BDI3U – Grade 11 Entrepreneurship – Exam Notes 2 Entrepreneurship Exam Review Unit 1 ● Entrepreneur – a person who organizes and operates a business orbusinesses, taking on financial risk to do so ● Entrepreneurship – the quality of being an entrepreneur; the act ofidentifying opportunities and mobilizing resources to bring about achange to operate a venture ● Characteristics of Successful Entrepreneurs ○ Confidence – is a hallmark of an entrepreneur. Not all areborn with this trait but this can be acquired throughout time.Confidence can make that little difference which can help you keep your business be stable ○ Communication – is key when operating a business, mostlyfor human resources. The best communicators got that wayby first being the best listeners. ○ Autodidactic (Quick Learner/Self Taught) – always be readyto learn because not everyone knows everything. New knowledge can always be beneficial. ○ Team Player – Team work is really important when it comes tooperating a venture and a team helps to shoulder a heavyburden. Remember a twig alone can snap easily, but a bundle of twigs becomes stronger than the sum of its individualparts, and can be impossible to bend, much less break. ○ Dedicated – Entrepreneurs dedicate themselves to thefulfillment of their plans, visions, and dreams. One of the biggest reasons why ventures fail is because theentrepreneur or the owner loses focus. ○ Visionary – Seeing the future can give a little boost, which isrequired for all at times. And that boost can make that difference to making the business successful ○ Optimistic – An optimistic mindset is crucial for theentrepreneur, who learns to view failures as inexpensivetuition for the priceless business skills learned via first-hand experience. Failures, disappointments, and shortcomingsbelong in the past and shouldn't follow you into the future. ○ Leadership – Entrepreneurs should be capable of motivatingthemselves and others by taking initiative and tackling problems with a positive attitude. They should also becapable of leading people. True leaders never become necessary because if they did, everything would start to fallapart without them and they would never reach the ultimate point of freedom and wealth. ○ Risk-Taking – is necessary for the venture to becomesuccessful, because certain opportunities may arise butseem like risks, and the entrepreneur might not take that opportunity and he/she will lose money and time. ○ Motivated – are driven by an internal need foraccomplishment and they seek success, both at work andelsewhere. ○ Hard-Working – can get a person to the moon. Entrepreneurswork long and hard to achieve success, which requires a lot of stamina. ● Needs – are essential for human survival. They can be classified as “real”or as “psychological”. Real or basic needs such as food, shelter and so on. ● Wants – are human desires that go beyond basic needs and are notessential for survival.
● Impacts on the Community ○ Job creation – An entrepreneur's job creation in theneighborhood has a multiplier effect. People working with thecompany will earn money and wish to buy things. People are more inclined to spend money and create more employmentif they are accessible in the neighborhood. The company will require more personnel as it expands. There may be a growthin the number of residents, which will raise demand for goods and services. ○ New Ideas – Entrepreneurs frequently develop novelapproaches to problems, which promotes the developmentof a wider variety of products and services than would otherwise be possible. ○ Economic Benefits – Entrepreneurs cut prices throughcompetition, but they also raise the standard of living in asociety. Everyone benefits from a society where wealth is more evenly distributed. A new business can open doors foradditional entrepreneurs, increasing the amount of money in society. ● Demographics – is the study of the characteristics of people in apopulation. Entrepreneurs who study this have a better chance ofsurviving in the market. For example an Indian restaurant in an Indian neighborhood will be more successful than an Asian restaurant. ● Enterprising People – are entrepreneurs in a way, but don’t want to takethe financial risks that entrepreneurs do. They have all the characteristicsand requirements to be one. ● S.M.A.R.T. Goals – (Simple, Measurable, Achievable & Realistic, Timely, andWorthwhile) ○ Simple – goals should always be stated simply and writtendown, which ensures that you know exactly what commitment you have made. Written goals always serve as remainders! ○ Measurable – Passing a course is a measurable goal, andbecoming a wiser person is not. Often the progress you can’tmake happens naturally as you pursue a path toward more measurable objectives. ○ Achievable & Realistic – goals should always be realistic andachievable. If you set a goal which you don’t have theresources for, the result will be frustration and failure. Goals shouldn’t be too easy, or you won’t notice the progress. Goalsshould be challenging enough to require effort. ○ Timely – setting target dates for achieving your goals will helpyou get started and progress. If the progressing is slow, then add more resources to meet the target date or alter it ○ Worthwhile – Your goals should be worthwhile if not, thendon’t waste your time! If it’s worth it then go in with all yougot! ● SWOT Analysis – is Strengths, Weaknesses, Opportunities, and Threats,which are involved in a venture. ● Accessing Your Skills ○ Interpersonal Skills ■ willingness and ability to talk to others ■ ability to listen to and understand what othersare saying ■ ability to motivate and encourage others ■ caring for yourself and others ○ Critical And Creative Thinking Skills ■ ability to solve problems by evaluating a varietyof solutions ■ having the confidence to make a decision andact on it
■ keeping records and being accountable for allactions ■ ability to generate ideas and identifyopportunities ○ Practical Skills ■ involve the ability to use special tools designedfor a specific job. For example someone whoworks with digital media or in telemarketing needs to know how to use the appropriateequipment for the job. Entrepreneurship Exam Review Unit 2 ● Invention – creation of something new. ● Innovation – is a change to something that already exists. ● Protecting your Ideas ○ Patents – is a grant made by the government that gives thecreator of an invention the sole right to make, use, and sellthe invention for a set period of time. This makes it safer for people to discuss their work. Anyone can apply for a patentthrough the federal government. ○ Copyrights – protects literary works, musical works, artisticworks, and software. All Canadians are legally the owners of any creative works they produce, unless they pay someone todo it for them. The Copyright Act prohibits the publication, performance, translation, copying, and adaptation ofanother person's work without that person's consent. Books, maps, songs, lyrics, music, paintings, sound recordings, andother works are examples of copyrighted works. ○ Trademarks– are words, symbols, or designs – or acombination of these – used to identify a product or service and distinguish it from its competition. Trademarks representthe business. ■ Ordinary Marks – are words or symbols thatdistinguish wares or services of specific firm or individual ■ Certification Marks – identify wares or servicesthat meet defined standards. They are owned byone person but are licensed to identify acceptable wares or services. ■ Distinguishing Guises – refers to the uniqueshape of a product or its packages – such as thedesign of the Coke bottles ○ Industrial Design Act ■ Industrial designs are protected by the IDA.Could be anything made by hand, tool ormachine that has distinctive features, such as the shape of a chair or the design of a spoon.Once the design is registered the designer, called the proprietor, has exclusive rights to thedesign for a 10 year period ○ Integrated Circuit Topography Act ■ ICT are electronic integrated circuits or ICproducts that are configured andinterconnected. These creations are protected in Canada by the ICTA, which gives the creatorexclusive rights for a 10 year period. Canada has
agreements with other countries that alsoprotect the ideas for a 10 year period because of exports that Canada does. ● Problem Solving Process ○ Problem Finding – the entrepreneur tries to define theproblem by gathering observations, feelings, and impressions about the situation. Fact-finding is alsoimportant during this stage, because facts help in define the problem and may provide information that can be used inthe solution ○ Idea Finding – the entrepreneur tries to come up withdifferent alternatives or different ways to solve the problem. Creativity is the key! All ideas should be evaluated becausesometimes the craziest ideas create the best ventures! (record them all) ○ SolutionFinding – when the entrepreneur will evaluate each ofthe ideas created earlier. The criteria needs to beestablished for this to occur. The ideas which don’t pass the criteria must be tossed out. The process isn’t complete untilthe solution has been tried. If the solution fails the entrepreneur needs to go back some steps and generatemore ideas to continue on. ■ Step 1) Think about the problem ■ Step 2) Generate lots of ideas ■ Step 3) Establish criteria for evaluating ideas ■ Step 4) Use the criteria for evaluating ideas ■ Step 5) Rank your ideas and select the best one ■ Step 6) Try your idea out ■ Step 7) Is the problem solved? If not, go back andchoose another idea and try again ● The 6 Thinking Hats ○ White – thinking concerned with gathering facts, figures, andobjective information. It does not allow opinions to interfere.It’s like a computer, without emotion, and sounds like this: Give me the facts and figures please! What is the problem?What are the needs? ○ Red – acknowledges emotional and intuitive thinking andgenerates information without using reasoning or judgment but rather hunches and feelings. Like this: I have a suspicion...I feel like this... This is horrible in my opinion! ○ Green – lateral thinking hat that includes creativity,alternatives, and proposals. The color represents nature and things that grow from seeds like plants, creativity also growsfrom seeds. Sounds like: Aha! I got an idea! So, that's what you mean! How else can this be done? ○ Black – represents judgment and caution. Always presents alogical case against the idea, and gives negative feedbackthat is objective and free from emotions. Sounds like: This idea won’t work because… This could pose a problem… Yes,but… ○ Yellow – is also logical but in a very constructive way. This hatlooks for positive outcomes and reasons why the idea will work. The Optimistic hat! Sounds like: this fits together well! Iwant to explore this further. This idea has some value! Blue - not the issue itself, but how the other hats will collaborate to address it. Whenleading and bringing other hats together, blue hat thinking is utilized. The hat responsible for everything is this one. Sounds like: Concentrate! Let's get going! Yourturn now!
● Left Side of the Brain – is sequential, analytical, and linear. It contains thefunction of language and all language-related activities. ● Right Side of the Brain – works with the left and is the portion that iscreative, imaginative, emotional, and intuitive. Keep exercising the right side of the brain to stay creative! Reading out loud grabs the attention ofthe right side of the brain. ○ Both hemispheres of the brain work together! ● Idea – A thought or suggestion as to a possible course of action. ○ Product-Driven Entrepreneurship – When an entrepreneurcomes up with an idea first and then looks for a marketing opportunity. ● Opportunities – A set of circumstances that makes it possible to dosomething. ● Market-pulled Entrepreneurship – An entrepreneur identifies a problem,see an opportunity, and then comes up with an idea to take advantage ofthe situation ● Primary Research – the technique of gathering data firsthand throughsuch methods as personal observation, interviews, and questionnaires. ● Secondary Research – the technique of analyzing and evaluatinginformation that has already been gathered by other means, such as census data. ● Life Cycle of a Business ○ Pre Start-Up – Preparation to launch the business is made.Consider your resources and much more is required, and seek advice to make any final adjustments ○ Development – The research is complete and you havefinalized the business plan and your goal is to reach thebreakeven point. Follow up on customers' concerns and stay in touch with slow payers. Make sure you have enough to payyour fixed overhead (telephone bill, water bill… and so on). ○ Growth – Business has passed the break-even point and isnow making money. Time to expand the business, might decide to add more to your inventory, or start an e-commerce. Take on a partner and revise your venture plan for the expansion you're going to apply to your business. ○ Comfort – By now your venture is secure and continuing togrow, although it's slower than 10% per year. The businessmay own the location it runs from and the assets of the business are worth more than the liabilities. This stage canalso be dangerous if the entrepreneur doesn’t pay attention. ○ Turn Around – The business is in dire financial straits, andlosses have been recorded for more than two years. Action must be taken immediately to save the business from failure.To prevent the company from failing and going bankrupt, you might need to terminate some staff, sell some assets, andlimit some product offerings. Entrepreneurship Exam Review ● The Venture Plan ○ Mission Statement – An opening sentence that will pique theinterest and attention of those who might be able to assist you, such as by making a financial investment in yourcompany. The kind of business you're planning, the kind of
product you'll produce, and the overarching goal that hasinspired this development are all stated in a good mission statement.. (Ex. McDonalds – “To provide the fast foodcustomer food prepared in the same high-quality manner world-wide that is tasty, reasonably-priced & deliveredconsistently in a low-key décor and friendly atmosphere.”) ○ Section 1: Executive Summary ■ Is a one or two page summary of the mostimportant points in your venture, intended tointroduce the venture and capture the attention of the reader. This is the chance to make a reallygood first impression. Opens with a solid mission statement. ■ Contact Information & Themanagement of the business ■ Name of the venture and adescription of its nature andobjective ■ Info about the products/servicesoffered, what makes the venture unique and so on ○ Section 2: Market Analysis ■ It’s important to determine if the product/serviceyou intend to provide will satisfy the needs of the market. This section helps you identify yourpotential customers, analyze your competition, set prices, and plan for ways to advertise! ■ Demographics of potential customers (age, gender, race,location, etc) ■ Types of products/services youthink the customers will buy ■ Description of trends that suggestthis is the right time to introduce your product or service ■ How much will you charge for yourproduct/service ○ Section 3: Resource Analysis ■ In this section the entrepreneur needs toconsider the material, human and financial resources. ■ Both raw materials and completedgoods are considered materialresources. They might need tools, storage containers, plastic, paper,extension cords, printers, fasteners, flour, ovens, delivery trucks, and soon for a specific project. Some resources are consumable, whileothers are fixed and reusable resources. ■ Human Resources – are the peopleneeded to operate the venture,without the right people the venture might as well fail. You will needemployee’s and people outside the venture like an accountant, lawyer,and so on. ■ Financial Resources – meaning themoney needed to start off the venture. This also includes themoney to buy equipment and
materials, to pay staff, and to payother expenses such as rent, electricity, and advertising costs. ○ Section 4: Operating Strategy ■ tells how you will manage these resources in theday-to-day operation of the business. It details people's responsibilities, channels ofcommunication, the different departments that will exist in the organization, how work groupswill operate, and how much work will be supervised. This section also deals with theinventory that is needed for the venture, any environmental policies that might affectoperations (Ex. Green Plan). ■ Who will do each job and how muchwork will be supervised ■ How people will work together ■ What records must be kept and whowill keep them ■ How the production process will beorganized ○ Section 5: Financial Strategy ■ that will be used to capitalize the venture. Unlikemost financial statements, which are accounts of past performance, a financial strategy is basedon projected results. ■ How much it will cost to start theventure ■ How much it will cost to keep theventure going ■ What sources of capital is available ■ How much capital is needed andwhen will it used ■ Must state how much money is needed, and itwill help to show where the money is needed witha breakdown of funds. How will the loan be paid back in how long? Entrepreneurship Exam Review Unit 3 ● 4 P’s & 2 C’s of Marketing ○ Product (Or Service) ■ Is the product/service something customers willwant to buy ■ Will it be of benefit to them? ■ Will it meet their needs? ○ Place ■ How will the product/service get to the customer ■ When should the product/service be instock/ready? ■ Where will the product/service be madeavailable ○ Price ■ How much are customers willing to and able topay?
■ What is the best price to charge to earn max.profit ○ Promotion ■ How will customers be made aware that theproduct/service is available? ○ Customers ■ Customers who bought this were also interestedin… ○ Competition ■ the same product, yet why a customer or clientstill might buy from you? ● Pricing Strategies ○ Cost-Plus Pricing ■ A mark-up is added to the cost price to ensure aprofit. (Mark-up = selling price – cost) Mark-up%=((selling price-cost price)/cost)x100 ○ Follow-The-Competition Pricing ■ Price of the product is set the same as thecompetition or slightly a bit lower. This canincrease market shares but make sure the price isn’t set so low that you’re going into a loss ○ Penetration Pricing ■ Pricing a new product/service below thecompetition’s price and selling a large volume at a low price can generate a lot of profit.(newcomers to win market shares from the competition and attract lots of new customers) ○ Skimming ■ When there’s no competition, a newproduct/service can enter the market with a high price. Short term profit and this will drop whenthe competition moves in. ○ Psychological Pricing ■ Prices give the impression that they are less butaren’t (Ex. $399.99 instead of $400.00). ○ Loss-Leader Pricing ■ Selected products are sold at the cost or less toattract customers to buy other products to make up for that loss. ● Promotion ○ Advertising – is a message paid for by the venture anddirected towards the target market. The purpose of advertising is to move customers through the AIDA formula –Attention, Interest, Desire, Action. Can be done through newspapers, magazines, billboards, radio, TV, internet and soon. The product should be advertised where your target market will most likely look. ○ Personal Selling – Salesman convinces the customer that theyneed this product/service, which requires thoroughknowledge of the product/service. And the sales rep. will add to the reputation of the venture. ○ Publicity – An unpaid message delivered by the media to thetarget market if the product is newsworthy. ○ Sales Promotion – Free sampling is done to attract morecustomers in and out of the target market. Usually couponsare used, free giveaways, and so on. ● Business Life Cycle ○ Stage 1: Introduction – is when the product/service firstappears, and during this stage there is little or no
competition. If the product is successful then it moves ontothe next stage. ○ Stage 2: Growth – Competition moves in at this point and thisis where the prices are reduced, or advertisement is increased, to increase the market shares. ○ Stage 3: Maturity – occurs when the product/service hasreached its peak of popularity. Promotions andadvertisements should be done as much as possible. ○ Stage 4: Decline – Sales of the product/service begin to drop.Many competitors have already fled, at this point the company must redesign the product/service or abandon it.Modifying it would take it to a different stage in the Cycle ● Expense Goods – Consumable material such as paper, oil, and gas. ● Capital Goods – long lasting goods, such as machinery, heavy dutyequipment, and so on. ● Internal Human R. – are people who are part of the venture such as theentrepreneur, partners, and the employees. ● External Human R. – are people outside of the venture like accountants,lawyers, market advisers, bankers, insurance agents, and so on. ● Hiring Employees ○ Read over the employee’s submitted resume and narrowdown the list to what your venture requires. Contact the references given, for just some background checks on theperson. Conduct interviews to get a sense of what each person has to offer to the business. ○ When the job is offered remember to tell them their salary,start date, any benefits that will be provided. Trainingemployees may be time consuming but it ensures that they will do a good job in the future. ● Law & Regulations ○ Before launching a business you need to find out all therules, and if your business requires any permits or licenses. ○ Since the laws vary from province to province, it is best tofind out from people like lawyers, bankers, accountants! Entrepreneurship Exam Review Unit 4 ● Insurance ○ Employee Insurance ■ Worker’s Compensation (what if your employeesget injured on the job?) ■ Insurance can pay for any injuries, medical bills,etc. ■ WSIB (Workplace Safety and Insurance Board) ■ Mandatory in Canada ○ Vehicle Insurance ■ If you purchase vehicle insurance, and registeryour business as part of the insurance, you will be covered if you are in an accident while on thejob ○ Home Insurance ■ If operating your business from home, may needto purchase additional coverage depending on
risks involved (which could include injury to avisiting client and/or damage or theft to your equipment and/or inventory.) ○ Property Insurance ■ If operating business in a building other thanyour home ■ Protect yourself against damage or theft of yourequipment or property ○ Research Insurance companies online, get a “quote” ● Financing Your Venture ○ Financial Objectives ■ Market Share ■ Way of representing company’ssales as part of total volume of sales of products made by company ANDcompetitors. ■ Expressed as percent ■ If business has a market share of18%, means its sales represent 18% oftotal sales made by all companies producing the same good/service ■ Profit Margin ■ Percent of the final selling price thatrepresents the profit (the amount left over after the cost of producingthe item is paid). ■ Example: If item costs $15 toproduce, and sells for $20, then profit margin is: ■ $5/$20 = 25% ■ Profit Margin = Selling Price – Costprice x 100 ■ Selling price ■ Return on Investment ■ Amount of profit investors earn inreturn for the capital they have invested in your business ■ Ex. Gagan invests $10 000 inSukhman’s Lawn Care Business.Gagan is paid $15,000 at the end of the summer ■ What is Gagan’s Return onInvestment? ■ $5000/$10000 = 50% ■ Return on Investment = Amountreturned – amount invested x 100 ■ amountinvested ○ Covering Costs ■ Covering Costs ■ Must have financial resources to cover startupcosts & operating costs ■ Startup costs: expenses that must be paid inorder to get business up and running (Also known as One-time expenses) ■ Ex: Include fixed costs of production, plusvariable costs incurred in providing goods orservices during the startup phase (ex: paper, internet service, etc).
■ Operating Expenses: Expenses needed to keep aventure going once it has successfully completed the startup phase. ■ Costs can be fixed or variable ■ Operating expenses should be paid from salesrevenues. (Otherwise, can go bankrupt) ○ Estimating Revenue & Expenses ■ Remember: Revenue=price x quantity ■ Venture becomes cash rich when revenuesgreater than expenses ■ When expenses are greater than revenues, theventure becomes cash poor. ■ Entrepreneurs should make sure there is enoughcash on hand to cover cash poor periods. ■ Revenue: Once you know how much you canexpect to sell, and at what price, you can estimate revenue ■ With cash sales, money flows into businessimmediately. ■ With credit, purchase may not be paid off formonths ■ Expenses: need to determine the cost of all theresources the venture will need. ■ Process depends on information in the resourceanalysis section of your venture plan. ■ Making sure there is always enough cash tocover expenses can be tricky ■ Tomorrow: We will discuss something that canhelp: Cash Flow Projection ● Cash Flow Projections ○ Part 1: Cash In - The money that the business really receivesfrom sources like sales, loans, and contributions is tracked in this area. When received, income is also noted. ○ Part 2: Cash Out – Tracks all the expenses paid out. Ifsomething was bought in Month 1 but paid in Month 2 it willbe recorded under Month 2. ○ Part 3: Net Cash – The value of Cash out is deducted fromCash In to determine whether it was a surplus or deficit. ● Ways to Raise Capital ○ Personal Savings – Conveys a high amount of confidence inthe venture to use personal money, and this way is takenbecause entrepreneurs don’t want others to tell them what to do. ○ Friends & Family – This type of investment is called lovemoney. Family wants to spend money to see the businesssuccessful, and the disadvantage is that the loss of money can lead to relationships being hurt. ○ Partnership – the partnership will split the business, and thebusiness will receive a higher credit rating and will increasethe borrowing power. ○ Incorporation and Selling Shares – selling shares can thebest route ○ Employee’s, Supplier’s, And Customers – Invite them to buy ashare of the company, and stock option plans. Consignments can be signed with suppliers to charge only for the goodssold.