BDI3U – Grade 11 Entrepreneurship – Exam Notes 2

Thank, Sant!

Entrepreneurship Exam Review (Pg. 1)

Unit 1

  • Entrepreneur – a person who organizes and operates a business or businesses, taking on financial risk to do so
  • Entrepreneurship – the quality of being an entrepreneur; the act of identifying opportunities and mobilizing resources to bring about a change to operate a venture
  • Characteristics of Successful Entrepreneurs
    • Confident – is a hallmark of a entrepreneur. Not all are born 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, mostly for human resources. The best communicators got that way by first being the best listeners.
    • Autodidactic (Quick Learner/Self Taught) – always be ready to learn because not everyone knows everything. New knowledge can always be beneficial.
    • Team Player – Team work is really important when it comes to operating a venture and a team helps to shoulder a heavy burden. Remember a twig alone can snap every easily, but a bundle of twigs becomes stronger than the sum of its individual parts, and can be impossible to bend, much less break.
    • Dedicated – Entrepreneurs dedicate themselves to the fulfillment of their plans, visions, and dreams. One of the biggest reason why ventures fail is because the entrepreneur or the owner loses focus.
    • Visionary – Seeing the future can give a little boost, which is required for all at times. And that boost can make that difference to making the business successful
    • Optimistic – a positive outlook is essential for the entrepreneur, who learns to see setbacks as bargains priced tuitions for the valuable business lessons gained through first had experience. Shortcomings and failure or disappointments are of the past so they shouldn’t continue to haunt in the future.
    • Leadership – Entrepreneurs should be skilled at not only leading themselves through self-motivation as a self-starters who jumps into tasks with enthusiasm, but they should also be skilled at leading others. True leaders never become indispensable, otherwise things will begin to fall apart in their absence and they can never rise to the highest level of freedom and prosperity.
    • Risk-Taking – is necessary for the venture to become successful, because certain opportunities may arise but seem like risks, and the entrepreneur might not take that opportunity and he/she will lose in money and time.
    • Motivated – are driven by an internal need for accomplishment ad they seek success, both at work and elsewhere.
    • Hard-Working – can get a person to the moon. Entrepreneurs work long and hard to achieve success, and which requires a lot 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 not essential for survival.
  • Impacts on the Community
    • Job creation – When an entrepreneur creates a jobs in the local community, it has the multiplier effect. Those who are employed at the business will make money and want to purchase goods. If there available in the community, people will more likely spend money there and more jobs will be created. As the business grows more employee’s will be needed. More people might move into the community, which will increase the demand of goods and services
    • New Ideas – Often entrepreneurs come up with new ways of doing things, which encourages the creation of a broader range of goods and services than would otherwise exist.
    • Economic Benefits – Through competition, not only do entrepreneur lower prices, but they also improve a society’s standard of living. When more wealth is distributed throughout the society, everyone enjoys the benefits. A new venture can spark an opportunity for other entrepreneurs, in return bringing more wealth to the society.
  • Demographics – is the study of the characteristics of people in a population. Entrepreneurs who study this have a better chance of surviving in the market. For example an Indian restaurant in a Indian neighbourhood will be more successful rather than a Asian restaurant.
  • Enterprising People – are entrepreneurs in a way, but don’t want to take the financial risks that entrepreneurs do. They have all the characteristics and requirements to be one.
  • S.M.A.R.T. Goals – (Simple, Measurable, Achievable & Realistic, Timely, and Worthwhile)
    • Simple – goals should always be stated simply and written down, 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, and becoming a wiser person is not. Often the progress you can’t make happens naturally as you purse a path toward more measurable objectives.
    • Achievable & Realistic – goals should always be realistic and achievable. If you set a goal which you don’t have the resources for the result will be frustration and failure. Goals shouldn’t be too easy, or you won’t notice the progress. Goals should be challenging enough to require effort.
    • Timely – setting target dates for achieving your goals will help you 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, then don’t waste your time! If it’s worth it then go in with all you got!
  • 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 others are saying
      • ability to motivate and encourage others
      • caring for yourself and others
    • Critical And Creative Thinking Skills
      • ability to solve problems by evaluating a variety of solutions
      • having the confidence to make a decision and act on it
      • keeping records and being accountable for all actions
      • ability to generate ideas and identify opportunities
    • Practical Skills
      • involve the ability to use special tools designed for a specific job. For example someone who works with digital media or in telemarketing needs to know how to use the appropriate equipment for the job.

 

 

 

 

 

 

 

 

 

 

 

 

 

Entrepreneurship Exam Review (Pg. 2)

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 the creator of an invention the sole right to make, use, and sell the invention for a set period of time. This makes it safer for people to discuss  their work. Anyone can apply for a patent through the federal government.
    • Copyrights – protects literary works, musical works, artistic works, and software. By law, all Canadians hold copyright to any original work they created unless they hired an employee to create it. Under the Copyright Act no one can publish, perform, translate, copy or adapt another person’s work without their permission. Copyrighted works include books, maps, songs, lyrics, music, paintings, sound recording and so on.
    • Trademarks– are words, symbols, or designs – or a combination of these – used to identify a product or service and distinguish it from its competition. Trademarks represent the business.
      • Ordinary Marks – are words or symbols that distinguish wares or services of specific firm or individual
      • Certification Marks – identify wares or services that meet defined standards. They are owned by one person but are licensed to other identify acceptable wares or services.
      • Distinguishing Guises – refers to the unique shape of a product or its packages – such as the design of the Coke bottles
    • Industrial Design Act
      • Industrial designs are protected by the IDA. Could be anything made by hand, tool or machine that has a distinctive features, such as the shape of a chair or a design of a spoon. Once the design is registered the designer, called the proprietor, has exclusive rights to the design for a 10 year period
    • Integrated Circuit Topography Act
      • ICT are electronic integrated circuits or IC products that are configured and interconnected. These creations are protected in Canada by the ICTA, which gives the creator exclusive rights for a 10 year period. Canada has agreement with other countries that also protect the ideas for 10 year period because of exports that Canada does.
  • Problem Solving Process
    • Problem Finding – the entrepreneur tries to define the problem by gathering observations, feelings, and impressions about the situation. Fact-finding is also important during this stage, because facts help in define the problem and may provide information that can be used in teh solution
    • Idea Finding – the entrepreneur tries to come up with different alternatives or different ways to solve the problem. Creativity is the key! All idea should be evaluated because sometimes the craziest ideas create the best ventures! (record them all)
    • SolutionFinding – when the entrepreneur will evaluate each of the ideas created earlier. The criteria needs to be established for this to occur. The ideas which don’t pass the criteria must be tossed out. The process isn’t complete until the solution has been tried. If the solution fails the entrepreneur needs to go back some steps and generate more 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 and choose another idea and try again
  • The 6 Thinking Hats
    • White – thinking concerned with gathering facts, figures, and objective 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 – recognizes the emotional and intuitional thinking, and uses hunches and feelings to generate information without judgement or logic. Sounds like this: I have a hunch… This is how I feel… I think this is terrible!
    • Green – lateral thinking hat that includes creativity, alternatives, and proposals. The colour represents nature and things that grow from seeds like plants, creativity also grows from seeds. Sounds like: Aha! I got an idea!  So, that`s what you mean! How else can this be done?
    • Black – represents judgement and caution. Always presents a logical case against the idea, and gives negative feedback that 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 hat looks for positive outcomes and reasons why the idea will work. The Optimistic hat! Sounds like: this fits together well! I want to explore this further. This idea has some value!

Blue – how the other hats will work together to solve the problem, not the problem itself. The blue hat thinking is used to lead and pull other hats together. This hat is the one that makes it all happen. Sounds like: Focus! Let’s get started! It’s your turn!

  • Left Side of the Brain – is sequential, analytical, and linear. It contains the function of language and all language-related activities.
  • Right Side of the Brain – works with the left and is the portion that is creative, imaginative, emotional, and intuitive. Keep exercising the right side of the brain to stay creative! Reading out loud grabs the attention of the 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 entrepreneur comes up with an idea first and then looks for a marketing opportunity.
  • Opportunities – A set of circumstances that makes it possible to do something.
  • Market-pulled Entrepreneurship – An entrepreneur identifies a problem, see an opportunity, and then comes up with an idea to take advantage of the situation
  • Primary Research – the technique of gathering data firsthand through such methods as personal observation, interviews, and questionnaires.
  • Secondary Research – the technique of analyzing and evaluating information that has already been gathered by other means, such as census data.
  • Life Cycle of a Business
    • Prestart-Up – Preparation to launch the business are made. Consider your resources and much more is required, and seek advice to make any final adjustments
    • Development – The research is complete and the you have finalized the business plan and your goal is to reach the breakeven point. Follow up on customers concerns and stay in touch with slow payers. Make sure you have enough to pay your fixed overhead (telephone bill, water bill… and so on).
    • Growth – Business has passed the break-even point and is now making money. Time to expand the business, might decide to add more to your inventory, or start a e-commerce. Take on a partner and revise your venture plan for the expansion your going to apply to your business.
    • Comfort – By now your venture is secure and continuing to grow, although its slower than 10% per year. The business may own the location it runs from and the assets of the business are worth more than the liabilities. This stage can also be dangerous if the entrepreneur doesn’t pay attention.
    • Turn Around – The venture is in a bad financial state and the record reflect losses for over 2 years now. To save the business action is required right now or the venture will fail. You may need to fire some employee and sell some assets and reduce some products to keep the business from failure and bankruptcy.

 

 

Entrepreneurship Exam Review (Pg. 3)

  • The Venture Plan
    • Mission Statement – Opening statement which will catch the attention and interest people who may able to help you for example by investing money into your business. A good mission statement states  the type of venture you are planning, the type of product you will deliver, and the overall purpose that has guided this development. (Ex. McDonalds – “To provide the fast food customer food prepared in the same high-quality manner world-wide that is tasty, reasonably-priced & delivered consistently in a low-key décor and friendly atmosphere.”)
    • Section  1: Executive Summary
      • Is a one or two page summary of the most important points in your venture, intended to introduce the venture and capture the attention of the reader. This the chance to make a really good first impression. Opens with a solid mission statement.
        • Contact Information & The management of the business
        • Name of the venture and a description of its nature and objective
        • Info about the products/services offered, what makes the venture unique and so on
    • Section 2: Market Analysis
      • It’s important to determine if the product/service you intend to provide will satisfy the needs of the market. This section helps you identify your potential 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 you think the customers will buy
        • Description of trends that suggest this is the right time to introduce your product or service
        • How much will you charge for your product/service
    • Section 3: Resource Analysis
      • In this section the entrepreneur needs to consider the material, human and financial resources.
        • Material Resources – are the both raw material and finished products. For a particular venture they might need equipment, storage bins, plastic, paper, extension cords, computers, software’s, printers, screws, flour, ovens, delivery truck, and so on. Some are consumable resources but others are fixed recourses which can be reused.
        • Human Resources – are the people needed to operate the venture, without the right people the venture might as well fail. You will need employee’s and people outside the venture like an accountant, lawyer, and so on.
        • Financial Resources – meaning the money needed to start off the venture. this also includes the money to buy equipment and materials, to pay staff, and to pay other expenses such as rent, electricity, and advertising costs.
    • Section 4: Operating Strategy
      • tells how you will manage these resources in the day-to-day operation of the business. It details peoples responsibilities, channels of communication, the different departments that will exist in the organization, how work groups will operate, and how much work will be supervised. This section also deals with the inventory that is needed for the venture, any environmental policies that might affect operations (Ex. Green Plan).
        • Who will do each job and how much work will be supervised
        • How people will work together
        • What records must be kept and who will keep them
        • How the production process will be organized
    • Section 5: Financial Strategy
      • that will be used to capitalize the venture. Unlike most financial statements, which are accounts of past performance, a financial strategy is based on projected results.
        • How much it will cost to start the venture
        • How much it will cost to keep the venture going
        • What sources of capital is available
        • How much capital is needed and when will it used
      • Must state how much money is needed, and it will help to show where the money is needed with a breakdown of funds. How the loan will be paid back in how long?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Entrepreneurship Exam Review (Pg. 4)

Unit 3

  • 4 P’s & 2 C’s of Marketing
    • Product (Or Service)
      • Is the product/service something customers will want 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 in stock/ready?
      • Where will the product/service be made available
    • Price
      • How much are customers willing to and able to pay?
      • What is the best price to charge to earn max. profit
    • Promotion
      • How will customers be made aware of that the product/service is available?
    • Customers
      • Customers who bought this were also interested in…
    • Competition
      • the same product, yet why a customer or client still might buy from you?
  • Pricing Strategies
    • Cost-Plus Pricing
      • A mark-up is added to the cost price to ensure a profit. (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 the competition or slightly a bit lower. This can increase 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 the competition’s price and sell 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 new product/service can enter the market with a high price. Short term profit and this will drop when the competition moves in.
    • Psychological Pricing
      • Prices give the impression that they’re are less but aren’t (Ex. $399.99 instead of $400.00).
    • Loss-Leader Pricing
      • Selected products are sold at the cost or less to attract customers to buy other products to make up for that loss.
  • Promotion
    • Advertising – is a message paid for by the venture and directed towards the target market. The purpose of advertising is to move customers through the AIDA formula – Attention, Interest, Desire, Action. Can be done through newspaper, magazines, billboards, radio, TV, internet and so on. The product should be advertised where your target market will most likely look.
    • Personal Selling – Salesman convinces the customer that they need this product/service, which requires thorough knowledge 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 the target market if the product is newsworthy.
    • Sales Promotion – Free sampling is done to attract more customers in and out of the target market. Usually coupons are used, free giveaways, and so on.
  • Business Life Cycle
    • Stage 1: Introduction – is when the product/service first appears, and during this stage there is little or no competition. If the product is successful then it moves on to the next stage.
    • Stage 2: Growth – Competition moves in at this point and this is where the prices are reduced, or advertisement is increased, to increase the market shares.
    • Stage 3: Maturity – occurs when the product/service has reached its peak of popularity. Promotions and advertisement 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 duty equipment, and so on.
  • Internal Human R. – are people who are part of the venture such as the entrepreneur, 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 Employee’s
    • Read over the employee’s submitted resume and narrow down the list to what your venture requires. Contact the references given, for just some back grounds checks on the person. 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. Training employee’s 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 the rules, and if your business requires any permits or licenses.
    • Since the laws vary from province to province, it is best to find out, from people like lawyers, bankers, accountants!

 

 

 

 

 

 

 

 

 

 

 

 

 

Entrepreneurship Exam Review (Pg. 5)

Unit 4

  • Insurance
    • Employee Insurance
      • Worker’s Compensation (what if your employees get 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 register your business as part of the insurance, you will be covered if you are in an accident while on the job
    • Home Insurance
      • If operating your business from home,  may need to purchase additional coverage depending on risks involved (which could include injury to a visiting client and/or damage or theft to your equipment and/or inventory.)
    • Property Insurance
      • If operating business in a building other than your home
      • Protect yourself against damage or theft of your equipment or property
    • Research Insurance companies online, get a “quote”
  • Financing Your Venture
    • Financial Objectives
      • Market Share
        • Way of representing company’s sales as part of total volume of sales of product made by company AND competitors.
        • Expressed as percent
        • If business has a market share of 18%, means its sales represent 18% of total sales made by all companies producing the same good/service
      • Profit Margin
        • Percent of the final selling price that represents the profit (the amount left over after the cost of producing the item is paid).
        • Example: If item costs $15 to produce, and sells for $20, then profit margin is:
        • $5/$20 = 25%
        • Profit Margin = Selling Price – Cost price    x 100
        •         Selling price
      • Return on Investment
        • Amount of profit investors earn in return for the capital they have invested in your business
        • Ex. Gagan invests $10 000 in Sukhman’s Lawn Care Business. Gagan is paid $15,000 at the end of the summer
        • What is Gagan’s Return on Investment?
        • $5000/$10000 = 50%
        • Return on Investment = Amount returned – amount invested  x 100
        •                                                 amount invested
    • Covering Costs
      • Covering Costs
      • Must have financial resources to cover startup costs & operating costs
      • Startup costs: expenses that must be paid in order to get business up and running (Also known as One-time expenses)
      • Ex: Include fixed costs of production, plus variable costs incurred in providing good or service during startup phase (ex: paper, internet service, etc).
      • Operating Expenses: Expenses needed to keep a venture going once it has successfully completed the startup phase.
      • Costs can be fixed or variable
      • Operating expenses should be paid from sales revenues. (Otherwise, can go bankrupt)
    • Estimating Revenue & Expenses
      • Remember: Revenue=price x quantity
      • Venture becomes cash rich when revenues greater than expenses
      • When expenses greater than revenues, venture becomes cash poor.
      • Entrepreneur should make sure there is enough cash on hand to cover cash poor periods.
      • Revenue: Once you know how much you can expect to sell, and at what price, you can estimate revenue
      • With cash sales, money flow into business immediately.
      • With credit, purchase may not be paid off for months
      • Expenses: need to determine the cost of all the resources the venture will need.
      • Process depends on information in the resource analysis section of your venture plan.
      • Making sure there is always enough cash to cover expenses can be tricky
      • Tomorrow: We will discuss something that can help: Cash Flow Projection
  • Cash Flow Projections
    • Part 1: Cash In – This section keeps track of the money that is actually received by the venture from sources such as sales, loans, and contributions. Income is also recorded when received.
    • Part 2: Cash Out – Tracks all the expenses paid out. If something was bought in Month 1 but paid in Month 2 it will be recorded under Month 2.
    • Part 3: Net Cash – The value of Cash out is deducted from Cash In to determine whether it was a surplus or deficit.
  • Ways to Raise Capital
    • Personal Savings – Conveys a high amount of confidence in the venture to use personal money, and this way is taken because entrepreneurs don’t want other to tell them what to do.
    • Friends & Family – This type of investment is called love money. Family wants to spend money to see the business successful, and the disadvantage is that the loss of money can lead to relationships being hurt.
    • Partnership – the partnership will split the business, and the business will receive a higher credit rating and  will increase the borrowing power.
    • Incorporation and Selling Shares –  selling shares can the best route
    • Employee’s, Supplier’s, And Customers – Invite them to buy a share of the company, and stock option plans. Consignments can be signed with suppliers to charge only for the goods sold.