Instructor Manuals For Canadian Entrepreneurship And Small Business Management 11th Edition By Wesley Balderson

1 Instructor Manuals For Canadian Entrepreneurship And Small Business Management 11th Edition By Wesley Balderson 2 Supplemental Case Notes Thompson Greenhouse................................................................................................................................. 1 Robinson Test Prep Co .................................................................................................................................. 4 The Beach Buddy........................................................................................................................................... 6 Organic Gourmet Express............................................................................................................................. 8 The Winslow Clock Company........................................................................................................................ 9 Windows Tech.............................................................................................................................................10 Edge Hockey................................................................................................................................................12 Beach Stake.................................................................................................................................................14 The Framemakers .......................................................................................................................................15 Top Human Tech Inc. ..................................................................................................................................21 Clovis Jewellers...........................................................................................................................................22 Blake Lock and Security Systems ................................................................................................................23 Thompson Greenhouse Case overview Thompson Greenhouse is family business owned by Earl and Lisa Thompson. The business has enabled them to supplement their income and provide work for their children. With increased competition from major retailers the Thompsons are unsure how they should compete in the year’s ahead and if they should invest further into their business. Discussion questions 1. Discuss the implications of the Thomsons’ attempt to obtain additional commercial contracts (the department stores) for their products. 2. Evaluate the decision to construct another greenhouse from a financial and an organizational point of view. (Use rate of return, payback, and break-even analysis in your evaluation.) 3. Comment on the financial health of Thomson Greenhouse through a review of the financial statements. 3 4. Discuss the implications for succession of the business if the decision were to pass the business to one of the sons sell the business to someone outside the family. Instructors may opt to use these questions or ask the students to complete a simple case analysis including a problem statement, SWOT, alternatives and recommendation. Solutions to discussion questions 1. Discuss the implications of the Thomsons’ attempt to obtain additional commercial contracts (the department stores) for their products. Student answers will vary. Students will likely point out that this is becoming an increasing popular choice amongst consumers. Students should also note that the business will come with much lower margins than they have now. Some students may question if the Thompson’s should pursue this type of business. 2. Evaluate the decision to construct another greenhouse from a financial and an organizational point of view. (Use rate of return, payback, and break-even analysis in your evaluation.) The case does not provide all the financial information needed to complete the tasks at hand, so some estimates are needed. To keep things simple: Margin: 20.53% (using revenue and all expenses) New Greenhouse - $75,000 Variable Cost of the Greenhouse - $60,0000 @ 8 percent interest over ten years = $26,861.45 in interest costs. Total repayment including interest would be $86,861.45. Variable cost per year using interest only would be 26,861.45/12 = 2,238.45 Extra Income - $60,000 a year If you read through their financials, most of their costs are fixed and would likely not increase as a result of the added greenhouse. The two extra expenses would be Power and Heat@ $6,450. There is no discussion of additional labour required. Hence the income before income, taxes and depreciation would be: 60,000 – 6450 – 2,223.45 (interest) = $53, 326.55 4 3. Comment on the financial health of Thomson Greenhouse through a review of the financial statements. Student answers will vary. 4. Discuss the implications for succession of the business if the decision were to pass the business to one of the sons sell the business to someone outside the family. If the business is sold, the owner would most likely maximize the value of the company. The sale may be slightly hindered as the marketplace is changing. Leaving the business in the family would ensure the long-term continuation of the company but the owner’s may not be able to maximize the sales price. Anytime there is an internal succession there is potential for stress among family members. Case Method: Problem Statement: Long term succession/planning Strengths: • Family owned and operated • Due income • Partnership agreement – tax benefits • Income from renting land • Loyal customers • Customer Service • Commercial accounts Weaknesses: • Seasonal and perishable business • Marketing (while effective) is aged in methods • Greenhouse condition • No income in the winter • Sales Opportunities: • Pursue commercial accounts • Expand Threats: • Large retailers • Succession planning Alternatives: 1. Sell the business 2. Expand and allow one of the interested son’s to take over 5 3. Close the business 4. Pursue commercial accounts Student answers for recommendations will vary. Given the access to land, and their family’s interest in keeping the business going it would be likely that most students would see expansion and succession planning as an optimal strategy. Robinson Test Prep Co. Case overview Olivia Robinson is the founder and CEO of Robinson Test Prep, an Ontario company specializing in preparing people for the Certified Accountant (CA) exam. In the Spring of 2019 she felt that she was not achieving market share and growing in the right direction. After three years of operation, Robinson had about five ercent of the market and was facing fierce competition from her primary rival, Canadian Assessment Centres. Olivia wanted to improve marketing and gain market share. Discussion questions 1. Although Olivia is confident about her share of the market in one-to-one test prep, but she sees potential for online course offerings to expand outside the region. How could she assess the demand to ensure the idea is worth pursuing? 2. What are the quantitative factors of this new business Olivia should consider? What about nonquantitive factors? 3. Olivia is already successful in her current business, but she recognizes she is weak in a few areas. Write a small business plan for Olivia, identifying what she is missing from her current business and why those aspects are important to include. 4. Reformatting the course and adjusting the work of the professors she has hired will mean recalculating her costs. Walk Olivia through her options for financing this new business venture. Solutions to discussion questions 1. Although Olivia is confident about her share of the market in one-to-one test prep, but she sees potential for online course offerings to expand outside the region. How could she assess the demand to ensure the idea is worth pursuing? 6 Students answers will vary. Some potential answers will include she could complete a market potential and market share calculation for Canada. Other students may note that she could complete primary market research first by surveying potential customers about their willingness to enrol. The information would enable her to create pro forma financial statements. Students may also note other less formal methods such as using social media to gauge interest 2. What are the quantitative factors of this new business Olivia should consider? What about nonquantitive factors? Olivia should calculate financial statements and pro forma financial statements for any expansion. She should also consider the impact of expansion on her personal life. An expanded business may enable her to reach financial goals, enjoy her business more, challenge her, and so forth. Of course an expansion/continuation of her business may lead to an increase in risk, stress, time demands, conflicts and she may not achieve her financial goals. 3. Olivia is already successful in her current business, but she recognizes she is weak in a few areas. Write a small business plan for Olivia, identifying what she is missing from her current business and why those aspects are important to include. Students answers will vary. Students will most likely note that she needs to ramp up her marketing. She needs to expand her social media use. Students may also question her methods of course delivery and note that using online learning would make much more sense and broaden out her geographical reach. Student should also consider if she could expand on the services she is offering and sell expanded or additional customized services. 4. Reformatting the course and adjusting the work of the professors she has hired will mean recalculating her costs. Walk Olivia through her options for financing this new business venture. Student answers will vary. Savvy students may note that Olivia could likely bootstrap the expansion of her business. Students may also mention that she could borrow the money from traditional lenders, consider non-traditional lenders or sell an equity stake into her business. Faculty may want to extend the question out and ask the about the advantages and disadvantages of various methods and have students make a recommendation. 7 The Beach Buddy Case overview Jack McDonald has a brand-new product the Beach Buddy, a lightweight cooler which does not require ice and comes with a rechargeable battery, built in speakers, plug in mic, charging station and a built-in blender. McDonald is unsure about the best way to launch his product which he sees as a vast improvement over the only similar product in the market place the Coolest Cooler which requires ice to keep food and beverages cold. Discussion questions While the case does not provide formal questions allowing the instructor to formulate discussion in any direction. Instructors may want to consider the following questions: 1. Complete a SWOT of the product/company and determine if McDonald should proceed with the business: 2. What distribution strategy would you recommend to McDonald? Why? What factors does he need to consider for various strategies? 3. Would you recommend McDonald proceed with the business? Solutions to discussion questions 1. Complete a SWOT of the product/company and determine if McDonald should proceed with the business: Strengths: • Innovative product which does not require ice. • Product is multi-functional and will appeal to several marketing including college students and families. • McDonald is clearly enthusiastic about the product. • Support of his family in the form of $750,000. Family money often comes with favorable terms. • Some market research. • Healthy margins based on the $299 price point 8 Weaknesses: • No formal proof of concept • Limited market research • No formal marketing/business plan • Price is more expensive than major competitor. Opportunities: • Coolest Cooler has been a runaway success proving a market does exist. • Product is globally appealing. Threats: • Competition from the Coolest Cooler and much cheaper basic cooler modules • Potential of portable refrigerator companies entering the marketplace • Any downturn in the economy may negatively impact sales of the premium product 2. Where should McDonald initially sell the product? Why? What factors does he need to consider for various strategies? Student’s Answers will vary. Students may discuss the following: A. Crowdfunding: Students may point out that crowdfunding will offer substantial proof of concept, inject capital into the business and create exposure. This will occur at quite a low cost. Students may also note that a crowdfunding campaign will take time, McDonald doesn’t appear to need the capital and perhaps he would be better going straight to market. B. Merchants: Students may advocate for distribution through merchants either higher end of discount. Students should note that this would allow for the quickest roll out of the product in North America and using merchants could compliment any social media marketing strategy. Students should recognize that using merchants will substantially reduce margins and may cause a more complicated shelfing process. C. Amazon or Online: Students may state that McDonald could use a website or Amazon to sell his product. Amazon will cut his margins, but students should be aware that they offer a number of services to small merchants. Solely selling the product on his website and using social media is another option. The method will allow for the highest margins but would need to be supported by a substantial marketing campaign. 3. Would you recommend McDonald proceed with the business? Most students would recommend that McDonald proceed with the business based on the small number of competitors (one), healthy margins and clear market for the product. Organic Gourmet Express Case overview 9 Gourmet Express is an interesting case and remains current. The entrepreneur is starting a business which not only delivers groceries but also recipes with easy to follow instructions for busy urbanites. The meals and ingredients are premium in nature and all deliveries will come pre-sorted with detailed storage and recipe instructions. A selling feature is that all meals can be prepared in under 20 minutes. Discussion questions 1. Based on the assessment of the business do you think Organic Gourmet Express will succeed? Why or why not? 2. What gaps were missed in the business analysis? 3. What recommendations would you make to Jan Jones? Solutions to discussion questions 1. Based on the assessment of the business do you think Organic Gourmet Express will succeed? Why or why not? While answers will and should vary students should draw on the premium aspect of the service, the readiness of the ingredients and so forth. Students should recognize the competitors who have entered the market but perhaps stress the emphasis on fresh and local being a major competitive factor. 2. What gaps were missed in the business analysis? Student answers will vary. Clearly a much more comprehensive competitor analysis is required. In addition there has to be recognition of potential new entrants into the marketplace from grocery stores themselves. Some consideration should be given to price and making some money from the source of food as well. 3. What recommendations would you make to Jan Jones? Student answers will vary. Students should ultimately stress that the business can be successful but a heavy emphasis will likely be needed on the fresh and organic aspect of the products. The Winslow Clock Company Case overview 10 The Winslow Clock Company was founded by Dr. Michael Winslow, inventor of a “throwable” alarm clock. After ten years of development, Dr. Winslow is poised to present his business plan to investors. He needs capital to manufacture, market, and distribute the product. This case requires students to thoroughly examine the information given in the Winslow Clock Company business plan and to make the changes they think will improve Dr. Winslow’s chances of gaining investors’ confidence. Discussion questions 1. Based on the information here, do you think the Winslow Clock Company will succeed? Why or why not? 2. What gaps were missed in the business analysis? 3. What recommendations would you make to improve the business plan? 4. Is there a less-expensive market-entry strategy involving lower risk that should be considered? Why should Winslow consider such a strategy? Solutions to discussion questions 1. Based on the information here, do you think the Winslow Clock Company will succeed? Why or why not? Student answers will vary. 2. What gaps were missed in the business analysis? Student answers will vary. Students will most likely point out that online sales and the use of social media to promote the product would make sense. 3. What recommendations would you make to improve the business plan? The business plan as presented is basically concise and well-written, but it could benefit from a few changes. To begin with, the “Summary” is much too long. With the summary shortened, a separate financial section should be developed, expanding on the material presented now. Third, 11 there is no support offered for the sales projections or the marketing approach selected. A great deal of more information needs to be presented on the marketing of the product. 4. Is there a less-expensive market-entry strategy involving lower risk that should be considered? Why should Winslow consider such a strategy? Student answers will vary. Students should likely determine that crowdfunding would be the quickest and easiest way to provide proof of concept and funds for the business. The product as described is a good fit for crowdfunding. Windows Tech Case overview This is a good case to illustrate the start of a franchise company. The business being discussed is a home improvement business with a patented process for window restoration. Students often think about franchising in terms of restaurants or retail stores so this is a unique aspect to the case. While not asked in the case, instructors may want to ask students if they think it is a good company to franchise and look for justification in their response. Students may argue that the company is a good choice for franchising as it will allow the owner to expand quickly with limited risk, it is a patent protected product, and the franchisees will be motivated managers. Other students may argue the company is not a good choice for franchising. It’s a relatively unproven concept, there is no franchise agreement and establishing one could be difficult as it’s not clear the franchisor will be able to exert control over franchisees and accurately determine franchisee revenue and so forth. Some students may argue Ahmed would be better off selling the patent to a larger company. Questions and discussion 1. Ahmed needs to know how to go about franchising the business. What kind of legalities would be involved? 2. He knew that he had patent protection on the machine, but what kind of procedures should Ahmed follow in terms of setting up guidelines for owning a Window Tech franchise? 3. Ahmed wants to sell his franchise to the group or groups that would give the Window Tech name the most exposure and continue to emphasize the quality of the work. Which group should he target for franchising? 4. How much should the franchise cost? 12 5. How should Ahmed proceed? Solutions to discussion questions 1. Ahmed needs to know how to go about franchising the business. What kind of legalities would be involved? In general franchise business offer the most value when they meet the following: • The franchise business is a sound concept. • The franchise is distinct, practical, and fill a need. • The processes are easy to teach and clearly communicated to others. • It must be capable of being replicated and transferred to other geographic areas. Ahmed’s business certainly meets all of these standards. There may be some concern about the ability teach and execute the process but there does not appear to be much concern about this in the actual case. Some of the legal requirements may include: • Registration and disclosure with government agencies; some provinces require detailed information before franchising can begin. • The required business licences and incorporations. In addition, the franchise contract should be drawn up by someone with legal expertise to ensure that the rights of both parties are protected. 2. He knew that he had patent protection on the machine, but what kind of procedures should Ahmed follow in terms of setting up guidelines for owning a Window Tech franchise? Ahmed should develop a planned and standardized program of operations, he will need to establish initial training and an on-going support system, and he will have to carefully select his franchisees, ideally selecting people with experience or training in carpentry, restorations and/or related industry experience. 3. Ahmed wants to sell his franchise to the group or groups that would give the Window Tech name the most exposure and continue to emphasize the quality of the work. Which group should he target for franchising? Student answers will vary. One could make an argument that selling to new franchisees without existing businesses would create the largest exposure for the company/brand. In reality, he could pursue all three markets noted in the case and students should recognize he should expand outside of his geographical area. 13 4. How much should the franchise cost? Student answers will vary. Students should recognize that this remains a relatively unknown product in one geographical area and suggest a low number. Students should note that a royalty stream should be established and this should be considered the key aspect of any franchise agreement. 5. How should Ahmed proceed? Most students will likely recommend Ahmed proceed with the franchise model but some students may argue an outright sale of the technology may make the most sense. Edge Hockey Case overview Edge Hockey was founded by Jack Supple as a successful side hustle to his teaching career. Jack had stated the business four years ago as a bit of a micro company with a trial one-week experiment. Since then, Jack is running five hockey camps a year but is starting to see an overall reduction in participation rates and additional competition. As such he is questioning the future of his business. Discussion questions 1. What are some of the advantages and disadvantages in running a supplementary business such as Edge Hockey for Jack? 2. Based on the information in the case what would you recommend to Jack? Why? 3. Complete a financial analysis of Jack’s current business and determine if he will make money at 75 percent capacity? 4. If Jack is going to market his business more formally, how would you recommend he do this? Solutions to discussion questions 1. What are some of the advantages and disadvantages in running a supplementary business such as Edge Hockey for Jack? 14 The major advantage of running a side business include extra income, but beyond that Jack is likely increasing his hockey knowledge for a sport he loves, improving his social networks, enjoying himself, and achieving some self-actualization goals. The main disadvantages include the potential stress of losing money, the time he invests in the firm which likely takes up most if not all of his vacation and time away from family. 2. Based on the information in the case what would you recommend to Jack? Why? Given his family situation and his love of sports the option of closing the business does not make a lot of sense. Students may opt to recommend either Option #2 (expansion) or Option #3 (downsize). Valid arguments can be made for both. Students recommending Option #2 may note that Jack could substantially increase his profits, he enjoys the business and he has a growing family to support. Proponents of Option #3 may state that Jack could likely make the same amount of money with less risk. 3. Complete a financial analysis of Jack’s current business and determine if he will make money at 75 percent capacity? Jack’s business is similar to a lot of side hustles where the financial record keeping is fairly simple. Weeks of Business for Jack: Five @ 75% of his average capacity equates to Jack registering 25 players per week Revenue: (25*450)*5 weeks = $56,250 in revenue Ice Costs: (20 hours a week *250 an hour) * 5 weeks = $25,000 Coaching Help @ $30 an hour average, he will normally employ five coaches given his numbers. (25 hours of coaching * $30 an hour wage) = $750 coach per week. ($750 coach per week * 5 coaches) * five weeks = $18,750 in coaching expense Insurance: $2500 Supplies: $2500 A simplified Income Statement: Revenue: $56,250 Expenses: Ice Costs: $25,000 Coaches Expense: $18,750 Insurance: $2,500 Supplies: $2,500 15 Net Income: $7,500 Jack will make a small profit at 75 percent capacity. Given that more than 50% of his costs are fixed faculty may want to point out the impact of additional participants has a significant impact on Jack’s bottom line. For example, if Jack operated at 100% of capacity at 36 participants his revenue would increase to $81,000 and his profits would rise dramatically to approximately $29,000. So an additional 11 participants a week makes a significant different to Jack’s bottom line. 4. If Jack is going to market his business more formally, how would you recommend he do this? Students answers will vary. Students should recognize the importance of low cost or no cost alternatives especially social media, email campaigns and as simple as signs in rinks. Beach Stake Case overview Will Miller is a University student/entrepreneur/inventor who believes he has created the latest craze in beach toys, the Beach Stake. He is considering whether to go ahead and just order inventory or perhaps use crowdfunding to further test his concept. Discussion questions 1. What would be the advantages and disadvantages of crowdfunding for Will’s business? 2. If Will opted to use crowdfunding, what would he have to do to create a successful crowdfunding campaign? 3. Has Will overlooked anything in completing his business analysis? If so, what did he not consider? 4. What recommendations would you make to Will? Solutions to discussion questions 1. What would be the advantages and disadvantages of crowdfunding for Will’s business? There would be several advantages to crowdfunding for Will including: • Offer Will proof of concept for his product. • Provide revenue. • Increase the exposure of his products. • Expand sales to global marketplace. 16 • Get feedback. Disadvantages include: • Potential reputation loss to product if unsuccessful. • Time it takes to plan a successful campaign. • Potential loss of sales. 2. If Will opted to use crowdfunding, what would he have to do to create a successful crowdfunding campaign? Answers will vary. Students should discuss that Will should develop a plan to be successful. He will need to select an appropriate site, he will need both phots and video and a compelling story to tell. Will must also bring attention to his campaign through social media, traditional public relations and so forth. 3. Has Will overlooked anything in completing his business analysis? If so, what did he not consider? Answers will vary. People should mention that Will does not seem to have a plan to actually sell his product, money for marketing or additional activities. 4. What recommendations would you make to Will? Answers may vary. Students should see crowdfunding as a safer method for Will to determine proof of concept. The Framemakers Case overview Robert and Teresa Norman have decided to leave a family business and start their own retail picture-framing business. Discussion questions 1. What aspects of Robert and Teresa Norman’s backgrounds will contribute to their success with the picture-framing store? 2. What positive things have Robert and Teresa done in investigating the feasibility of the new store and what additional information might they have collected? From what sources could this information be obtained? 17 3. From the information provided, evaluate the business plan they have prepared for their new business. 4. Weigh the relevant pros and cons for the Normans of operating a U-Frame-It franchise instead of starting their business from scratch. 5. Evaluate the Normans’ initial approach to obtaining financing for The Framemakers. 6. Assuming you are the banker, evaluate the financial requirements and projections Robert and Teresa prepared. Solutions to discussion questions 1. What aspects of Robert and Teresa Norman’s background would contribute to success if they decide to go ahead with the picture-framing store? The Norman’s have several things going for them if their decision is to proceed with the new business. a. Robert has had business and interior design college training – both aspects should be helpful in managing the new business. b. Both Robert and Teresa enjoy working with people and have had considerable retail experience. The new business will undoubtedly involve this type of customer contact. c. The Normans have some background in the picture framing business having done it on the side for the some time. d. Robert is independent. He does not enjoy working for others. e. Teresa is interested in and is very fond of framing. f. The business may have more growth opportunities than the painting business which to some extent is limited being a service business because of the expertise of the owner. g. The proposed business is something both Robert and Teresa enjoy. 2. What positive things have Robert and Teresa done in investigating the feasibility of the new store and what additional information might they have collected? From what sources could this information be obtained? The Normans have done several positive things in their investigation: a. They have talked to a manager of a framing shop and has learned valuable information about the operations. b. They have learned about industry growth and have made contacts with the industry association, suppliers and other dealers. c. They have subscribed for the trade magazines which are relevant to the proposed business. 18 d. They have prepared a preliminary evaluation of saturation of this type of business in the City of Brandon and a per customer profit analysis. One of the first things Robert should be doing at this point is to evaluate the new opportunity relative to his goals, capabilities, and experience. He should also collect more information in order that he can prepare a financial feasibility study for the proposed business. For example: Market Potential: a. He did not clearly define his market area. Was it just the City of Brandon or a surrounding area as well? What is the population of this area? This information is likely available form the City of Brandon or the Brandon Chamber of Commerce. b. He has no idea of sales revenues in the market area for this type of business. He may be able to obtain this information from provincial or municipal government sources. If this is not available, per capita expenditures from Federal Government data may be helpful. The $32.00 spent per customer is helpful but Robert needs to get some idea of number of customers that he can expect. Another weakness of the secondary data is that it is for the "typical" store. Robert needs to obtain some information about "his" store in Brandon. He may solve this problem and lack of availability of secondary data by doing a consumer survey for his market to assess level of demand for the store. c. Some adjustments to the secondary data may be required. These would involve such things as updating the data, and allowing for in-shopping from the outlying regions around Brandon. The result of estimating market potential should be a dollar revenue based on number of customers multiplied by the amount spent per customer. Market Share: Robert should then calculate a potential market share by multiplying his store's share of retail-service capacity by the market potential. This capacity probably could be measured in square footing devoted to framing in the city. He should also make some adjustments to this amount by assessing consumer satisfaction with the existing store in Brandon (which could be obtained from the survey), and by assessing the competitive strengths and weaknesses his store might have. The above information could provide an estimated sales revenue amount Robert and Teresa could expect for the first year. Projected Income Statement: Using the figure obtained from the market share calculation combined with the expense figures already obtained, Robert should be able to construct a projected income statement. He may be well advised to verify the material and overhead expense figures of his business for the Brandon area. As part of the financial feasibility he should also calculate start-up costs. Robert and Teresa also probably moved too quickly in closing down the painting business. They should have at least waited until they had collected some of this data. 3. From the information provided, evaluate the business plan they have prepared from their new business. 19 Robert has covered some of the key aspects of a business plan such as target market, financial requirements, location, personnel, layout and regulations. However, he has left some critical points out of the plan. Objectives: Robert's only objective is to own a "big" business "someday." He should try to quantify this goal and others if possible and set a time limit. Sales and profit targets for the first year would be a good place to start. Market Approach: Although he has defined his target customer he hasn't obtained information about its size, characteristics and needs. He also needs to do more work on firming up his plans for his marketing mix (i.e., product, pricing, location and promotion) in response to the target market's needs. Robert may be overlooking some important environmental influences such as the (potential) competition in Brandon, and the economy's influence on the business. More data could be obtained on the trend to do-it-yourself picture framing as well as any legislation that might affect the business. Financial: It doesn't appear Robert has done a very thorough job of estimating the financial requirements for the business. This was discussed in Framemakers part II. He has taken much of his data from the store in Winnipeg. A part of his business plan should include the type of financial record keeping he will employ as well as operating standards which can be evaluated. Personnel: Even if he and Teresa do not plan to hire anyone at present, they should set down a division of responsibilities between themselves and begin developing plans for the recruitment and management of other employees as the business grows. Physical Facilities: Robert again appears to be approaching this aspect of planning in a haphazard way. Estimates should be obtained and evaluated before purchases are made. The location decision appears also to have been made without much evaluation although there was recognition of the need for a high traffic location. Regulations: Robert knows he must obtain a business license. There are several other potential regulations which should be investigated however. Does he need a provincial license as well as one from the city? Are there any zoning regulations which preclude the Framemakers type of business in certain locations? What taxes apply to the business? Would incorporation reduce some of the risk in starting the business? Robert would be well advised to consult a lawyer in seeking answers to these questions. 4. Weigh the relevant pros and cons for the Normans of operating a U-Frame-It franchise instead of starting their business from scratch. The relevant pros and cons to franchise for the Normans are: Pros 20 - They have little experience in the industry. A franchise would provide considerable training to overcome this deficiency which could be especially valuable during startup. - They would have some instant recognition of the name to help with market demand. This may help them in planning and obtaining needed financing. - The franchiser may provide additional services such as location selection (a very important aspect in this situation), interior layout, training, advertising, possible financing and would undoubtedly speed up the establishment time. - The "U Frame It" franchise is looking at expanding to Brandon even if the Normans do not sign on with them. This will be additional competition. Cons - The $20,000 franchise fee would be particularly burdensome for the Normans. - Robert appears to be very independent and would no doubt resent franchiser monitoring and restrictions over their operations. - It is unclear without further research what increase in sales would come from affiliation with the franchise. - There is potential for non-delivery of franchiser obligations in terms of training, advertising, discounts, etc. 5. Evaluate the Norman’s initial approach to obtaining financing for The Framemakers. Robert and Teresa were due to run into difficulties obtaining financing because of their lack of investigation. Some of the things they could have done to alleviate the problem are as follows: - Give some thought to the proportion of debt versus equity they would employ. Perhaps they might have obtained equity financing from family or prospective partners. - Much more care should have been taken in obtaining estimates of financial requirements. This information should have been tailored to Framemakers in Brandon rather than a "typical" store in Winnipeg. This would have involved utilizing both secondary and primary sources such as checking with government agencies and suppliers of necessary inventory and equipment. - The Normans might have investigated the possibility of obtaining financing from government sources. It appears that they were aware of this source. - The investigation of financial requirements should have taken place well in advance of the need for funding. This would have resulted in much less stress on the Normans as the store opening approached. - each item of start-up and operating costs should be sourced if possible with some backup for "estimates." 6. Assuming you are the banker, evaluate the financial requirements and projections Robert and Teresa prepared. 21 From the information provided in the case, we can see that Robert underestimated several items. In general, a verified source for each item on both statements should have been provided. Once again Robert appears to have been following the P.P.F.A. averages rather than obtaining information specific to Brandon. The P.P.F.A. averages also reflect results of businesses currently operating - not one just starting up. Based on the format, it is easy to see why the banker required the Normans to rework their statements several times. Some of the specific weaknesses of the proposal, some of which were mentioned, are: Proposal Requirements Inventory - 4000 appears low - should have used amounts from existing stores Equipment & Fixtures - low - should have obtained specific quotes First Month's Rent - should have verified amount from landlord Utilities & Phone deposit - should have verified amount from utility and phone company. Supplies - did not estimate an amount for supplies Contingency - should have budgeted an amount for contingencies First Year Projection Revenue - 76,800 - should have made this estimate by looking at more than P.P.F.A. averages i.e. - Winnipeg stores, adjust for Brandon and its competitive situation, surprising that Framemakers was new and would take some time to build up a clientele. Expenses - 57,600 - these should have been itemized and verified rather than rely on P.P.F.A. estimates only i.e. cost of goods sold, salaries, supplies, promotion, rent, utilities, interest, phone, repairs, and depreciation. Each of these expenses could have been different for framemakers than for the average framing shop. Top Human Tech Inc. Case overview 22 This is a case where instructors can discuss growth and how a company can succeed internationally. While the case does not come with formal questions, instructors may ask students to complete a full analysis or discuss the case in class. From a discussion standpoint, instructors may ask students the following questions: Discussion questions 1. What do you think are the keys to success for the company? 2. How will the company expand in the future? 3. What do you think about relying on word of mouth as the sole method for advertising? Solutions to discussion questions 1. What do you think are the keys to success for the company? While student answers may vary students should discuss their business strategy, investment of ownership, establishment of communications department and forwardthinking founders. 2. How will the company expand in the future? While student answers may vary students should discuss international expansion or by adding other products. Students should be concerned about quality control and impact on culture. The company is well placed to continue to pursue growth initiatives. 3. What do you think about relying on word of mouth as the sole method for advertising? While student answers will vary they should recognize that this is a low- cost way of marketing which has resulted in significant revenue. Some students will argue that in the future they may have to in fact invest in more traditional advertising. Clovis Jewellers Case overview 23 This is a very interesting case that allows for multiple uses. The instructor and students should recognize that this is a small family jewelry store, like so many, which are struggling to survive. While not professionally done, the instructor may fine this video useful in highlighting the difference between small local and online retailers: Video Title: Blue Nile vs Local Jeweler Brief Description: This is a common conversation between an online diamond shopper and a local jeweler. This one has a happy ending... Posted By: diamondvids Published: October 6, 2010 The case is detailed enough where an instructor could assign the case as a formal written case submission. In the formal submission students could be asked to complete a case analysis with a SWOT, alternatives and a recommendation or students could be asked to follow the fundamental question in the case and evaluate each section. Problem Statement: Company wants to be sustainable in the long term. Recent decline in sales due to external forces. Online competition is also an issue (not discussed in detail in the case – students should be aware). Strengths: • Purchasing gemstones direct • Reputation/Brand • Little employee turnover • Quality merchandise • Good markup • Owner • Quality control • Improvements in management of finances Weakness: • Recent decline in sales • Financial controls • Reliant on ring and stone sales • Potential damage to brand due to product switch (temporary) • Formulating prices • Marketing • Lack of inventory control • Lack of formal planning 24 Opportunities: • Customization • Expansion • Online sales • Target events Threats: • Competition including online • Local economy • Regulations • Anti diamond campaign Alternatives: 1. Focus on customization 2. Improve marketing, especially social media and stress local business angle. 3. Cut prices due to new deal with diamond suppliers. Students could create a pro and con table. Student recommendations should vary. It would likely make the most sense to focus on either alternative one or two or a combination of them both. Blake Lock and Security Systems Case overview Paul Blake started Blake Lock and Security Systems (BLSS) two years ago offering locksmithing services to residential and commercial customers as well as automobile owners in the greater Halifax area. Blake has limited his service offerings by excluding alarm installations and after hours emergency service. Discussion questions 1. Paul Blake has asked you to be his mentor as he has decided to overhaul his business practices. What first steps would you advise Paul to take? Why? Solutions to discussion questions 1. Paul Blake has asked you to be his mentor as he has decided to overhaul his business practices. What first steps would you advise Paul to take? Why? 25 Student Answers will vary. Students will likely engage in a discussion about marketing and the long-term sustainability of the business. Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette CHAPTER LEARNING OBJECTIVES PART ONE: The Decision to Start a Small Business CHAPTER 1: The Role of Entrepreneurship & Small Business in Canada LO1. Discuss the level of interest and activity in the small business sector. LO2. Evaluate common methods of defining small business and explain why a definition is important. LO3. Summarize the current extent of entrepreneurship and small business in Canada. LO4. Describe the benefits a healthy small business sector can offer to society. LO5. Explain the probable future environment for entrepreneurship and the small business community. ANSWERS TO SMALL BUSINESS IN ACTION & SMALL BUSINESS BEGINNINGS QUESTIONS SMALL BUSINESS IN ACTION 1-1: CROWDFUNDING HELPS BROTHERS BUILD A BETTER WATER BOTTLE 1. Do you think the Pressa Bottle will continue to be a successful product? Why or why not? Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette Answer: Student Choice 2. What do you think are some of the advantages and disadvantages of crowdfunding? Answer: Student Choice – however students should mention from the entrepreneur’s perspective that it allows them to test market product ideas, provides additional sources of capital and can assist in pre-selling products. From a disadvantage side, entrepreneurs have additional work to communicate with many people, it is fairly unregulated and some entrepreneurs and/or investors could act unethically. 3. Visit the Kickstarter website and report back to the class on some of the best ideas that are being pitched. What are the terms associated with the ideas? Would you personally donate or invest money using crowdfunding? Answer: Answer will vary on student work. SMALL BUSINESS IN ACTION 1-2: YOUNG CANADIAN SOCIAL ENTREPRENEURS 1. How would you define social entrepreneurship? Do you think there is a difference between social entrepreneurs and regular entrepreneurs? Why, or why not? Answer: Student Choice 2. Can an entrepreneur consider themselves social entrepreneurs if they retain all the profits from their business? Answer: Student Choice – however students may mention that businesses can provide society benefits and still make profits. Donating profits is not essential to being a social entrepreneur. 3. Either in groups or individually, list some ideas for a social enterprise. If time permits, discuss the marketing mix for the social enterprises, including the product or service you will sell, how you will promote the business, the price you will charge, and where the business will be located. Answer: Answer will vary on student work. SMALL BUSINESS IN ACTION 1-3: FASHIONING AN ONLINE BUSINESS 1. What are some of the advantages and disadvantages of the Chic Marie business model? Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette Answer: Students may mention from a customer’s perspective that they will enjoy being able to replenish their wardrobe once a month, that the company is providing women with a service which is relatively low in cost, consumers can purchase clothes they like and the use of the Scarlett app. From the business perspective students may mention the high growth in sales, relationships with designers may allow for cheaper clothes and that the company is essentially renting out clothes at a significant margin. On the disadvantage side for consumers, students may discuss that clothes may not fit or be out of style. Speaking specifically to the business, students may discuss the high start-up costs, the need to find additional designers, and the difficulty in raising capital. 2. Do you think Chic Marie will be a long-term success? Why or why not? Answer: Student Choice 3. Simard is quickly expanding her business both in Ontario and into the United States. Do you think this is a good idea? Why or why not? What are some advantages and disadvantages of pursuing expansion? Answer: Student Choice – however students may mention that expansion will lead to higher sales, increase the brand awareness and enable Simard to gain valuable first-mover advantage. Disadvantages could include difficulties in managing a rapidly growing company including keeping costs in check, the need to raise additional funds, where to find new designers, and that the U.S. market tends to be more competitive than Canada. 4. Were you surprised Simard experienced some initial difficult in raising capital? Why or why not? Answer: Student Choice – however students should mention from the entrepreneurs perspective that it allows them to test market product ideas, provides additional sources of capital and can assist in pre-selling products. From a disadvantage side entrepreneurs have additional work to communicate with many people, it is fairly unregulated and some entrepreneurs and/or investors could act unethically. 5. There are many monthly subscription services. Working either in a small group or independently, develop some products you think would fit well into this subscription model. Be sure to justify the choices, identify target markets, and how you would appeal to customers. Answer: Answer will vary on student work. 6. Use Internet resources to find out about the current state of Chic Marie's business. Has the business model remained the same? Has the company reached its expansion goals? Answer: Answer will vary on student work. Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette SMALL BUSINESS BEGINNINGS 1-2: PEACE BY CHOCOLATE 1. The Hadhad family has been quite successful in public relations (PR). The business has been featured in numerous articles and on television. What are some of the advantages of this type of marketing? Do you think the business will be able to maintain this positive PR long term? Why or why not? Answer: Students may discuss that PR is free and it comes with credibility with readers/consumers. Students may offer different opinions on the company’s ability to maintain as much PR coverage in the long run. Some students may offer that the media may move on to more current stories while other students may note that the Hadhad’s appear interested in using PR for their business and if they maintain a good strategy and promote new topics/concepts that it may continue. 2. What do you think would be some of the advantages and disadvantages associated with starting a business in rural Nova Scotia, specifically Antigonish, which has a population of approximately 4300 people. Answer: Advantages: Caring community, community support, people who moved away may be willing to move back for work, lower wages, lower rent, assist in generating PR, less taxes. Disadvantages: Inability to attract workers, far away from urban centres may increase shipping costs, taxes and costs could be higher 3. Do you think Peace by Chocolate should be considered a social enterprise? Why or why not? Answer: Answer will vary on student work. SMALL BUSINESS IN ACTION 1-4: INNOVATION IN NEW BUSINESS - A SOCIAL MEDIA SUCCESS STORY 1. What are some of the advantages and disadvantages of using a product like HootSuite for your company? Answer: Student Choice – however students may discuss that HootSuite allows business owners to post to multiple social media sites from one location saving time and money. 2. Given that many consumers are becoming increasingly concerned about privacy rights, do you think HootSuite or companies that use its social media tracking tools could be subject to public backlash against monitoring social media use and activities? Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette Answer: Student Choice 3. If time permits, visit HootSuite’s website, and try out the free tools. Report back to the class if the tools worked as you expected. Prepare a summary of the features HootSuite can offer businesses. Answer: Student Choice SMALL BUSINESS IN ACTION 1-5: ECONOMIC DOWNTURN PRESENTS OPPORTUNITIES 1. Why do you think some companies fail to plan for a downturn in the economy? Answer: Student Choice – however students may mention it is human nature to assume things will be good for a long period of time; owners may want to keep the money rather than re-invest. 2. Do you think it is ethical for businesses to negotiate deep price cuts from suppliers? Why or why not? Answer: Student Choice 3. What on-going actions do you think an entrepreneur should engage in to sustain a business for the long? Answer: Student Choice – however some students many mention investing in the business; continuous improvement; diversification ANSWERS TO DISCUSSION QUESTIONS 1. Why do you think entrepreneurial activity has increased? Do you think these trends will continue? Why or why not? Answer: Student Choice - however the following aspects should be covered - significant contribution to society as a result of a healthy small business sector. Examples such as employment, innovation, productivity, flexibility, competitiveness and social contributions should be included. 2. What excites or interests you about being an entrepreneur? What are your major concerns? Answer: Student Choice 3. Under what conditions would the various definitions of small business be more appropriate? (i.e., the level of profit may be used by Revenue Canada to determine the small business tax rate.) Answer: The appropriate definition would depend on the use of the information. For example: To obtain counselling assistance form the CASE Program of the Business Development Bank of Canada, the number of employees would be used (75). Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette To obtain funding under the Small Business Loans Act gross sales would be used $5 million). To receive the reduced "Small Business" tax rate from Revenue Canada net operating profit would be used ($500,000). 4. What is meant by the statement “Small business is the backbone of the Canadian economic system"? Give evidence to support this statement. Answer: Several factors illustrate the impact of small business to our economy. 1. As indicated in the text, there is considerable evidence that those economies that provide the most encouragement for entrepreneurship and small business are those which have experienced the highest growth rates since the 1950's. 2. Small firms have accounted for most of the new jobs created. 3. Further evidence shows that 97% to 99% (depending on the definition) of businesses operated are small businesses and approximately 50% of gross domestic product is provided by small business. 4. A large portion of the inventions we enjoy today were provided by Canadian entrepreneurs. 5. Small businesses make approximately 32% of all business profits. 6. Approximately 29% of Canadian gross sales and 17.5% of exports are made by small business. 7. 20% of all business assets are owned by small businesses. 8. Small business is also more flexible and can respond more quickly to changes in the economy. 9. A much higher percentage of small businesses are Canadian owned than compared to large corporations. 10. Finally, small businesses seem to be more socially conscious than large companies and tend to operate with the community in mind. All of these factors contribute to the theory that small business is the backbone of our economy. 5. The computer consulting business is becoming more and more fragmented. In data processing, for example, there are hardware versus software consultants, batch versus time sharing service Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, Tenth Edition Prepared by Peter Mombourquette bureaus, and mainframe versus microcomputer specialists. What effect does this type of industry fragmentation have on the small business community? Answer: Fragmentation of markets to better service consumer needs and wants is beneficial to the future of small business. A small specialized time sharing service bureau, for example, has some economic and service advantages over a large firm with large overhead that handles all types of computer services. On this premise the outlook for small business in the future is very promising as many industries are following a similar pattern as the data processing industry. ANSWER TO EXPERIENTIAL EXERCISES 1. Form groups of two to three, and start a small business or mini-venture that will run for a period of four to six hours. The only rules are: a. The business has to be legal b. No lotteries c. Maximum investment of $1 d. Businesses must cease operations at day’s end. After completing the project, write a reflection stating what you did, whether you made a profit, and what you learned. you may also present this information to the class. Answer: Dependent on student choice. 2. Ask three small business owners about their projections for the future of small business. What problems and opportunities do they foresee? Answer: Will vary based on the entrepreneurs selected 3. Using Internet resources, find out how different Canadian organizations define social enterprise. After preparing a summary report on your findings, draft your own definition of the term. Answer: Student Choice 4. Write a short essay discussing your views on the future of small business given current trends in society and in your geographic area. Answer: Student Choice – however student's answers should be positive. CONCEPT CHECKS (Not in text) Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, Tenth Edition Prepared by Peter Mombourquette Why has there been an increase in entrepreneurial activity throughout the world in recent years? Answer: Many countries are turning to small business and private initiative to assist in their economic growth. What evidences are there that there is an entrepreneurial "revolution" occurring? Answer: The entrepreneurial revolution is evidenced by increases in: business establishments, employees in small businesses, government small business programs, college small business classes, and entrepreneurial activities of large companies. Why is it important to define small business? Answer: Although defining a small business is difficult, it is important to make for comparison, evaluation, and various lending and assistance programs. What are the criteria used to make this definition? Answer: Some of the common criteria in defining small are total revenue, number of employees, profitability and type of management structure. What is the extent of small businesses in Canada? Answer: Small business accounts for roughly 98% of all businesses, 29% of gross sales, 26% of gross domestic product and 56% of the labour force, 32% of business profits, 17.5 % of all business assets, 25% of exports and 52% of net job creation. What two demographic groups have shown an increase in proprietorships in recent years in Canada? Answer: In recent years there has been an increase in small businesses established by seniors and women. What are the contributions small businesses can make to a society? Answer: Small business promotes Canadian ownership and economic growth, provides jobs, innovations, high productivity, flexibility, and social contributions to a society. What are the positive and negative factors which may influence the small business community in the future? Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette Answer: The climate for starting a small business in the future should improve; however there will continue to be competitive disadvantages which may negate this potential advantage. The factors which may influence this change include technology, consumer demographics and buying patterns, and the competitive aspects of markets. KEY TERMS (Not in text) Baby Boom Generation: People born between 1946 and 1964 and are the 2nd largest cohort of people in Canada. They are characterized by being quite wealthy and are attractive potential customers for business owners. Canadian Federation of Independent Businesses: A non-profit organization which represents, promotes and advocates for small businesses and entrepreneurs in Canada. Entrepreneurs: A person who starts a business. A wide variety of definitions exist. Entrepreneurship: The act of starting a new business or acting intrapreneurially within an existing company. Labour Intensity: The number of employees a firm employs to produce outputs. Global Entrepreneurship Monitor: A report which examines new and growing business in 21 countries. Millennial Generation: People who were born between 1980 and 2000. They are the largest cohort of people in Canada and entrepreneurs are interested in Millennials as potential customers due to the size of the group and their spending power. Red Tape Reduction Action Plan: A Federal government plan to reduce red tape and regulations taking into account their impact on small business. Social entrepreneur: A person who applies the skills of entrepreneurship, such as risk taking, problem solving, and business planning, to create social change. Social entrepreneurs not only strive to make money but also work toward making the world a sustainable community. Social enterprise: An organization that is committed to improving society. Small Business: The term is defined differently by numerous organizations in Canada. Most definitions cite state a business must be independently managed and have fewer than 500 employees. SME: Small and medium enterprise Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette VIDEOS Other Video Resources: • Mount Saint Vincent University, Entrepreneurship Panels: Subscribe to this YouTube channel here: • Suggested Panel: GROUP PROJECT While many of the experiential questions would work as group projects. Questions 1 and 3 from this Chapter would make excellent group assignments/projects. Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette CHAPTER LEARNING OBJECTIVES CHAPTER 2: The Small Business Decision LO1. To discuss the advantages and disadvantages of small business ownership as a starting point in making the small business decision. LO2. To review the personal and organizational attributes of a successful small business owner. LO3. To explain the reasons some businesses succeed and others fail. LO4. To discuss entrepreneurial development in large business. LO5. To identify the differences between an entrepreneur and a manager. ANSWERS TO SMALL BUSINESS IN ACTION & SMALL BUSINESS BEGINNINGS QUESTIONS SMALL BUSINESS IN ACTION 2-1: MOMPRENEURS Copyright © 2020, McGraw-Hill Ryerson Ltd. Balderson, Canadian Entrepreneurship & Small Business Management, 11th Edition Prepared by Peter Mombourquette 1. Given the challenges associated with starting and running a business, do you think being a mompreneur allows for more work–life bala