Question 1

If you're thinking about starting a small business, it is often a good idea to work for about three years for someone else in the same industry before venturing out on your own.

Accepted Answer

Working for someone else in the same industry can provide valuable experience and insights that can be applied to starting your own business. It can also help you understand the market and competition better. Three years is a common recommendation to gain enough knowledge and skills to successfully start and manage a small business.

Question 2

The Global Entrepreneurship Monitor (GEM) shows that people living in high-income countries tend to be much more willing to start their own businesses than people who live in low-income countries.

Accepted Answer

The Global Entrepreneurship Monitor (GEM) often finds that people in low-income countries are more likely to start businesses, frequently out of necessity, whereas in high-income countries, entrepreneurship is more often opportunity-driven.

Question 3

One advantage of opening a franchise rather than starting a business from scratch is that start-up costs tend to be lower.

Accepted Answer

Opening a franchise often involves significant start-up costs, including franchise fees, royalties, and the cost of adhering to the franchisor's established systems and standards, which can be higher than starting an independent business from scratch.

Question 4

While clearly important to their owners, employees, and local communities, small businesses actually account for only a very small percentage of employment in the Canadian economy.

Accepted Answer

Small businesses are crucial to the Canadian economy, accounting for a significant percentage of employment. As of recent data, they employ over 8.4 million individuals, which represents about 68.8% of the total private labor force.

Question 5

Because they lack the financial resources to fund research and product development efforts, small businesses are seldom able to introduce new innovations into the marketplace.

Accepted Answer

Small businesses often drive innovation by being more agile, adaptable, and willing to take risks, despite having fewer financial resources than larger corporations. They can introduce new innovations through unique approaches, niche market targeting, and leveraging partnerships.

Question 6

Buying an established business is generally less risky than starting a business from scratch.

Accepted Answer

Buying an established business means that it already has a customer base, proven products or services, established systems, and a track record of financial performance. These factors reduce the risk compared to starting a business from scratch, where there is no guarantee of success. However, there are still risks involved in buying an established business, such as inheriting legal liabilities, outdated equipment or technology, and hidden financial problems.

Question 7

Small businesses are the major source of new jobs created by the Canadian economy.

Accepted Answer

According to Statistics Canada, small businesses are responsible for creating the majority of new jobs in Canada. In 2017, small businesses accounted for 30% of all employment in the country.

Question 8

Small businesses cannot succeed without a business plan.

Accepted Answer

Many small businesses have succeeded without formal business plans by adapting to changes, understanding their market, and focusing on customer needs.

Question 9

Entrepreneurship rates are significantly lower in countries that provide employment protection such as unemployment insurance.

Accepted Answer

Countries that provide employment protection such as unemployment insurance, make it less risky for individuals to remain as employees and less likely to become entrepreneurs. Therefore, entrepreneurship rates are significantly lower in these countries.

Question 10

A key reason for developing a formal business plan is that having such a plan is absolutely critical when seeking external financing.

Accepted Answer

A formal business plan helps to demonstrate to potential investors or lenders that the business owner has thoroughly researched and planned out their business strategy, goals, and financial projections. This makes the business more attractive and credible to external financing sources.

Question 11

One of the biggest problems facing people who want to start a small business is the lack of educational resources available to help them learn the ins and outs of starting and managing their new company.

Accepted Answer

There are numerous educational resources available for aspiring entrepreneurs, including online courses, workshops, books, mentorship programs, and resources provided by organizations such as the Small Business Administration (SBA) in the United States.

Question 12

Small businesses rarely have the creative means to develop new and innovative products. They often wait for larger organizations to develop the product and then simply copy the larger organization's idea.

Accepted Answer

This statement is not entirely true. Small businesses can and do develop new and innovative products. In fact, small businesses are often more agile and able to take risks with new products than larger organizations. While some small businesses may choose to replicate successful products from larger organizations, it is not always the case that they lack creative means to develop their own innovative products.

Question 13

A key benefit of buying an existing business is that relationships with customers, suppliers, and vendors are already established.

Accepted Answer

When buying an existing business, the new owner inherits the existing relationships with customers, suppliers, and vendors, which can save time and effort in building new relationships from scratch.

Question 14

Three downsides to buying a franchise include initial high costs, the ongoing percentage-of-sales royalty fees, and the franchise requirements that, in effect, reduce the owner's independence.

Accepted Answer

These are indeed potential downsides to buying a franchise.

Question 15

One advantage of buying a franchise is that the franchiser usually offers training, financial assistance, and a recognizable brand.

Accepted Answer

One of the main advantages of buying a franchise is that the franchiser provides various forms of support, such as training, marketing, and financial assistance. Additionally, franchises often have established brand recognition, which can help attract customers and create trust in the business.

Question 16

As a franchisee, if something goes wrong with the national brand your business will suffer too.

Accepted Answer

As a franchisee, your business is directly tied to the reputation and success of the national brand. If something negative happens to the brand, the franchisees may suffer consequences such as loss of customers and revenue.

Question 17

One common mistake that small business owners make is to develop long, detailed business plans that bankers and investors simply won't take the time to read.

Accepted Answer

The answer of One common mistake that small business owners...

Question 18

Fifty percent of small business owners are 50 years of age or older.

Accepted Answer

According to a survey conducted by Guidant Financial, 50% of small business owners are in the age group of 50 years or older.

Question 19

The failure rate of a franchise is significantly higher than the rate for starting a business from scratch.

Accepted Answer

Franchises typically have a lower failure rate compared to starting a business from scratch because they operate under an established brand and business model, which often includes support from the franchisor in areas such as training, marketing, and operations.

Question 20

Workers employed by small businesses are much less likely to be laid off during an economic downturn than workers in major corporations.

Accepted Answer

This statement is false. During an economic downturn, small businesses may struggle to stay afloat and may not have the financial resources to keep all their employees. On the other hand, major corporations may have more stable financial resources and may be able to weather the economic storm better, allowing them to keep more of their employees. Ultimately, whether a worker is laid off or not during an economic downturn depends on many factors, including the nature of their job, the industry they work in, and the financial health of their employer.

Quiz 6: Small Business and Entrepreneurship: Economic Rocket Fuel