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

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PART ONE: THE DECISIONTO START A SMALL BUSINESSCHAPTER 1: THE ROLE OF ENTREPRENEURSHIP AND SMALL BUSINESS IN CANADACHAPTER OBJECTIVES1. To discuss the evidence of the level of interest and activity in the small business sector.2. Toreview 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 CHECKSWhy has there been an increase in entrepreneurial activity throughout the world in recent years?Manycountries are turning to small business and private initiative to assist in their economicgrowth.What evidences are there that there is an entrepreneurial "revolution" occurring?The entrepreneurial revolution is evidenced by increases in: business establishments, employeesin small businesses, government small business programs, college small business classes, andentrepreneurial 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 businesses, 29% of gross sales, 26% of gross domesticproduct and 56% of the labour force, 32% of business profits, 17.5 % of all business assets,25%of exports and 52% of net job creation.What two demographic groups have shown an increase in proprietorships in recent years inCanada?In recent years there has been an increase in small businesses established by seniors andwomen.What are thecontributions 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 andnegative factors which may influence the small business community inthe future?The climate for starting a small business in the future should improve; however there willcontinue to be competitive disadvantages which may negate this potential advantage. The factorswhich may influence this change include technology, consumer demographics and buyingpatterns, and the competitive aspects of markets.KEY TERMS AND CONCEPTSEntrepreneurial RevolutionSmall BusinessCurrent Stateof Small Business in CanadaContributions of Small BusinessLabour IntensityProductivityFlexibilitySmall Business and the FutureANSWERS TO INCIDENT QUESTIONSINCIDENT 1.1-YOUNG CANADIAN SOCIAL ENTREPRENEURS1. How would you define socialentrepreneurship? Do you think there is a difference betweensocial entrepreneurs and regular entrepreneurs? Why, or why not?Answer:Student Choice2. Can an entrepreneur consider themselves social entrepreneurs if they retain all the profitsfrom their business?Answer:Student Choice–however students may mention that businesses can provide societybenefits 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, discussthe marketing mix for the social enterprises, including the product or service you will sell, howyou will promote the business, the price you will charge, and where the business will be located.Answer:Answer will vary on student work.INCIDENT1.2CROWD-FUNDING HELPS A CANADIAN BUILD A SMARTWATCH1. 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 whichtheir 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 itallows 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 withmany 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 beingpitched. What are the terms associated with the ideas? Would you personally donate or investmoney using crowd-funding?Answer:Student Choice7. 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 atthe same time may curtail both investors and entrepreneurs from participating.INCIDENT1.4INNOVATION IN NEW BUSINESS-A SOCIAL MEDIA SUCCESS STORY1. What are some of the advantages and disadvantages of using a product like HootSuite for yourcompany?Answer:Student Choice–however students may discuss that HootSuite allows business owners topost 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 youthink HootSuite or companies that use its social media tracking tools could be subject to publicbacklash against monitoring social media use and activities?

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Answer:Student Choice3. If time permits, visit HootSuite’s website, and try out the free tools. Report back to the class if thetools worked asyou expected. Prepare a summaryof the features HootSuite can offer businesses.Answer:Student ChoiceANSWERS TODISCUSSION QUESTIONS1.Why do you think entrepreneurial activity has increased? Do you think these trends willcontinue? Why or why not?Answer:Student Choice-however the following aspects should be covered-significant contributionto 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 Choice3.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 ofCanada, 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 profitwould be used ($300,000).4.What is meant by the statement “Small business is the backbone of the Canadian economicsystem"? 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 providethe most encouragement for entrepreneurship and smallbusiness are those which haveexperienced 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 andapproximately 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 Canadianentrepreneurs.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 smallbusiness.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 theeconomy.9.A much higher percentage of small businesses are Canadian owned than compared tolarge corporations.10.Finally, small businesses seem to be more socially conscious than large companies andtend 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 dataprocessing, for example, there are hardware versus software consultants, batch versus timesharing service bureaus, and mainframe versus microcomputer specialists. What effect does thistype of industry fragmentation have on the small business community?Answer:Fragmentation of markets to better service consumer needs and wants is beneficial to thefuture of small business. A small specialized time sharing service bureau, for example, has someeconomic and service advantages over a large firm with large overhead that handles all types ofcomputer services. On this premise the outlook for small business in the future is very promising asmany industries are following a similar pattern as the data processing industry.ANSWERS TO APPLICATION QUESTIONSAND HANDS-ON ACTIVITIES1.Form groups of two to three, and start a small business or mini-venture that will run for aperiod of four to six hours.The only rules are:a. The business has to be legalb. No lotteriesc. Maximum investment of $1d. 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. Whatproblems and opportunities do they foresee?Answer:Will vary based on the entrepreneurs selected3. Using Internet resources, find out how different Canadianorganizations define socialenterprise. After preparing a summary report on your findings, draft your own definition of theterm.Answer:Student Choice4. Write a short essay discussing your views on the future of small business given currenttrendsin 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 DECISIONCHAPTER OBJECTIVES1. To discuss the advantages and disadvantages of small business ownership as a starting point inmaking the small business decision.2. To review the personal andorganizational attributes of a successful small business owner.3. To explain the reasons some businesses succeed and others fail.4. To discuss entrepreneurial development in large business.5. To identify the differences between an entrepreneur and a manager.CONCEPT CHECKSList the advantages and disadvantages of owning a small business?There are many advantages and disadvantages to owning a small business.Some of the mostcommon 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 listincludes: achievement oriented, risk taker, independence, innovative, strong verbal and numericalskills, problem solving ability, strategic planning, 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 managerrapport, more labour intensive, personal attention todaily operations by the owner, flexibility, anda market where demand is local.What are the major causes of business failure?The major causes of business failure are generally related toexternal shocks and/or managementproblems.Statistics Canada estimates that roughly 68 percent of businesses fail due tosome type of external shock. These commonly include a downturn in the economy, changes inthe economy such as interest and/or currency rates, new competition, loss of customers, loss ofsuppliers, new competition or substitute product, and/or change in laws or regulations.Management problems usually revolve around issues such as startinga business without raising enough funds, inabilityto raise additional capital, failure to controlcosts, problems attracting or retaining employees, growing too quickly, and/or poorly plannedexpansion. Additionally, some entrepreneurs will also suffer from burnout associated withworking 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 andexpanding a business. Managerial skills are more useful for maintaining and solidifying thealready started business.KEY TERMS AND CONCEPTSAdvantages of small business ownershipIndependenceSkill developmentDisadvantages of small business ownershipRiskStressPeople conflictsCharacteristics of successful small businessesAlertness to changePersonality characteristics for a entrepreneurAchievement orientedInnovativeEntrepreneur versus ManagerANSWERS TO INCIDENT QUESTIONSINCIDENT 2-1MOMPRENEURS1. Given the challenges associated with starting and running a business, do you think being amompreneur allows for more work–life balance compared with traditional work or part-timeemployment?Answer:Student Choice–however students should mention a motivation for many mompreneurs wasto start a business so theycould be personally in charge of their own work schedule2. 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 disadvantagesdiscussed in the text.3. What do you think are some business ideas that would allow work and life balance?Answer:Student ChoiceINCIDENT 2-2TAKING THE PLUNGE

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1. Asarianotes one of the disadvantages of being an employee is your work sometimes benefitsthe company, but the financial rewards may not flow back to you the employee. Based on thisstatement, 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 increasingcompetition from American online retailers would you have invested money in Well.ca? Why orwhy not?Answer:Student ChoiceINCIDENT 2-5YOUNG ENTREPRENEUR APPEARS TO POSSESS ALL THE KEYS TOSUCCESS1. Review the keys to entrepreneurial success above. Does Satok possess most of thesecharacteristics?Answer:Student Choice–however most students will cite altertness to change and the ability toobtain capital.2. Do you think AppHero is a strong product? Will the company succeed? Why, or why not?Answer:Student Choice3. Were you surprised that an 18-year-old was able to raise $1.8 million for a business? What doyou 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, oftenhave 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-basedbusinesses you may want to start. For example, fora similar project, an Acadia University student actually developed a beer appreciation app thathe is now selling.Answer:Student ChoiceANSWERS TO DISCUSSION QUESTIONS1.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 mostcommon 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 mostimportant? Why?Answer:The students could develop answers for a number of characteristics. Three characteristicsstand out as important for any successful small business. The first characteristic is to stay close to theconsumer. Businesses that are constantly monitoring the market have a good idea of what theconsumer wants and needs. A second very important characteristic is the ability to attract and holdcompetent employees. A manager cannot do everything in the firm so he/she needs good employees toeffectively carry out duties and deal with the client on an everyday basis. A third importantcharacteristic of successful small businesses is to have very thorough operating details. Thesesuccessful businesses have goals, reports, and constant evaluation and adjustments to follow a detailedbusiness plan.3.How do managerial skills differ from entrepreneurial skills? When would an entrepreneur'sskills be more useful than a manager's? Why?Answer:The textoutlines the difference between an entrepreneur and a manager. Entrepreneurialskills tend to be more valuable in starting and expanding a business. Managerial skills, on the otherhand, 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 thesuccesscharacteristics 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 ACTIVITIES1.Investigate a local business that has recently failed. Using Internet sources and other researchmethods, identify why the business ceased to exist.Answer:The answers will vary.2.Complete the checklist in Figure 2-5of this chapter. Do you possess the personalitycharacteristics 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 theadvantagesand 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 characteristicsand leadership style.Answer:Student Choice.5.Select a successful small business and discuss the reasons for its success drawing upon thesuccess 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 OPPORTUNITYCHAPTER OBJECTIVES1.List the four stages of the entrepreneurial process.2.Identify the various sources of ideas for new ventures.3.Summarize thenon-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 asmall business and illustrate how that information can be used.7.Identify a systematic way to quantitatively assess an industry and evaluate the financialfeasibility of a specific small business opportunity.CONCEPT CHECKSDescribe the entrepreneurial process.The process of starting a new venture can be referred to as theentrepreneurialprocess. The process involves four specific stages that include (1) identification andevaluation of an opportunity, (2) development of a business plan, (3) determination of the resourcesrequired, and (4)management of the business. While the stages proceed sequentially, no one stageis dealt with in isolation or completed beforework 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 deliberatesearches such as focus groups and/or brainstorming.Describe thenon-quantitative factorswhichshould be considered in selection of a smallbusiness?Before deciding what small business to go into it is necessary to consider some non-quantitativefactors 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.Itnormally includes answering the following questions: 1.What product or service will thebusinessprovide? How will the business offer value tocustomers?2. How will you enter themarket? What will your competitive advantage be?3. Who will the customers be? Why will theybuy from you?4. Assess the industry and environments your business will be operating in: What isthe state of the economy? What are the economic trends? Who will your competitors be? Whatadvantages and disadvantages do they have? What are the key success factors?5. How will youmarket 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 areoffered?7. What will your start-up costs be? Where will you get the money? Project your incomeover 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 atotally new product, the second method is to offer an existing product to a different market orindustry and the third method is to offer a product or service similar to those which already exist inthe same market.What are the two methods of collecting market information? In what situations would secondarydata be most useful? Primary?There are two general types of information available to aid a potential small business owner inselecting a small business. The first and most inexpensive method is collecting secondary researchon a potential market. There are many government documents and other sources that can providevaluable secondary data.When there is a lot of money at stake or no current secondary data theprospective small business owner can collect primary data to help determine the feasibility of hisbusiness.What are the 3 methods of collecting primary data? Which is mostrelevant to small business?Primary data is information that is collected through one's own research. Although it is usuallymore costly, it can be more relevant and current to the analysis. There are three general methods ofdoing primary research: observation, survey, and experimentation. Surveying seems to be the mostcommonly 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 mustestimate the proposed business share of that total market. The third step is to subtract the associatedexpenses from the revenue estimate to determine an estimated net income of the prospectivebusiness.KEY TERMS AND CONCEPTSNon-quantitative factorsMethods of entering a small businessCollection of informationSecondary dataPrimary dataObservationSurveyExperimentationFeasibility analysisMarket potentialMarket shareNet income

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ANSWERS TO INCIDENT QUESTIONSINCIDENT 3-1CONSUMER TRENDS1. Do you think entrepreneurs can identify business opportunities by visiting mediasites such asthe ones mentioned above?Answer:Student Choice–however students should state that this is the case and provide somejustification.2. Many businesses have become quite successful by taking an idea from someone else andmaking it their own. If you observe a great business opportunity on Dragons’ Den, do you thinkit is ethical to simply duplicate the idea under a new business name? Why, or why not? What if astudenttalks about an idea she has in class? Would it be ethical for you to start a business based on yourpeer’s idea?Answer:Student Choice3. Visit some of the trend sites mentioned above individually or in small groups. Report back tothe class what ideas you found which have the most business potential. What ideas were yousurprised by? Did you think any ideas were really bad?Answer:Student Choice4. What do you think are some of the advantages and disadvantages of using social media sites todiscover trends? What social media sites would you recommend to trend watchers?Answer:Student ChoiceINCIDENT 3-3WEB SUCCESS1. Review the information in this chapter on market entry and competitive advantage. How didDickiechoose 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 orservice that is similiarto 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. Thecompany has recently expanded into several other businesses. Do you think this is a good strategyfor the company? Why, or why not?Answer:Student Choice-however students should note that expansion can lead to additional revenuealbeit 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 Choice4. 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 pointofcontact saving time and money.5. TTC has yet to catch on with sports teams that are used to making travel arrangementsthrough traditional methods. Do you think TTC will ultimately be successful? Why do you thinksome sports teams have been slow to use the service?Answer:Student ChoiceINCIDENT 3-4THE INTERNET’S IMPACT ON COLLECTING INFORMATION1. What do you think are some of the advantages anddisadvantages of entrepreneurs usingonline information to assess an opportunity?Answer:While answers may vary students should note online data is cheap and easy to obtain whilepotential disadvantages include someentrepreneurs lack the knowledge to use online tools to collectinformation,not all consumers are online, so relying solely on online sites could lead to businessesmaking the wrong conclusion2. Do you think Robert Fung and Mike Bric obtained enough information online to make thecorrect business decision for their companies? Why, or why not?Answer:Student Choice3. A lot of business owners are spending countless hours reading and, in many cases, respondingto online reviews about their companies. Do you think reading and responding to online reviewsis a good business strategy? Why, or why not?Answer:Student Choice4. If you were going to start a travel company catering to university students, how would you usethe Internet to evaluate the opportunity? How could you use social media and online informationto improve your marketing mix?Answer:Student Choice

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