MgtC39 - New Business Planning & Creation
MANAGEMENT

 

Lecture #1 - The Role of Entrepreneurial Small Business

Purpose of This Lecture

Introduction and Overview to the Course

Administrative and Logistical Details

 

Why Learn How to Write A Business Plan?

Context of small, entrepreneurial (SME) business sector

Number of small, entrepreneurial businesses

Importance of SME sector to employment

Importance of SME sector to job creation

SME success and failure rates

The role of the business plan

 

Recommended reading

"Small Business, Big Picture"

Andreea Dulipovici and Benjamin Kahn

CFIB Research, November 2004

http://www.cfib.ca/research/reports/Canada%20Big%20Picture%2004E.pdf

 

 


Importance of Entrepreneurial/Small Business

Approximately 2,450,000 business enterprises in Canada.

Size breakdown is:

employees
# of enterprises
 % cumul. %
self-employed

1,496,000

61.0% 61.0%
< 5 employees

718,282

 29.3% 90.3%
6 - 19

170,033

6.9% 97.2%
20 - 49

42,580

 1.7% 98.9%
50 - 99

13,358

0.5% 99.4%
100 - 499

9,221

 0.4% 99.8%
500 or more

2,322

0.1% 100%

Source: Insights On... Statistics Canada Document 61F0019X1E Vol. 4 No.1
Frequently Asked Questions on Small Business May 2000
http://www.statcan.ca:80/english/freepub/61F0019XIE/vol4no1.pdf

 

What About Jobs?

The Canadian Private sector workforce = 12 million

# of workers approx. avg. number of employees number of workers # of workers % of workforce cumulative %
self employed 1 1,496,200 1.49 mm 12.4% 12.4%
2 - 5 2.5 718,282 1.80 mm 14.9% 27.3%
6 - 19 9 175,000 1.60 mm 12.7% 40.0%
20 - 49 25 43,500 1.06 mm 8.8% 48.8%


Conclusion:

50% of workforce work with less than 50 others.

Up from 30% in 1979

Source: Insights On... Statistics Canada Document 61F0019X1E Vol. 4 No.1
Frequently Asked Questions on Small Business May 2000
http://www.statcan.ca:80/english/freepub/61F0019XIE/vol4no1.pdf

 



Small Business Statistics in USA

Refer to: http://app1.sba.gov/faqs/faqindex.cfm?areaID=24

Similar to Canada

c. 16 million "businesses"

c. 10.3 million (65%) "businesses" run by self-employed

c. 5.7 million (35%) businesses have employees

c. 5.0 million (88%) employers have <20 employees

Approx. 99% of all businesses are "small"

Approx 50% of workforce in "small" businesses

Size of Firm Total# of employees(millions) % of workforce cumulative
total %
0-4 5.6 5.2 5.2
5-9 6.6 6.1 11.3
10-19 8.0 7.4 18.7
20 - 99 19.3 17.92 36.6
100 - 499 15.4 14.2 50.8
500 + 53.1 49.1 99.9
total 108.1    

Source: US Small Business Administration

source: http://www.sba.gov/advo/stats/sb_econ2004.pdf

 

Small Firms Increasing in Number

Large Firms are Disappearing


Firm Creation - USA 1993 to 1998

  Very Small Firms< 20 employees Very large Firms> 500 employees
1997 - 98 53,237 -213
1996 - 97 64,183 -213
1995 - 96 86,993 -89
1994 - 95 96,445 -122
1993 - 94 69,770 -188

Source: US Small Business Administration http://www.sbaonline.sba.gov/advo/stats/dyn_b_d8998.pdf


Job Creation - USA 1991 to 1998

Jobs Created (in thousands) very small firms< 20 employees very large firms> 500 employees
1997 - 98 1,386 1,078
1996 - 97 1,557 750
1995 - 96 1,435 407
1994 - 95 1,677 978
1993 - 94 1,311 351
1992 - 93 1,475 161
1991 - 92 1,142 -321
1990 - 91 550 -454
Total 90 - 98 10,533 2,950

Source: US Small Business Administration http://www.sbaonline.sba.gov/advo/stats/dyn_b_d8998.pdf

 


Small Firms Spend More on R&D


Firms with sales <$1 million spend 2x - 3x more on R&D per $ of sales than the average

Source: Canadian Federation of Independent Business


New Firms Hire Young People More Readily

In 1996:

1 year old firms:  30% of employees < 25 yrs. old
11 year old firms: 15% of employees < 25 yrs. old

Source: Canadian Federation of Independent Business, "On Hire Ground", 1996
http://www.cfib.ca/hire/eng1_38/nature6.htm
page 24

 

Job Creation

US government: small firm dominated sectors will contribute 60% of all new jobs between 1994 - 2005.

High Technology Employment: 73% of high tech. firms have fewer than 20 employees.

 


Innovation

Small firms produce 55% of innovations

Produce twice as many innovations per employee as large firms.

Small firms obtain more patents per sales dollar.

Probably make more discoveries: research shows small firms less likely to patent discoveries.

 

 


SUMMARY - JUSTIFICATION OF THIS COURSE


99% of all businesses in Canada employee < 50 people

Those businesses account for +/- 45% of all jobs - and rising

Those firms hire younger workers - i.e. YOU

They produce more innovations.

They obtain more patents.

 


Another Statistic About Small Firms

80% of small businesses fail within the first 5 years.

 

This Course: tools to evaluate business ideas

How: by discussing, and making you write about

Primary market research
Secondary market research
Marketing plan
Distribution plan
Price structure
Cash requirements
Financing structure
Income statements
Venture capital investment
Share valuation


 

The Business Plan

A business plan has two purposes:

Planning document. Entrepreneurs write business plans as means of articulating their plans, ideas, and assumptions in black and white.

Marketing document. Document that entrepreneurs show to bankers, venture capitalists, private investors as means of convincing them that business has been analysed, risks identified, and rewards quantified.

Business plan is first - sometimes, only - contact between entrepreneurs trying to build a business and potential suppliers of finance.

A business plan should be written with the reader in mind.