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Managing early growth of the new venture

To grow or not to grow
To grow or not to grow should be an important part of the entrepreneur’s 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.

A clear statement of the situation can go a long way to ensuring survival.Hitting the growth wall • Researchers and authors in entrepreneurship often refer to a phase in the new venture’s 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 result do not have to be fatal. 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 tragedy of this type of scenario is that when it happens it usually ends in disaster.

((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 . • The cash amount can be determined from a simple formula.Financial strategies to support growth • The entrepreneur will need to determine how much cash will be needed to accommodate the rapid sales growth.

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

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

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

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. .

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

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. Entrepreneurial skills and strategies . Some entrepreneurs are managing this issue by hiring professional employer organization.

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

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 .

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

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

Time management Basic 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 .

Negotiation Negotiation 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) .

analysis of alternatives and actions. .Negotiation Integrative 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.

Negotiation Rational decision model .

Negotiation Competitive 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 opponent’s share. In this competitive adversarial bargaining arena. values and perceptions. the smaller the entrepreneur. each party tries to discover the others goals. Methods use to collect information •Indirect methods •Direct methods .

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

Negotiation Approach .

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

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