managing early growth of the new venture

Download Managing Early Growth of the New Venture

Post on 25-Aug-2014




6 download

Embed Size (px)


Managing early growth of the new venture

To grow or not to growTo grow or not to grow should be an important part of the entrepreneurs strategic plan. For those who choose to grow their venture, it is necessary to be prepared for growth and to understand its implications. In many cases the growth may not be entirely voluntary. Customer may demand more goods, better services and even better prices.

Hitting the growth wall Researchers and authors in entrepreneurship often refer to a phase in the new ventures life as "hitting the growth wall where operations reach out of control proportions such as cash runs out and key employees leave for more stable jobs. The tragedy of this type of scenario is that when it happens it usually ends in disaster. The only way to survive it is to probably avoid it altogether by being prepared to manage growth up front with effective management skills and controls. When and if it occurs , the result do not have to be fatal. A clear statement of the situation can go a long way to ensuring survival.

Financial strategies to support growth The entrepreneur will need to determine how much cash will be needed to accommodate the rapid sales growth. The cash amount can be determined from a simple formula. ((Sn-GP)+OH/Td) tar= cash needed Sn= new sales in next period GP= gross profit OH= additional overhead in next period Td= time frame for sales forecast in days Tar = average collection period for accounts receivable in days

Organizational changes duringMany entrepreneurs finds that as the venture reaches the growth stage they need to change the organizational culture. Organizational culture Internal venture atmosphere based on employees attitudes. Some of the important guidelines to cultural change during growth involve the following: Communicate all matters to key employees. Trust and understanding by employees are important so that their roles and responsibilities during this stage of business are clear.


Be a good listener. Learn whats on the mind of your employees and what they would do if they ran the company. Be willing to delegate responsibility . The entrepreneur cannot always be available to assess every management decision. Give key employees the flexibility to make decision without the fear of failure. Provide feedback consistently and regularly. Provide continuous training to key employees. They in turn will be able to train others in the organization. Emphasize results to key managers with incentives built in to encourage them to train and delegate within the roles.

Organizational changes during growth

Provide continuous training to key employees. They in turn will be able to train others in the organization. Emphasize results to key managers with incentives built in to encourage them to train and delegate within the roles. Maintain a focus by establishing a mission with goals and using consensus in management decision making. Establish a we spirit not a me spirit in meetings and memoranda to employees.

Organizational changes during growth

Record keeping and financial control

Entrepreneurial skills and strategies

With growing venture it is sometime necessary to enlist the support and services of an accountant or consultant to support record keeping and financial control. These external services firms can also help train employees using the latest and more appropriate technology that can meet the needs of the venture.

Inventory control Efficient electronic data interchange (EDI) among producers, wholesalers, and retailers can enable these firms to communicate with one another. Linking the needs of a retailer to the wholesaler and producers allows for the fast order entry and response. These systems also allow the firm to track shipments internationally. Transportation mode selection can also be important in inventory management.

Entrepreneurial skills and strategies

Human resources Generally the new venture dose not have the luxury of a human resource department that can interview, hire and evaluate employees. Most of these decisions will be the responsibility of the entrepreneur and perhaps one or two key employees. Some entrepreneurs are managing this issue by hiring professional employer organization.

Entrepreneurial skills and strategies

Marketing skills As the company grows, it will need to develop new products and services to maintain its distinctiveness in a competitive market. This should be an ongoing process based on information regarding changing customers needs and competitive strategies. Strategic planning skills Planning is continual process, particularly in a rapidly changing environment. It is unlikely that a plan that worked yesterday will be effective in todays marketplace.

Entrepreneurial skills and strategies

Strategic plan Three to five year plan that includes all functions of an organization Outline of a strategic plan Business mission Situation analysis Internal environmental analysis External environmental analysis Goal formulation Strategy formulation Formulation of programs to meet goals implementation

Entrepreneurial skills and strategies

Strategy formulation Formulation of programs to meet goals implementation Feedback and control

Entrepreneurial skills and strategies

Time managementTime is the entrepreneurs most precious yet limited recourse. It is unique quantity: an entrepreneur cannot store it, rent it, hire it, or by it. Entrepreneurs can always make better use of their time, and the more they strive to do so, the more it will enrich their venture as well as their personal lives. Time management Process of improving individuals productivity through more efficient use of time.

Time managementBenefits of time management Increased productivity More job satisfaction Improved interpersonal relations Reduced time anxiety and tension Better health

Time managementBasic principles of time management The principle of desire The principle of effectiveness The principle of analysis The principle of teamwork The principle of prioritized planning The principle of reanalysis

NegotiationNegotiation Negotiation is the process by which parties attempt to resolve a conflict by agreement. There are two type of negotiation Distributive bargaining(competitive negotiation) Integrative bargaining (cooperative negotiation)

NegotiationIntegrative bargaining (cooperative negotiation) In this situation the entrepreneur is willing to let the other side achieve its desired outcome while maintaining a commitment to his or her own goals. Rational decision model Method of resolving conflict through objectives, analysis of alternatives and actions.


Rational decision model

NegotiationCompetitive negotiation (Distributive bargaining) Distributive bargaining does not allow the other party to achieve his or her goals. There is a fixed pie to be divided which means that the larger the opponents share, the smaller the entrepreneur. In this competitive adversarial bargaining arena, each party tries to discover the others goals, values and perceptions. Methods use to collect information Indirect methods Direct methods

NegotiationIndirect methods Indirect methods include discussing the person with anyone who has had previous contact, such as your own employees, the party employees, or outside individuals. Direct methods Whenever possible, he or she should meet informally with representatives of the other company, probing them to determine their levels of preparation. Frequently, insight can be obtained from response to relaxed, almost innocent questions.

Negotiation Approach

Customer service and satisfaction tracking Tracking and monitoring customer complaints suggestions. Following activates fall in this program:

Information planning and controland

Thank you !


View more >