Although it is usually more costly, it can be more relevant and current to the analysis. There are three general methods of doing primary research: observation, survey, and experimentation. Surveying seems to be the most commonly used method for small businesses. What are the steps involved in determining the financial feasibility of a retail store? There are essentially three steps in estimating financial feasibility of a proposed business venture. The first step is the determination of potential revenues for the total market. Secondly, one must estimate the proposed business share of that total market. The third step is to subtract the associated expenses from the revenue estimate to determine an estimated net income of the prospective business. KEY TERMS AND CONCEPTS Non - quantitat ive factors Methods of entering a small business Collection of informat ion Secondary data Primary data Observat ion Survey Experimen tation Feasibil ity analysis Market potential Market share Net income

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    ANSWERS TO INCIDENT QUESTIONS INCIDENT 3 - 1 CONSUMER TRENDS 1. Do you think entrepreneurs can identify business opportunities by visiting media sites such as the ones mentioned above? Answer: Student Choice – however students should state that this is the case and provide some justification. 2. Many businesses have become quite successful by taking an idea from someone else and making it their own. If you observe a great business opportunity on Dragons’ Den, do you think it is ethical to simply duplicate the idea under a new business name? Why, or why not? What if a student talks about an idea she has in class? Would it be ethical for you to start a business based on your peer’s idea? Answer: Student Choice 3. Visit some of the trend sites mentioned above individually or in small groups. Report back to the class what ideas you found which have the most business potential. What ideas were you surprised by? Did you think any ideas were really bad? Answer: Student Choice 4. What do you think are some of the advantages and disadvantages of using social media sites to discover trends? What social media sites would you recommend to trend watchers? Answer: Student Choice INCIDENT 3 - 3 WEB SUCCESS 1. Review the information in this chapter on market entry and competitive advantage. How did Dickie choose to enter the market, and how has he achieved a competitive advantage? Answer: Student Choice – however students should likely state that Dickie is offering a product or service that is similiar to others and he is striving to differentiate his business through service. 2. Goalline’s original business was web hosting for sports teams, specifically hockey teams. The company has recently expanded into several other businesses. Do you think this is a good strategy for the company? Why, or why not? Answer: Student Choice - however students should note that expansion can lead to additional revenue albeit with the challenge of managing multiple businesses.

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    3. Why do you think Goalline has been aggressively looking for other revenue streams? Answer: Student Choice 4. What do you see are the primary advantages of TTC to consumers? Answer: TTC will allow teams to book hotels, cars, and make other arrangements through one point of contact saving time and money. 5. TTC has yet to catch on with sports teams that are used to making travel arrangements through traditional methods. Do you think TTC will ultimately be successful? Why do you think some sports teams have been slow to use the service? Answer: Student Choice INCIDENT 3 - 4 THE INTERNET’S IMPACT ON COLLECTING INFORMATION 1. What do you think are some of the advantages and disadvantages of entrepreneurs using online information to assess an opportunity? Answer: While answers may vary students should note online data is cheap and easy to obtain while potential disadvantages include some entrepreneurs lack the knowledge to use onlin e tools to collect information, not all consumers are online, so relying solely on online sites could lead to businesses making the wrong conclusion 2. Do you think Robert Fung and Mike Bric obtained enough information online to make the correct business decision for their companies? Why, or why not? Answer: Student Choice 3. A lot of business owners are spending countless hours reading and, in many cases, responding to online reviews about their companies. Do you think reading and responding to online reviews is a good business strategy? Why, or why not? Answer: Student Choice 4. If you were going to start a travel company catering to university students, how would you use the Internet to evaluate the opportunity? How could you use social media and online information to improve your marketing mix? Answer: Student Choice

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