Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

Part one
The Decision To Start A Business . . . . . . . 1
Chapter 1

The Role of Entrepreneurship and

Small Business in Canada . . . . . . . . . . . . . . . . . . . . 2
Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . . . 3
The Entrepreneurial Revolution . . . . . . . . . . . . . . . . . 4
Increases in the Number of Business
Establishments . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Increases in the Number of Employees
of Small Businesses . . . . . . . . . . . . . . . . . . . . . . 8
Increases in Government Interest and Programs . . . 8
Increases in the Number of SmallBusiness-Related Courses at Colleges
and Universities . . . . . . . . . . . . . . . . . . . . . . . . . 8
Increases in Entrepreneurial Activities
in Large Businesses . . . . . . . . . . . . . . . . . . . . . . 8
Increases in the Political Power of
Small Business . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Improvement in the Image of Small Business . . . . 9
What Is Small Business? . . . . . . . . . . . . . . . . . . . . . . 10
Comparison and Evaluation . . . . . . . . . . . . . . . . . 10
Government Programs . . . . . . . . . . . . . . . . . . . . . 10
Lending Programs . . . . . . . . . . . . . . . . . . . . . . . . 10
Current State of Small Business in Canada . . . . . . . 11
Young Entrepreneurs . . . . . . . . . . . . . . . . . . . . . . 11
Senior Entrepreneurs . . . . . . . . . . . . . . . . . . . . . . 12
Female Entrepreneurs . . . . . . . . . . . . . . . . . . . . . . 12
Immigrant Entrepreneurs . . . . . . . . . . . . . . . . . . . 14
Entrepreneurial Activity by Industry . . . . . . . . . . 14
Entrepreneurial Activity by Region . . . . . . . . . . . 14
Contributions of Small Business . . . . . . . . . . . . . . . . 16
Labour Intensity . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Innovations and Inventions . . . . . . . . . . . . . . . . . 16
Productivity and Profitability . . . . . . . . . . . . . . . . 17
Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Canadian Ownership . . . . . . . . . . . . . . . . . . . . . . 17

00-Balderson-Prelims.indd 4

Small Business Health as a Link to

Economic Growth . . . . . . . . . . . . . . . . . . . . . .
Social Contributions . . . . . . . . . . . . . . . . . . . . . . .
Small Business and the Future . . . . . . . . . . . . . . . . .
Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer Demographics and Buying Patterns . .
Competitive Aspects of Markets . . . . . . . . . . . . .
The Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Political Climate . . . . . . . . . . . . . . . . . . . . . .
The Social Climate . . . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter Problems and Applications . . . . . . . . . . . . .
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . .

18
18
18
18
18
19
20
22
22
23
24
24
25
25

Chapter 2

The Small Business Decision . . . . . . . . . . . . . . . 26

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . . 27
The Small Business Decision:
Personal Evaluation . . . . . . . . . . . . . . . . . . . . . . . 28
Advantages of Small Business Ownership . . . . . . . . 28
Disadvantages of Small Business Ownership . . . . . . 31
Demographic Characteristics of Entrepreneurs . . . . 33
Personality Characteristics Required by
Successful Entrepreneurs . . . . . . . . . . . . . . . . . . . 33
The Small Business Decision:
Organizational Evaluation . . . . . . . . . . . . . . . . . . 38
Small Business Successes . . . . . . . . . . . . . . . . . . . . . 38
Entrepreneurial Success in Large Businesses . . . 39
Small Business Failures . . . . . . . . . . . . . . . . . . . . . . 39
Entrepreneurship and Small Business
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Entrepreneurial Skills . . . . . . . . . . . . . . . . . . . . . . 42
Managerial Skills . . . . . . . . . . . . . . . . . . . . . . . . . 42
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Chapter Problems and Applications . . . . . . . . . . . . . 44
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Appendix 2A: Entrepreneur Suitability Checklists . . . 44
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . 44
Comprehensive CaseSid Stevens: Part 1 . . . . . . . 45

10-12-15 10:06 AM

Contents

Chapter 3

Evaluation of a Business Opportunity . . . . . . . 47

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . . 48
Non-quantitative Assessment of
Business Opportunities . . . . . . . . . . . . . . . . . . . . . 49
Idea Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Evaluating How to Break Into the Market . . . . . . . . 51
Developing a Strategic Competitive Advantage . . . . 52
Collecting Information . . . . . . . . . . . . . . . . . . . . . . . 54
Sources of Information . . . . . . . . . . . . . . . . . . . . . 55
Secondary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Primary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Quantitative Assessment of Business
Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Preparing the Feasibility Analysis . . . . . . . . . . . . 61
Step 1: Calculate Market Potential . . . . . . . . . . . . 61
Step 2: Calculate Market Share . . . . . . . . . . . . . . 63
Step 3: Calculate Net Income and
Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Chapter Problems and Applications . . . . . . . . . . . . . 71
Web Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Appendix 3A: Small Business Reference
Books and Sources of Information . . . . . . . . . . . . 72
Suggested Periodicals for Small Business . . . . . . 74
Online Sources of Assistance for
Small Business . . . . . . . . . . . . . . . . . . . . . . . . . 75
Organizations and Trade Associations
that Assist Entrepreneurs . . . . . . . . . . . . . . . . . 76
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . 77
Comprehensive CaseSid Stevens: Part 2 . . . . . . . 78
Video Cases for Part 1 . . . . . . . . . . . . . . . . . 79
Java Nook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Bright Lights, Deep Waters . . . . . . . . . . . . . . . . . 79
Cases for Part 1 . . . . . . . . . . . . . . . . . . . . . . . . 80
Petite Shop (A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Petite Shop (B) . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Big Ds Painting Company . . . . . . . . . . . . . . . . . 82
Katies Custom Engraving Logos . . . . . . . . . . . . 84

00-Balderson-Prelims.indd 5

Part two
Preparing for Small Business
Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Chapter 4

Organizing a BusinessThe Business Plan . . 88

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . . 89
Getting Started: Establishing the Business . . . . . . . . 90
Advantages of Organizing a Small
Business from Scratch . . . . . . . . . . . . . . . . . . . . . 90
Disadvantages of Organizing a Small
Business from Scratch . . . . . . . . . . . . . . . . . . . . . 91
The Small Business Plan . . . . . . . . . . . . . . . . . . . . . . 91
Components of the Plan . . . . . . . . . . . . . . . . . . . . . . 93
Prepare a Table of Contents . . . . . . . . . . . . . . . . . 93
Prepare a Synopsis of the Plan in an Executive
Summary and Background Statement . . . . . . . 93
Describe the Management Team . . . . . . . . . . . . . 94
Establish Business Objectives . . . . . . . . . . . . . . . 94
Plan the Marketing Approach . . . . . . . . . . . . . . . 94
Describe the Selection of the Location . . . . . . . . 96
Determine the Physical Facilities . . . . . . . . . . . . . 99
Plan the Financing . . . . . . . . . . . . . . . . . . . . . . . 101
Plan the Personnel . . . . . . . . . . . . . . . . . . . . . . . 102
Investigate the Legal Requirements . . . . . . . . . . 102
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Chapter Problems and Applications . . . . . . . . . . . . 109
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Appendix 4A: Checklist for a Small
Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Appendix 4B: Sample Business Plans . . . . . . . . . . 112
Business Plan 1Retail Stocking Store,
The Sock Hop . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Business Plan 2Quality Cuts . . . . . . . . . . . . . . . . 126
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . 137

Chapter 5

Buying a Business . . . . . . . . . . . . . . . . . . . . . . . 138

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 138
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 139
Purchasing an Existing Business . . . . . . . . . . . . . . 140
Advantages of Purchasing . . . . . . . . . . . . . . . . . 140
Disadvantages of Purchasing . . . . . . . . . . . . . . . 141
Sources of Businesses for Sale . . . . . . . . . . . . . . . . 142

10-12-15 10:06 AM

vi

Contents

Evaluating a Business for Sale . . . . . . . . . . . . . . . .

Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . .
The Previous Owner . . . . . . . . . . . . . . . . . . . . . .
Financial Condition of the Business . . . . . . . . . .
Condition of the Assets . . . . . . . . . . . . . . . . . . .
Quality of Personnel . . . . . . . . . . . . . . . . . . . . . .
External Relationships of the Business . . . . . . .
Condition of the Records . . . . . . . . . . . . . . . . . .
Determining the Price or Value of a Business . . . .
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings Value . . . . . . . . . . . . . . . . . . . . . . . . . .
Combination Methods . . . . . . . . . . . . . . . . . . . .
The Purchase Transaction . . . . . . . . . . . . . . . . . . . .
Negotiating the Deal . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter Problems and Applications . . . . . . . . . . . .
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix 5A: Checklist of Considerations
in Purchasing a Business . . . . . . . . . . . . . . . . . .
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive CaseSid Stevens: Part 3 . . . . . .

Chapter 6

143
143
143
144
145
146
146
146
146
147
147
147
148
150
151
152
152
153
153
155
156

Franchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 158
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 159
History and Background of Franchising . . . . . . . . . 160
What Is Franchising? . . . . . . . . . . . . . . . . . . . . . . . 163
Advantages of Franchising . . . . . . . . . . . . . . . . . . . 164
Potential Disadvantages of Franchising . . . . . . . . . 166
Evaluation of a Franchise Opportunity . . . . . . . . . . 167
Franchisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Industry Associations . . . . . . . . . . . . . . . . . . . . . 168
Professionals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Other Franchisees . . . . . . . . . . . . . . . . . . . . . . . . 169
Government Agencies . . . . . . . . . . . . . . . . . . . . 169
Additional Areas to Investigate . . . . . . . . . . . . . 169
The Entrepreneur as Franchisor . . . . . . . . . . . . . . . 170
What Businesses Can Be Franchised? . . . . . . . . 170
How Does One Become a Franchisor? . . . . . . . . 170
Franchising in the Future . . . . . . . . . . . . . . . . . . . . 172
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Chapter Problems and Applications . . . . . . . . . . . . 173
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

00-Balderson-Prelims.indd 6

Appendix 6A: A Sampling of Franchises

Operating in Canada . . . . . . . . . . . . . . . . . . . . . . 174
Appendix 6B: A Checklist for the Potential
Franchisee: Questions to Answer
Affirmatively before Going into Franchising . . . 175
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . 178

Chapter 7

Financing the Small Business . . . . . . . . . . . . . 179

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 179
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 180
Small Business Financing . . . . . . . . . . . . . . . . . . . . 181
Determining the Amount of Funds Needed . . . . . . 182
Start-up Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Ongoing Operating Costs . . . . . . . . . . . . . . . . . . 182
The Owners Net Worth . . . . . . . . . . . . . . . . . . . 183
Determining Types of Financing . . . . . . . . . . . . . . 184
Equity Financing . . . . . . . . . . . . . . . . . . . . . . . . 184
Debt Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Determining the Term of Financing . . . . . . . . . . . . 193
Preparing a Proposal to Obtain Financing . . . . . . . 194
Criteria Used in the Loan Decision . . . . . . . . . . 194
Lender Relations . . . . . . . . . . . . . . . . . . . . . . . . 197
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Chapter Problems and Applications . . . . . . . . . . . . 198
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Appendix 7A: Provincial Equity
Capital Programs . . . . . . . . . . . . . . . . . . . . . . . . 199
Appendix 7B: Federal Government
Assistance Programs for Small Business . . . . . . 200
Appendix 7C: Provincial and Territorial
Government Financial Assistance Programs
and Agencies for Small Business . . . . . . . . . . . . 202
Appendix 7D: Venture Capital Firms In Canada . . . 205
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . 206
Comprehensive CaseSid Stevens: Part 4 . . . . . . 207
Video Cases For Part 2 . . . . . . . . . . . . . . . . 208
Beer Mitts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
Cottage Cheesecake Industry . . . . . . . . . . . . . . . 208
Bulldog Interactive Fitness . . . . . . . . . . . . . . . . . 209
Easy Wash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Cases for Part 2 . . . . . . . . . . . . . . . . . . . . . . . 209
Clarks Sporting Goods . . . . . . . . . . . . . . . . . . . 209
Jensen Roofing . . . . . . . . . . . . . . . . . . . . . . . . . . 210
Conrads Photographers Supplies . . . . . . . . . . . 213
Kellys Grill . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
Second Cup . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215

10-12-15 10:06 AM

vii

Contents

Part threE
Managing the Small Business . . . . . . . 217
Chapter 8

Marketing Management . . . . . . . . . . . . . . . . . . . . 218

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 218
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 219
The Role of Marketing Management in
the Small Business . . . . . . . . . . . . . . . . . . . . . . . 220
The Target Customer . . . . . . . . . . . . . . . . . . . . . . . 220
The Consumer Market . . . . . . . . . . . . . . . . . . . . 221
The Organization Market . . . . . . . . . . . . . . . . . . 223
The Export Market . . . . . . . . . . . . . . . . . . . . . . . 225
Influences External to the Organization . . . . . . . . . 230
Developing the Product or Service . . . . . . . . . . . . . 232
Developing the Distribution System . . . . . . . . . . . . 234
Channel Options . . . . . . . . . . . . . . . . . . . . . . . . . 236
Channel Length . . . . . . . . . . . . . . . . . . . . . . . . . 236
Channel Intensity . . . . . . . . . . . . . . . . . . . . . . . . 237
Multi-Level Marketing . . . . . . . . . . . . . . . . . . . . 237
Setting the Price for the Good or Service . . . . . . . . 237
Cost-Based Pricing . . . . . . . . . . . . . . . . . . . . . . . 237
Demand-Based Pricing . . . . . . . . . . . . . . . . . . . . 238
Competition-Based Pricing . . . . . . . . . . . . . . . . 239
Value-Based Pricing . . . . . . . . . . . . . . . . . . . . . . 239
Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
Types of Promotion . . . . . . . . . . . . . . . . . . . . . . 240
Steps in a Promotional Campaign . . . . . . . . . . . . . . 242
Customer Relationship Management for
the Small Business . . . . . . . . . . . . . . . . . . . . . . . 244
The Database Information System . . . . . . . . . . . 244
Database Marketing for the Small Business . . . 244
Applications of Customer Relationship
Management and Databases . . . . . . . . . . . . . . . . 245
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
Chapter Problems and Applications . . . . . . . . . . . . 248
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
Appendix 8A: Advertising as Practised by
Selected Small Businesses . . . . . . . . . . . . . . . . . 249
Appendix 8B: Checklist for a Marketing Plan . . . . 250
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . 252
Comprehensive CaseSid Stevens: Part 5 . . . . . . 253

00-Balderson-Prelims.indd 7

Chapter 9

Small Business and Electronic Commerce . . . 254

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 254
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 255
Small Business and Electronic Commerce . . . . . . . 256
What Is Electronic Commerce? . . . . . . . . . . . . . . . 256
Growth of E-Commerce . . . . . . . . . . . . . . . . . . . . . 257
Types of E-Commerce . . . . . . . . . . . . . . . . . . . . . . 257
Business to Consumer (B2C) . . . . . . . . . . . . . . . 258
Business to Business (B2B) . . . . . . . . . . . . . . . . 258
Business to Government (B2G) . . . . . . . . . . . . . 259
Consumer to Consumer (C2C) . . . . . . . . . . . . . . 260
Consumer to Business (C2B) . . . . . . . . . . . . . . . 260
E-Commerce Models . . . . . . . . . . . . . . . . . . . . . . . 260
Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
Advertising Model . . . . . . . . . . . . . . . . . . . . . . . 260
Infomediary Model . . . . . . . . . . . . . . . . . . . . . . . 261
Merchant Model . . . . . . . . . . . . . . . . . . . . . . . . . 261
Manufacturer Model . . . . . . . . . . . . . . . . . . . . . . 261
Affiliate Model . . . . . . . . . . . . . . . . . . . . . . . . . . 261
Community Model . . . . . . . . . . . . . . . . . . . . . . . 261
Subscription Model . . . . . . . . . . . . . . . . . . . . . . 261
Utility Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
Advantages of E-Commerce for the
Small Business . . . . . . . . . . . . . . . . . . . . . . . . . . 262
Expand Markets . . . . . . . . . . . . . . . . . . . . . . . . . 262
Maximize Customer Relationships . . . . . . . . . . 263
Create New Services . . . . . . . . . . . . . . . . . . . . . 263
Reduce Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
Problems with E-Commerce for Small Business . . . 264
Security Concerns . . . . . . . . . . . . . . . . . . . . . . . 264
Copyright and Intellectual Property Threats . . . 266
Logistics Problems . . . . . . . . . . . . . . . . . . . . . . . 267
Payment Systems . . . . . . . . . . . . . . . . . . . . . . . . 267
Planning and Building a Website . . . . . . . . . . . . . . 269
Identifying Objectives . . . . . . . . . . . . . . . . . . . . 269
Strategies for Website Development . . . . . . . . . 272
Choosing a Web Host . . . . . . . . . . . . . . . . . . . . . . . 273
Types of Web Hosts . . . . . . . . . . . . . . . . . . . . . . 274
Advantages of Using a Web Host . . . . . . . . . . . 274
Attracting Customers to the Website . . . . . . . . . . . 275
Register with a Search Engine . . . . . . . . . . . . . . 275
Request Links on Industry Sites . . . . . . . . . . . . . 275
Include URL on Stationery, Business
Cards, and Literature . . . . . . . . . . . . . . . . . . . 275

10-12-15 10:06 AM

viii

Contents

Request Reciprocal Links . . . . . . . . . . . . . . . . . .

Issue News Releases . . . . . . . . . . . . . . . . . . . . . .
Capture Visitor Email Addresses and
Request Permission to Send Updates . . . . . .
Publish an Email Newsletter . . . . . . . . . . . . . . .
Set up a Signature in the Email Program . . . .
Promote the Site in Mailing Lists and
Newsgroups . . . . . . . . . . . . . . . . . . . . . . . . . .
Begin an Affiliate Program . . . . . . . . . . . . . . . .
Advertising on the Web . . . . . . . . . . . . . . . . . . . . .
Banner Ads . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cookies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Full-Page Ads . . . . . . . . . . . . . . . . . . . . . . . . . . .
Push Technology Ads . . . . . . . . . . . . . . . . . . . . .
Email Ads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cutting-Edge E-Commerce Web Tools . . . . . . . . .
Social Networks for Small Business . . . . . . . . .
Wikis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why Create a Small Business Wiki? . . . . . . . . .
Webinairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mobile Commerce or M-commerce . . . . . . . . . .
The Future of E-Commerce and Small Business . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter Problems and Applications . . . . . . . . . . . .
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive CaseSid Stevens: Part 6 . . . . . .

Chapter 10

275
275
275
275
275
276
276
276
276
276
276
276
277
277
277
278
278
280
280
280
281
281
282
282
283

Financial Management . . . . . . . . . . . . . . . . . . . . . 284

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 284
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 285
The Need for Financial Records . . . . . . . . . . . . . . . 286
The Accounting Cycle . . . . . . . . . . . . . . . . . . . . . . 288
Recording Transactions . . . . . . . . . . . . . . . . . . . 288
Classifying Transaction Totals . . . . . . . . . . . . . . 289
Summarizing Data . . . . . . . . . . . . . . . . . . . . . . . 290
Accounting Systems for the Small Business . . . . . 293
Manual Systems . . . . . . . . . . . . . . . . . . . . . . . . . 294
Outsourcing Financial Activities . . . . . . . . . . . . 294
Small Business Computer Systems . . . . . . . . . . 294
Management of Financial Information
for Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296
Short-Term Financial Planning . . . . . . . . . . . . . 296
Long-Term Financial Planning . . . . . . . . . . . . . 296

00-Balderson-Prelims.indd 8

Evaluation of Financial Performance . . . . . . . . . . .

Management of Current Financial Position . . . .
Evaluation of Financial Statements . . . . . . . . . .
Credit and the Small Business . . . . . . . . . . . . . . . .
Advantages of Credit Use . . . . . . . . . . . . . . . . .
Disadvantages of Credit Use . . . . . . . . . . . . . . .
Management of a Credit Program . . . . . . . . . . .
Use of Bank Credit Cards . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter Problems and Applications . . . . . . . . . . . .
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix 10A: Use of Financial Ratios for
a Small Business (Automotive Dealer) . . . . . . .
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive CaseSid Stevens: Part 7 . . . . . .

300
300
301
304
304
305
305
305
306
307
308
309
310
311

Chapter 11

Operations Management . . . . . . . . . . . . . . . . . . 313

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 313
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 314
Management of Internal Operations . . . . . . . . . . . . 315
The Production Process . . . . . . . . . . . . . . . . . . . . . . 315
Total Quality Management . . . . . . . . . . . . . . . . . 316
Physical Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 318
Layout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318
Layouts for Manufacturing Firms . . . . . . . . . . . 318
Layouts for Retail Firms . . . . . . . . . . . . . . . . . . 321
Layouts for Service Firms . . . . . . . . . . . . . . . . . 324
Purchasing and Controlling Inventories . . . . . . . . . 325
Sources of Supply . . . . . . . . . . . . . . . . . . . . . . . . 325
Evaluating Suppliers . . . . . . . . . . . . . . . . . . . . . 326
Determining Order Quantities . . . . . . . . . . . . . . 326
Inventory Control . . . . . . . . . . . . . . . . . . . . . . . . 329
The Small Business-Supplier Relationship . . . . 330
Supply Chain Management . . . . . . . . . . . . . . . . 331
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331
Chapter Problems and Applications . . . . . . . . . . . . 332
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . 333
Comprehensive CaseSid Stevens: Part 8 . . . . . . 333

Chapter 12

Human Resources Management . . . . . . . . . . . . 335

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 335
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 336

10-12-15 10:06 AM

ix

Contents

Human Resources Management and

the Small Business . . . . . . . . . . . . . . . . . . . . . . .
Planning for Human Resources . . . . . . . . . . . . . . .
The Hiring Process . . . . . . . . . . . . . . . . . . . . . . . . .
Sources of Employees . . . . . . . . . . . . . . . . . . . .
The Screening Process . . . . . . . . . . . . . . . . . . . .
Notification of the Hiring Decision . . . . . . . . . .
Personnel Management . . . . . . . . . . . . . . . . . . . . . .
The Introduction Period . . . . . . . . . . . . . . . . . . .
The Probationary Period . . . . . . . . . . . . . . . . . . .
Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Owner-Manager as Personnel Manager . . .
Motivation and Loyalty . . . . . . . . . . . . . . . . . . .
Paying Employees . . . . . . . . . . . . . . . . . . . . . . .
Fringe Benefits . . . . . . . . . . . . . . . . . . . . . . . . . .
Controlling and Evaluating Employee
Performance . . . . . . . . . . . . . . . . . . . . . . . . . .
Handling Grievances . . . . . . . . . . . . . . . . . . . . . . . .
Terminating the Employee . . . . . . . . . . . . . . . . .
Unionization and the Small Business . . . . . . . . .
Government Requirements and Assistance . . . . . .
Federal Government . . . . . . . . . . . . . . . . . . . . . .
Provincial and Territorial Governments . . . . . . .
Municipal Governments . . . . . . . . . . . . . . . . . . .
Record Keeping for Employers . . . . . . . . . . . . . . .
Contract Employees . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter Problems and Applications . . . . . . . . . . . .
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix 12A: Labour Legislation Jurisdiction . . .
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive CaseSid Stevens: Part 9 . . . . . .

Chapter 13

337
338
340
340
341
343
343
343
344
344
345
346
348
350
350
352
352
352
353
353
353
354
355
356
357
357
358
358
359
359

Tax Management . . . . . . . . . . . . . . . . . . . . . . . . . . 361

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 361
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 362
Taxation and Small Business . . . . . . . . . . . . . . . . . 363
General Tax Management Principles . . . . . . . . . . . 365
Continual Tax Planning . . . . . . . . . . . . . . . . . . . 365
Tax Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365
Income Splitting . . . . . . . . . . . . . . . . . . . . . . . . . 365
Marginal Tax Rates . . . . . . . . . . . . . . . . . . . . . . 367
Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367
Government Tax-Related Programs . . . . . . . . . . 368
The Incorporation Question . . . . . . . . . . . . . . . . 370
The Remuneration Question . . . . . . . . . . . . . . . . 370

00-Balderson-Prelims.indd 9

Transferring the Business: Capital Gains . . . . . .

Goods and Services Tax (GST) and
Provincial Sales Taxes (PST) . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chapter Problems and Applications . . . . . . . . . . . .
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . .
Video Cases For Part 3 . . . . . . . . . . . . . . . .
Julie Aurora . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baron of Beer . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bijouxbead . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Red Paper Clip . . . . . . . . . . . . . . . . . . . . . . . . . .
Cases for Part 3 . . . . . . . . . . . . . . . . . . . . . . .
Alliance Cosmetics . . . . . . . . . . . . . . . . . . . . . . .
Derochers Market . . . . . . . . . . . . . . . . . . . . . . .
Home Mart Hardware Store . . . . . . . . . . . . . . . .
Marthas Designs . . . . . . . . . . . . . . . . . . . . . . . .
Sadies Country n Western . . . . . . . . . . . . . . . .
Dales Sport Pursuit . . . . . . . . . . . . . . . . . . . . . .
Susies Fashions . . . . . . . . . . . . . . . . . . . . . . . . .
Taylor Construction Company . . . . . . . . . . . . . .
The Barrel Bracket . . . . . . . . . . . . . . . . . . . . . . .
Threadz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Garner Mens Wear . . . . . . . . . . . . . . . . . . . . . .
Boomerang Bouncers Entertainment . . . . . . . . .

371
371
372
373
373
374
374
374
375
375
375
376
376
377
378
380
381
382
383
385
386
387
388
389

Part four
Looking to the Future . . . . . . . . . . . . . . . 391
Chapter 14

Managing Growth . . . . . . . . . . . . . . . . . . . . . . . . . 392

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 392
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 393
Small Business and Growth . . . . . . . . . . . . . . . . . . 394
The Business Cycle . . . . . . . . . . . . . . . . . . . . . . . . . 394
Problems Created by Growth . . . . . . . . . . . . . . . . . 396
Evaluating the Growth Question . . . . . . . . . . . . . . . 399
Planning for Growth . . . . . . . . . . . . . . . . . . . . . . . . 400
The Expansion Plan . . . . . . . . . . . . . . . . . . . . . . 400
Understanding the Requirements of Growth . . . 400
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403
Chapter Problems and Applications . . . . . . . . . . . . 403
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . 404
Comprehensive CaseSid Stevens: Part 10 . . . . . 405

10-12-15 10:06 AM

Contents

Chapter 15

Managing the Transfer of the Business . . . . . 406

Chapter Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 406
Small Business Profile . . . . . . . . . . . . . . . . . . . . . . 407
Long-Range Planning . . . . . . . . . . . . . . . . . . . . . . . 408
Alternative Outcomes for the Business . . . . . . . . . . 408
Transferring Ownership to Family Members . . . 408
Selling the Business to an Employee . . . . . . . . . 415
Selling the Business to Outsiders . . . . . . . . . . . . 416
Closing Down or Going Bankrupt . . . . . . . . . . . 418
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420
Chapter Problems and Applications . . . . . . . . . . . . 420
Web Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421
Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . 421
Video Cases For Part 4 . . . . . . . . . . . . . . . . 422
Sugar High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422
Chick Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . 422
Cases for Part 4 . . . . . . . . . . . . . . . . . . . . . . . 423
Baileys Office Supply . . . . . . . . . . . . . . . . . . . . 423
Baker Hardware Ltd. . . . . . . . . . . . . . . . . . . . . . 424
Brian Luborsky-Premier Salons
International Inc. . . . . . . . . . . . . . . . . . . . . . . 428
ITI Educational Corporation . . . . . . . . . . . . . . . 428
Companys Coming Cookbooks . . . . . . . . . . . . 429

00-Balderson-Prelims.indd 10

Directory of Supplementary Cases . . . . . . . . 431

The Framemakers . . . . . . . . . . . . . . . . . . . . . . . . 432
Clovis Jewellers . . . . . . . . . . . . . . . . . . . . . . . . . 435
Thomson Greenhouse . . . . . . . . . . . . . . . . . . . . . 445
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456

10-12-15 10:06 AM