Management Failures in Entrepreneurship - Term Paper Example

 Management Failures in Entrepreneurship Introduction It's commonly known that a great number of enterprises are likely to stagnate or collapse within the initial four years of their inauguration. In many of the situations, the entrepreneurial ventures fail because they were founded by highly inexperienced and over ambitious entrepreneurs. In most cases, this over ambitious behavior causes failure in entrepreneurial ventures usually early in operation. In order to fix a failure, people should first identify what the problem is. This paper will extensively discuss and analyze in-depth about two or three of the most common failures in entrepreneurship ventures. The failures to be analyzed and discussed here relate to financing and management execution. These form part of the major indicators of the failure of most entrepreneurial ventures. An aspiring entrepreneur can avoid these so as to succeed in an entrepreneurial career, if one is intending to set out in entrepreneurship, or if one has already started a form of business of their own (Greene 20). Wrong or Misplaced Motivation of the Entrepreneur To succeed, for someone setting out in entrepreneurship, they should be profit or success motivated or oriented. Although one cannot be told his objective, it is recommended that an entrepreneur think about it, as well as all the possible incentives, many times – and thoroughly. In fact, they should go beyond monetary values. In most cases, for a great majority of successful entrepreneurs, it usually comes as a surprise that most of them really like their businesses, which is the main reason behind their success. This also contributes to their monetary success, thus they receive monetary gains in doing what they love. The main argument or principle here is that if anything is set out for misplaced reasons, then it is more than likely to be terminated for the same reasons. For example, if one only considers monetary incentives while setting out on an entrepreneurial venture, and if the only intention is to generate massive money, then one’s mentality will be put to a great test if zero profit is generated after approximately five years of operation. As an entrepreneur, one may want to donate cash or build a house for the needy, charity or early retirement. Whatever one may decide to do, it should be a motivation for one to keep going regardless of the tough situations he may encounter as an entrepreneur (Greene 25). Weak Management structures Numerous reports on failures in entrepreneurship view weak management structures as a major reason for lack of success by some entrepreneurs. Entrepreneurs are more than likely to fail in their business unless they make out their areas of weaknesses and look for any form of professional assistance. A successful entrepreneur comes up with a conducive work environment which encourages innovation and productivity. As an entrepreneur, one has to be good in recruiting proficient people and teaching/training them on the specifics of your business (Greene 31). Professionalism and experience are very critical in ensuring that an entrepreneurial venture succeeds. For one to succeed, he/she must recruit experienced staff/employees, who will bring in more innovative ideas to the business, hence facilitating its success to greater heights or levels in future. The modern business environment has become very competitive; hence for one to overcome the extreme market competition, he/she has to be very innovative and diverse. In the management scheme, one must be able to readily avail of marketing services. Most new enterprises just lack marketing budgets that are large. However, this is not a reason for failure to market, since if one is not doing it well, someone else more proficient in management will do it better (Greene 37). Strategic or planned marketing is very essential to the success of any business and therefore, entrepreneurs should give special attention to marketing their products, so as to make people aware of their existence, which will in turn increase their amount/volume of sales. There are numerous reasonably priced marketing tools that can be utilized by the management, networking being the favorite for both new and old businesses, since there is minimal cost, and the primary focus of the investment is time. In fact, an entrepreneur should develop a publicity logo pertaining to his entrepreneurial activity or just about his company (which should be benefit-focused). Also, one should always carry business cards and interact with people when he is out. This way, one will be able to get business deals or opportunities by talking with people, especially at social or public events. As a manager or part of the management of the business, a person should focus his efforts in coming up with ways or mechanisms of maximizing profits of the business. One should also consider alternative tools for marketing, including direct mail (which is much targeted), direct e-mail, e-newsletters, a web site (which can take the place of a printed brochure) and public relations. Although it is not essential to develop a campaign for advertising, it is essential to do a marketing activity related to that (Dollinger 24). Lack of Mentorship and Lack of Experience A mentor or mentors are very essential in the management, since they help in identifying pitfalls and confirming certain setbacks that the management may encounter if it continues doing what its doing. Mentors are invaluable assets that must be sleeked in the management body decision making, for one to succeed in business. These mentors bring in their experience, which goes a long way in helping to also deal with the fear related to failure. This is because entrepreneurship and fear of failure go together. In entrepreneurship, one has to be acutely aware of the fact that the business stands a chance of failing, and therefore as an entrepreneur, one should not be afraid of failure and if one is, then he should be ready to be employed. In entrepreneurship, if one is risk aversive, then he/she should stay away from business. In most readings about entrepreneurs who have been successful, it’s evident that a great number of them have had their drawbacks: either businesses that did not work well for them or business strategies that did to materialize, but this did not deter them from trying again (Dollinger 28). Finance in entrepreneurship: Mobilizing and managing investment money Knowledge of markets, services or products is very common to most of the serious entrepreneurs. The only thing that most of them don’t understand, and which makes some of them fail, is the existence of the two major markets, that is the financial and products markets, which are very critical in determining the upward progress or success of the entrepreneurs. In fact, most of them think that the two markets are directly related, but this is not actually the case. For entrepreneurs to be guaranteed success, they should clearly try to understand the two markets, which play a very critical role in determining the direction of any business (Leach and Melicher 42-45). A close and critical analysis of many successful entrepreneurs around the globe clearly explains this fact. In fact, many of them have succeeded through their extensive study and understanding of these two markets. When one understands his focus/main market, he is likely to succeed because he will adjust his line of production or business to adapt to that kind of market (Leach & Ronald 42-45). In entrepreneurship, one should be able to know the financial management’s key areas. These key areas involve: Coming up with a successful and profitable business model. Properly managing the cash flow and finances. Forecasting the involved business’s valuing and financial performance. Mobilizing finances to finance the enterprise development. In financial management, an entrepreneur should be well versed in: Operating views of the finances involved Preparation, operation and budgets related to cash-flow. Budgeting for the capital Analyzing the breakeven The profitability path Giving value to start-ups and forecasting Identifying the proper business model Coming up with projections that have detailed expense Coming up with financial statements that are related to pro-forma Adept in both valuation methods and forecasting Estimating the business value Business valuation methods Knowledge in valuation modes related to cash flow discounting Cash flows discounting The cost of scalability The final section above concentrated on how entrepreneurs can clearly be aware of advanced valuation, forecasting and financial management in their businesses. Conclusion The discussion in this paper is mainly aimed at developing a more balanced theoretical perspective on failure relating to financing and management execution in the entrepreneurial process. The discussion and analysis in this paper offer a useful tool, whereby failure can be reconceptualized. A major reason as to why failure offers entrepreneurs benefits is because as observed in this discussion, it is usually much easier to identify why a failure has occurred than to explain a success, thus making the analysis of failure a powerful mechanism in resolving uncertainty. It is by carefully analyzing failures and offering a comprehensive way forward that as scholars, people can begin to make systematic progress on better analytical models pertaining to entrepreneurial value creation (Leach and Melicher 72-75). Works Cited Dollinger, Marc. Entrepreneurship: strategies and resources. Hillsborough: Marsh Publications, 2007. Print. Greene, Cynthia. Entrepreneurship: Ideas in Action. London: Cengage Learning, 2008. Print. Leach, Chris, & Ronald Melicher. Entrepreneurial Finance. London: Cengage Learning, 2011. Print. Read More