MANAGING GROWTH

ENTREPRENEURSHIP
MBA 802
Dr Stephen Nhuta
 MANAGING GROWTH

 More value is created when these enterprise grow

 Value for more customers, investors, employees,
entrepreneur, society
 Growth/problems
 Life cycle / problems
 STAGES OF GROWTH

Necessary competencies required to keep a company growing

Vision
Communication
Leadership
Delegation
Performance facilitation
 FACTORS AFFECTING
ENTREPRENEURIAL GROWTH
Economic Factors
Lack of adequate overhead facilities
Non availability of capital
Great risk 
Non availability of labor and skills
Social Factors
Cultural Factors
Personality Factors
 FACTORS AFFECTING
ENTREPRENEURIAL GROWTH
Motivating factors
Education 
Occupational experience
Family background
Desire to work independently
Assistance from financial institution
Availability of technology
Family Tradition
Psychological Factors
 FACTORS INFLUENCING
ENTREPRENEURSHIP
Political Factors
Economic Policies
CAUSES OF SLOW GROWTH IN
ENTREPRENEURSHIP IN
ZIMBABWE
Agriculture
Educational System
Colonial Rules
Joint Family System
Religious attitude
Mindset
Recognition by the society
Family Background
 GROWING THE BUSINESS

• Entrepreneurship widely recognized as creating value

• Value is really created as the enterprise grows
• Growing company continues to create more jobs and pay
taxes.

H
 GROWTH STAGES
stage 1 stage 2 stage 3 stage 4 stage 5 stage 6
Existence survival satisfaction growth take off maturity
Large

size

Small

young mature
age of organization
 ISSUES OF GROWTH

Growth death
teach
&
successor’s
hard
work
creation of myth share
or
hard work destroy

liquidation
 GROWING THE BUSINESS

Stage I: Existence

In this stage the main problems of the business are obtaining
customers and delivering the product or service contracted for

Want to get enough customers, deliver and provide services to
become a viable business

Want to expand from that one key customer or pilot production
process to a much broader sales base

Need enough money to cover the considerable cash demands of
this start-up phase
 GROWING THE BUSINESS

Organization is a simple one and owner does

everything and directly supervises subordinates,
who should be of at least average competence
Systems and formal planning are minimal to
nonexistent
Strategy is to remain alive with owner being
major supplier of energy/direction
 PHASES OF BUSINESS
GROWTH
 Companies in this stage range from newly started restaurants and retail
stores to high-technology manufacturers that have yet to stabilize either
production or product quality
 Many never gain sufficient customer acceptance or product capability to
become viable and the owners close the business and if they’re lucky, sell
the business for its asset value. 
 Eventual Problems in Phase 1
 Informal communication
 Additional functions
 Locate and install a strong business manager
 Fight urge to resist change
PHASES OF BUSINESS GROWTH
Stage II: Survival
To be here, the business has demonstrated that it is a workable
business entity. with enough customers and satisfies them
sufficiently
Problem shifts from mere existence to the relationship between
revenues and expenses .i.e. generate enough cash to break even
Generate enough cash flow to stay in business and to finance
growth to a size that is sufficiently large to earn an economic return
on our assets and labor
Company has a limited number of employees supervised by a
manager who carries out well-defined orders of the owner.
PHASES OF BUSINESS GROWTH

Systems development is minimal. and major goal is still

survival, and the owner is still synonymous with the
business.
Enterprise may grow in size and profitability and move
on to Stage III. it may, as many companies do, remain at
the Survival Stage for some time, earning marginal
returns and eventually go out of business
Examples In this category, are manufacturing businesses
that cannot get their product or process sold as planned
PHASES OF BUSINESS GROWTH
Substage III-D.
 In the Success-Disengagement sub stage, the company has
attained true economic health, has sufficient size and
product-market penetration to ensure economic success,
and earns average or above-average profits.
 The company can stay at this stage indefinitely, provided
environmental change does not destroy its market niche or
ineffective management reduce its competitive abilities.
 The company has grown large enough to require functional
managers to take over certain duties performed by the
owner.
 Cash is plentiful and the main concern is to avoid a cash
drain in prosperous periods to the detriment of the
company’s ability to withstand the inevitable rough times.
PHASES OF BUSINESS GROWTH
 The first professional staff members come on board and basic financial,
marketing, and production systems are in place.
 Many companies continue for long periods in the Success-
Disengagement sub
 Many companies continue for long periods in the Success-
Disengagement sub stage.
 The product-market niche of some does not permit growth; this is the
case for many service businesses in small or medium-sized, slowly
growing communities and for franchise holders with limited territories.
 If the company cannot adapt to changing circumstances, it will either
fold or drop back to a marginally surviving company
 PHASES OF BUSINESS GROWTH
Stage IV: Take-off
In this stage the key problems are how to grow rapidly and how to
finance that growth. :
 Delegation.
• Owner to delegate responsibility to others to improve the managerial
effectiveness of a fast growing and increasingly complex enterprise
 Cash.
• Enough to satisfy the great demands growth brings and a cash flow
that is not eroded by inadequate expense controls or ill-advised
investments brought about by owner impatience
• Operational and strategic planning are being done and involve specific
managers. The owner and the business have become reasonably
separate, yet the company is still dominated by both the owner’s
presence and stock control.
PHASES OF BUSINESS GROWTH

• This is a pivotal period in a company’s life. If the owner

rises to the challenges of a growing company, both
financially and managerially, it can become a big business.
• Often the entrepreneur who founded the company and
brought it to the Success Stage is replaced either voluntarily
or involuntarily by the company’s investors or creditors.
PHASES OF BUSINESS GROWTH
 Phase 5 Maturity
 Consolidate and control financial gains
 Expand management force
 Systems are extensive and well developed
 Owner and business are quite separate
 Company now has the advantage of size, financial resources and
managerial talent
 Phase 6 Ossification
 Lack of innovative decision making
 Avoidance of risk
EXTERNAL CAUSES OF FAILURE

Recession
Interest rate changes
Changes in government policy
Inflation
The entry of new competition
Industry/product obsolescence
 INTERNAL CAUSES OF FAILURE
 Inattention to strategic issues
 Misunderstood market niche
 Mismanaged relationships
 Diversification into an unrelated business area
 Mousetrap myopia
 The big project
 Lack of contingency planning
 General management problems
 Lack of management skills, experience, and know-how
 Weak finance function
 Turnover in key management personnel
 Big company influence in accounting
 INTERNAL CAUSES OF FAILURE
 Poor planning, financial/accounting systems, practices, and controls
 Poor pricing
 overextension of credit
 excessive leverage
 Lack of cash budgets/projections
 Poor management reporting
 Lack of standard costing
 Poorly understood cost behavior

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