Economics 11 Chapter 4 The Entrepreneur/Franchising

entrepreneurs are individuals who start their own businesses or who aggressively expand existing ones they organize the other productive factors (land, labour, capital) and they assume the risk in our economy, entrepreneurs play a key role, they are the innovators

Characteristics of Successful Entrepreneurs 1. a “go-getter” attitude -recognize the opportunities that exist in situations -optimistic 2. risk taking - moderate risk takers

Characteristics of Successful Entrepreneurs 3. hard work -lots of time, energy, effort, and ingenuity involved -must be in good health to withstand the pressures and long hours 4. motivation -money -work for themselves -must be able to motivate employees by setting a good example

Characteristics of Successful Entrepreneurs 5. self-confidence -have sufficient faith in themselves -adept at finding solutions -unlikely to rely on luck or friends 6. objectivity -must be able to recognize when help is needed -will seek out expert help rather than go it alone

Why do businesses fail? hard work alone is not sufficient to ensure success 4/5 new businesses fail in the first five years

Why do businesses fail? businesses may fail because of the personal characteristics of the entrepreneurs -they may be unwilling or unable to give the time and effort necessary - they may have too little knowledge of the business and how to run it

Why do businesses fail? -they may not have an adequate financial plan for the business and/or lack the skill to assess its ability to turn a profit -they may fail to understand the market in which they are selling their goods and services  the competition from other businesses may be too severe  their own prices may be too high  the market may be too small for the products they have to offer - it can take months or years to build up a sufficient customer base, if a business lacks cash flow, they will fail

one response to the high rate of failure among new businesses is industrial incubators -an example of an industrial incubator if the Venture Centre in Pasadena, Newfoundland it provides a favourable environment in which new businesses can take root and grow the Venture Center helps to increase public awareness about small business opportunities, as well as exposing potential entrepreneurs to prospects in worthwhile industries

How industrial incubators help small business it provides a favourable environment in which new businesses can take root and grow helps to increase public awareness about small business opportunities, as well as exposing potential entrepreneurs to prospects in worthwhile industries Offers business counselling

How industrial incubators help small business Sometimes offers low rent or help with rent development officer - a development officer is available to guide and assist -this includes arranging financing, reviewing business plans, and setting up cash flow forecasts cost sharing of services - provides the opportunity to share costs with other businesses that might be too expensive for an individual business to handle -this includes secretarial help, photocopying, telephone answering service, and access to computer information business advisory committee - a lawyer, a banker, an accountant and three other business people provide advice

(CBDC) Community Business Development Corporations CBDC Youth Loan Tailored business solutions for young entrepreneurs ages interested in starting, expanding or modernizing projects that require financing to get the business moving. CBDC General Business Loan The CBDC General Business Loan is designed to assist entrepreneurs to obtain financing for their business, when traditional avenues of financing are not available. It can be used for key events in the business life cycle such as business creation, purchase, and business succession planning. Business Counselling Business counselling in the form of advice to new and established entrepreneurs throughout Atlantic Canada. Self Employment Benefit Program The Self Employment Benefits (SEB) Program allows participants to continue to receive their Employment Insurance Benefits while they are getting their business up and running

Franchises A franchise is a license or privilege granted by a corporation (the franchiser) to another corporation or individual (the franchisee) to sell a particular product or service with an advertised trade name.

Pros of the Franchise (for the franchiser) By having others finance the establishment of the stores or outlets, the franchiser’s total sales can grow quickly And because their money is tied up in the franchise, franchisees are highly motivated to run their businesses efficiently

Disadvantages (for the franchisee) The franchisee must follow the operating procedures of the parent firm They must pay a fee for the franchise And usually they pay the franchiser a percentage of sales

Advantages (for the franchisee) They get a proven business with proven expertise They get ongoing assistance to help keep it running

–a franchisee can be described as a “semi- entrepreneur”  a franchise demands somewhat less risk, less innovation, and less self-reliance, compared to an independently-launched small business