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Business Planning Considerations
for Entrepreneurs
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Overview
• Nature of the business
• Common forms of business (legal)
• New legal form for SEs
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Nature of the Business
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TRMN 625 focus is on small1 tourism businesses
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Over 90% of the small businesses in Canada have fewer than 5
employees (aka micro-enterprises)
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Micro-enterprises2 have fewer than 5 employees (often family-based
firms)
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Regardless of the business size, a business plan helps to:
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Provide a roadmap for the business
Communicate the plan (visually/textually)
Make the idea real (a motivator)
Entrepreneurs use business plans to describe unmet needs (gaps) that
have given rise to a business opportunity
1Small
business is generally defined as a company having less than 500
employees (www.sba.gov/size/indexguide.html)
2Industry
Canada (www.ic.gc.ca/sbstatistics)
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Common Forms of Business (legal)
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Sole Proprietorship
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General Partnership
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Corporation (profit or non-profit)
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Co-operatives
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Mutual Benefit Societies
“Most new businesses are started without the owner ever having
written a formal business plan. But then, most new businesses fail
within a year or two” (Skinner, 2012, p. 14; author of Business Plan
Business Reality).
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Sole Proprietorship
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The simplest, cheapest, and most common form of business
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Owned and operated by one person
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Owner and business are one and the same as far as the law is
concerned
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Owner personally owns the assets and the debts
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Unlimited liability; there is no limit to how much the owner is
personally responsible for the debts of the business
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General Partnership
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Similar to sole proprietorship except that business has two or
more owners
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Each owner has unlimited liability
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Each owner has 100% responsibility for business debts, not
just their own share
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Corporation (for profit)
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Size has nothing to do with this legal form; a one person
company can be a corporation
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Owners are referred to as shareholders
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Owning 51% or more of shares gives owner the power to
decide who will run the company
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Owners do not personally own the assets of the company;
they belong to the company
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Company is responsible for the debts of the business
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Liability is limited as owner’s personal assets are not at risk if
the business fails
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Corporation (non profit)
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Similar to for profit corporations except:
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Individual, direct legal control is not possible and no
dividends are paid
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Can issue tax receipts for donations if corporation is
registered under the Income Tax Act.
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CEO salary and expenses paid are expected to be
reasonable and fixed by the Board of Directors
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Ultimate powers rests with the board
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The job of managing volunteers can be challenging
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Co-operatives
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Primary purpose is to provide employment for the workers/owners of
the firm
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In some cases, workers pool their money to buy their company and
make it a co-operative
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Owners/employees own a different percentage of the shares based on
their contribution to the purchase
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Regardless of percentage ownership, each owner has only one equal
vote in setting policy and selecting a CEO to run the company
(democratic)
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In Canada, there are more than 9,000 co-ops, directly employing
155,000 people and including 4 out of 10 Canadians among their
members
Examples:
Consumer co-ops,
buying co-ops, housing
co-ops, credit unions
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Mutual Benefit Societies
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Similar to co-operatives in that they are not intended to
benefit individuals
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Intended to benefit groups that would otherwise be in
competition with each other (e.g. marketing boards)
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“Co-opetition” is term used to describe competing
businesses that collaborate for their mutual benefit
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Profit is not the direct goal of the enterprise
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Community Contribution
Companies (CCCs)
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New hybrid corporate structure (July, 2013) in British Columbia
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Based on similar model in UK. Nova Scotia is only other province
in Canada with this structure
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A hybrid business model aimed at encouraging private
investment in B.C's social enterprise sector
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CCCs may accept equity investment money, issue shares and
pay shareholder dividends (options previously not available to
non-profits)
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Unlike typical for-profit companies, CCCs will have a limited
ability to pay dividends
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Are able to assure potential investors that a portion of the
company's profits will be used for social purposes