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The Role of Entrepreneurship and Small Business in Canada

The Role of Entrepreneurship and Small Business in Canada. Chapter 1. The Entrepreneurial Revolution.

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The Role of Entrepreneurship and Small Business in Canada

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  1. The Role of Entrepreneurship and Small Business in Canada Chapter 1

  2. The Entrepreneurial Revolution • “The entrepreneur is the most important player in the building of the global economy, so much so that big companies are decentralizing and reconstituting themselves as networks of entrepreneurs.” • John Naisbitt in Global Paradox

  3. The Entrepreneurial Revolution cont’ • After 2nd World War – bigger is better • Mid-1970’s – reawakening of interest in entrepreneurship • Governments looked to small businesses to provide a catalyst for their stagnant economies • 80’s and 90’s – rapid growth • During the economic slowdown of 2001, small business activity outpaced the rest of the economy.

  4. The Entrepreneurial Revolution cont’ • Ernst and Young survey: 8 out of 10 influential North Americans indicated they believed entrepreneurialism will define 21st C. business. • Canada is 2nd in the World in entrepreneurial activity • Half a million new businesses are started each year (Statistics Canada) • 22% of small businesses are started as a result of downsizing.

  5. The Entrepreneurial Revolution cont’ • 97% of all existing businesses have fewer than 50 employees (Statistics Canada) • 2003 – 2.41 million self-employed persons; and increase of 43% since 1990 • Micro-businesses accounted for 20% of new jobs in Canada in 2002 (fewer than 5 employees) • Entrepreneurship and Small Business Office in the Department of Industry Canada coordinates and administers programs to aid small businesses at the federal level; http://www.ic.gc.ca/eic/site/ic1.nsf/eng/h_00140.html

  6. The Entrepreneurial Revolution cont’ • Intrapraneurship – encouraging creativity, entrepreneurship and individual initiative within a business • Examples: Bombardier www.bombardier.com and Nortel www.nortel.com • Canadian Federation of Independent Business; 100,000 membership – increase in political power of small businesses

  7. What is Small Business? Defined by: • Revenue or net sales • Number of employees • Profits • Type of management-ownership structure

  8. What is Small Business? • Revenue or net sales: [limits vary by industry] • Average net sales of $1 million or less (Statistics Canada) • $2 million in revenue (Ministry of State for Small Business and Small Business Loans Act in Canada) • US: • retailing $3.5 million to $13.5 million • Services $ $3.5 million to $14.5 million • Construction $7 million to $17 million

  9. What is Small Business? • Number of employees: • fewer than 50 employees in nonmanufacturing and 100 employees in manufacturing industries • Fewer than 75 to be eligible for Counselling assistance for Small Business Program • Some agencies may use larger numbers upwards of 250 – 1500 depending on the industry

  10. What is Small Business? • Profits • Net operating profit of $200,000 or less. • CCRA uses this to determine which businesses qualify for a reduced tax rate • Type of management-ownership structure • The degree to which the owner is also the day to day manager • Independent management; owner-supplied capital; local area of operations; small size within industry

  11. Small Business vs Big Business • Class brainstorming activity

  12. Current State of Small Business in Canada • In 2003, 19% of the self-employed were under the age of 35 showing that it is an attractive career option • Young Entrepreneurs Association www.yea.ca and ACE in Canada provide networking and information for young entrepreneurs • Lending programs from BDBC as well as Canada Youth Business Foundation • More prevalent among young men than women

  13. Current State of Small Business in Canada cont’ • Women now account for 40% of one-person businesses; WEC and WPO • Majority of self-employed work in the service industry, some in goods sector • Men in construction, women in agriculture • 1 in 5 self-employed is an immigrant • The economies of all provinces are dominated by small businesses; Alberta and Ontario have seen most rapid growth

  14. Contributions of Small Business • More labour intensive than large companies • Create more jobs than they lose • Responsible for a majority of innovations and inventions that we benefit from today • Productivity and Profitability: • Bias for action • Close to the customer • Autonomy • Employee stake • Hands on managers • Less buraucracy

  15. Contributions of Small Business cont’ • Flexibility; able to respond more quickly to changes in the economy • Canadian ownership- fewer than 1% are foreign owned • A country has a better chance of achieving economic well-being if entrepreneurial activities are supported by that society • Long term interest in the community in which their business operates

  16. Small Business and The Future • Changes are occurring in technology, consumer demographics and buying patterns, and the competitive aspects of markets • Small business flexibility can capitalize on this • Computers allow entrepreneurs to manage large amounts of information as effectively as a larger business • New technology has allowed small businesses to obtain subcontracts of many services • Opportunities for entrepreneurs in both obtaining and informationand marketing products and services to both domestic and global markets are limitless

  17. Small Business and The Future cont’ Retail expenditures are key to growth of the small business sector and current demographics show Canadian consumers are aging and their disposable incomes are growing Video: 7 small business ideas.mp4 The larger number of working women has created greater economic clout for females as well as a heavier demand for time saving products and convenience Erosion in the domestic and international market boundaries means that smaller businesses have increased opportunities to source, produce, and deliver to international markets NAFTA, defeat of communism in the Eastern Bloc, EU, opening of China’s borders

  18. Small Business and The Future cont’ Difficulties small businesses may face? Competing with large businesses for capital, raw materials, and labour Financing problems Labour shortages Losing flexibility and independence due to outsourcing (complying to larger businesses) Changes in the economy; recession, social crisis, changes in the canadian dollar

  19. Small Business and The Future cont’ Difficulties small businesses may face? Political climate: Burdens of paperwork, taxes, regulations Immigrant visas GST Ineffective government programs Federation of Independent Businesses collective lobbying efforts to achieve a political environment more conducive to their operations

  20. Small Business and The Future cont’ Social climate: High level of respect Strong culture of individualism and self-betterment 10 ideas for small businesses for students: http://sbinfocanada.about.com/od/businessideas/a/summerjobbiz.htm Chapter 1 Online Quiz: http://glencoe.mcgraw-hill.com/sites/0078613035/student_view0/unit1/chapter1/practice_test.html

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