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Entrepreneurs differ from many small business owners as one of their major goals is
expansion and growth
Despite this, entrepreneurs and small-business owners share the same drive, creative
energy and desire to succeed
Entrepreneurs combine ideas and drive with money, employees and other resources to
create a business which meets a need
Entrepreneurs may perform a managerial role, but their main role is use organization’s
resources to accomplish their goals
There are certain personality traits and behaviours common to entrepreneurs that differ
from traits and behaviours needed for managerial success
Categories of Entrepreneurs
- Classic Entrepreneurs
o Entrepreneurs that see business opportunities and set aside resources to gain
access to these markets
- Serial Entrepreneur
o An entrepreneur that starts one business, runs it and then starts and runs more
businesses, one after another
o Elon Musk, founder of Paypal, SpaceX and Tesla is an example of a serial
entrepreneur
- Social Entrepreneur
o Social entrepreneurs see a societal problem and use business principles to
develop new solutions
o Lijjat Pappad in India is an example of a business formed by such entrepreneurs
Two most important things when choosing an idea for a business are:
o Find something you love to do and are good at doing
o Find an idea that meets a need in the marketplace
Entrepreneurs need to be sure that the idea they choose will interest consumers in the
marketplace
Most successful entrepreneurs tend to work in industries where lots of change is taking
place
In such industries, entrepreneurs can use their strengths:
o Creativity
o Hard work
o Tolerance of Ambiguity
Strengths can be used to build customer relationships
Many entrepreneurs invent new products and processes, and must protect rights to
their invention through a patent
Patent office is part of Canadian Intellectual Property Office in Canada
Buying a New Business
Some entrepreneurs prefer to buy established businesses rather than take risks with
a new business
Most people want to buy a healthy business to build on its success, but an
experienced entrepreneur may buy a struggling business with hope of turning it
around
Buying a franchise is similar to buying an established business, however franchising
involves risks
Advantages of Buying a New Business
- Employees already in place
- Regular customers available
- Good or service already known in marketplace
- Necessary permits and licenses have already been obtained
- Easier to obtain financing
- Less risky than setting up a new business
Creating a Business Plan
In the past, many entrepreneurs launched their own business without writing formal
business plans
Entrepreneurs often go after opportunities as they arise and then change course when
needed
Flexibility is key to business start-ups, especially in rapidly changing markets
Starting a business has many risks, and doing some planning is necessary
Finding Financing
Seed Capital: Initial funding needed to launch a new venture
Debt Financing: Borrowed funds that entrepreneurs must repay
Equity Financing: Funds invested in new ventures in exchange for part ownership
Venture Capitalists: Business firms or groups that invest in new and growing firms in exchange
for an ownership share
Angel Investors: Wealthy individuals who invest directly in a new venture in exchange for an
equity stake
- Debt Financing
o Debt Financing includes
Loan from banks
Loans from finance companies
Loans from credit card companies
o High interest rates on credit cards means this source of funding is expensive
o Many banks turn down start-ups looking for loans as they are fearful of huge risk
of starting a business
o Bank loan officers want to see a business plan and will evaluate the
entrepreneur’s credit history
o Banks are more willing to make loans to three kinds of entrepreneurs:
Those who have been in business for a while
Those whose business show a profit on rising revenues
Those who need funds to finance expansion
o A line of credit is an approved loan that a business can borrow from when funds
are needed
o Without this, some businesses wouldn’t have money to make products that
consumers have already offered
- Equity Financing
o Entrepreneurs invest their own money and funds supplied by the other people
and firms that become co-owners of the start-ups
o Entrepreneurs doesn’t have to pay back equity funds, instead the investors share
in success of the business
o Sources of equity financing include
Family and friends
Business partners
Entrepreneurs with a great business idea but little money can
team with a partner who has money to invest
If a disagreement happens, one partner may buy the other one
out
Venture Capitalists
VC’s usually back companies in high-tech industries e.g. biotech
VC’s expect high rate of return and a share of the companies
Typical terms for accepting VC funds include:
o Agreement on worth of company
o How much stock investors and founders retain
o Control of company’s board
VC’s want to invest in companies that have qualities such as:
o Use of innovative technologies
o Potential for rapid growth
o Well-developed business model
Angel Investors
AI’s are larger source of capital for start-up firms
In contrast to VC’s, AI’s mostly focus on new firms
Many AI’s are successful entrepreneurs who want to help others
through their familiar difficulties of launching their business
Government Support for New Ventures
Various local agencies and incubators offer information, resources and sometimes
financing for entrepreneurs
Enterprise zones can be set up to encourage entrepreneurship
These can encourage investment, often in troubled areas, by offering tax advantages
and incentives to businesses locating within the zone
First Nation’s Urban Reserves are examples of such enterprise zones
Enterprise Zones: Specific geographic areas set aside for economic renewal
Urban Reserve: An economic zone within a municipality
Intrapreneurship
Intrapreneurship: The process of promoting innovation with the structure of an existing
organization
In modern business world things can change quickly, and firms need to innovate
continuously to hold onto competitive advantages
30% of large firms set aside funds to support intrapreneurship
A skunkworks project is initiated by employees who has an idea then recruits resources
within the company to turn it into a commercial product
Bootlegging is when entrepreneurs are allowed to ‘borrow’ time from other
assignments to explore new product ideas of their choosing